Specialize with a Market Segmentation Strategy
A market segmentation strategy is a strategy in which you target and cater to (or specialize in) just one narrow type or group of customer. The object of this approach is to be so well suited to that specialized customer that you become the top seller in your segment.
The main way to develop a segmentation strategy is to look at your current customers and identify one particular type that seems most profitable for you right now. Or if a subset of your customers is growing faster than the rest, consider specializing in those types of customers to gain more of their business.
And you don’t have to limit yourself to just one segment. If you see several with potential, adjust your product, pricing, promotion, or distribution for each, and, in essence, operate several parallel marketing programs that have enough synergy, such as through a common core product, to be economical and easy to manage.
The advantage of a segmentation strategy is that it allows you to tailor your product and your entire marketing effort to a clearly defined group with uniform, specific characteristics. For example, the consulting firm that targets only the healthcare industry knows that prospective clients can be found at a handful of healthcare industry conferences and that they have certain common concerns around which consulting services can be focused.
Many smaller consulting firms target a narrowly defined market segment to compete against larger, less specialized consulting firms.
If you’re in the consulting business, you can specialize in nonprofits, for example, instead of trying to be a consultant to all businesses. If you sell office furniture, you can decide whether to focus on corporate sales, small businesses, government offices, schools, or home offices.
Each segment has different needs and buying patterns, and at any particular time, one of these segments is going to be easier for you to dominate (and it may be growing faster, too). As an added bonus, marketing is usually easier and less expensive when you’re highly specialized because you know exactly where to find your customers.
The next sections explain how to determine whether a market segmentation strategy is right for you and how to expand your business by focusing on more than one specific target customer base.
Gauging whether specializing is a good move
Specializing in a specific market segment can give you the momentum you need to power past your competition, but it may not always be the right approach for your operation. The segmentation strategy may work well for you if
You think your business can be more profitable by specializing in a more narrowly defined segment than you do now.
You face too many competitors in your broader market and can’t seem to carve out a stable, profitable customer base of your own.
It takes better advantage of things you’re good at.
You’re too small to be one of the leaders in your overall market or industry. Maybe you can be the leader in a specific segment of your market.
Adding a segment to expand your market
If you’re running out of customers and market and need to expand, one way to do so is to decide to target a new segment. For example, the consulting firm specializing in coaching healthcare executives can decide to start offering a similar service to nonprofits.
A different approach and marketing program may be needed, because the two industries are different in many ways and have only partial overlap (some hospitals are nonprofits, but many nonprofits aren’t hospitals). By specializing in two segments rather than just one, the firm may be able to grow its total sales significantly while still maintaining a grasp in niche markets that gives it an edge over the competition.