View Small Business Sales by Target Market Segment - dummies

View Small Business Sales by Target Market Segment

By Barbara Findlay Schenck

Identify your small business’s target market by analyzing your product sales data, and focus your marketing efforts precisely at target audiences that have the interest and ability to purchase your products. To match segments of your market with the categories of your product line they’re most likely to want to purchase, take these steps:

Marketing is a matter of resource allocation. No budget — not even those of mega-brands like General Motors or McDonald’s — is big enough to do it all. At some point, every marketer has to decide to aim its dollars toward the markets and products that have the best chance of delivering results and providing a good return on the marketing investment.

  1. Break down your sales by product categories to gain a clear picture of the types of products you sell, the sales volume each category produces, and the type of customer each attracts.

  2. Use your findings to determine which product categories offer the best potential growth opportunities and also to clarify which segments of your clientele are most likely to respond to marketing messages.

  3. Weight your marketing expenditures and develop your marketing messages and media plans to achieve your targeted sales goals through promotions that appeal to clearly defined customer segments.

For example, a furniture manufacturer may divide its products into office, dining, and children’s lines — each meeting the demands of a different market segment and even employing a different distribution and retailing strategy. The manufacturer would follow three separate marketing-communications strategies, placing primary emphasis (and budget allocation) on promoting the line most apt to deliver top sales volume over the upcoming period.

On the other hand, an accounting firm may sort its clientele both by type of service purchased and by client profile. It may target individual clients for tax-return business during the year’s first quarter, target high-net-worth clients for estate- and tax-planning right after the April 15 tax-filing deadline, and target business clients for strategic planning services in early fall, when those customers are thinking about their business plans for the upcoming year.

After you’re clear about which segments of your customer base are most apt to purchase which products, you’ll have the information you need to develop and communicate compelling promotions and offers. You may also discover clues to new-customer development. For example, studying sales patterns may lead to the finding that certain products or services provide a good point of customer entry to your business, arming you with valuable knowledge you can use in new-customer promotions.

This table shows how a motel might categorize its market so that it can learn the travel tendencies of customers in each geographic market area and respond with appropriate promotional offers.

Market Segmentation Analysis: Mountain Valley Motel
Hometown Rest of Home State Neighboring States Other National/
Total Sales
$712,000 $56,960 $462,800 $128,160 $64,080
8% 65% 18% 9%
Sales by Length of Stay
1-night stay $48,416 $83,304 $19,224 $3,204
2-night stay $2,848 $231,400 $70,488 $32,448
3–5 night stay none $101,816 $32,040 $28,428
6+ night stay $5,696 $46,280 $6,408 none
Sales by Season
Summer $5,696 $277,680 $96,120 $54,468
Fall $11,962 $55,536 $12,816 $6,408
Winter $4,557 $37,024 $6,408 none
Holiday $22,783 $23,140 none none
Spring $11,962 $69,420 $12,816 $3,204

With detailed market knowledge, you can make market-sensitive decisions that lead to promotions tailored specifically to consumer patterns and demands. The following examples show how the motel featured in the table can use its findings to make marketing decisions:

  • Local market guests primarily stay for a single night and mostly during the holiday season, making them good targets for local year-end promotions. Additionally, 10 percent of local guests stay for six nights or longer, likely while undergoing household renovations or lifestyle changes.

    This long-stay business tends to occur during non-summer periods when motel occupancy is low, so the motel may want to consider special offers to attract more of this low-season business.

  • Half of statewide guests spend two nights per stay, although nearly a third spend three to six nights, which proves that the motel is capable of drawing statewide guests for longer stays. This information may lead to an add-a-day promotion.

  • National and international guests account for approximately one-quarter of the motel’s business. Because these guests are a far-flung group, the cost of trying to reach them in their home market areas via advertising would be prohibitive. Instead, the motel managers might research how these guests found out about the motel.

    If they booked following advice from travel agents, tour group operators, or websites, the managers could cultivate those sources for more bookings. Or, if the guests made their decisions while driving through town, the motel may benefit from well-placed billboard ads and greater participation in travel apps and review sites that influence traveler behavior.

Conduct a similar analysis for your own business:

  • How do your products break down into product lines?

  • What kind of customer is the most prevalent buyer for each line?

Then put your knowledge to work. If one of your product lines attracts customers who are highly discerning and prestige-oriented, think twice about a strategy that relies on coupons, for example.