New business, no customers? This is a common problem for many start-ups and small businesses. At Akcela, we have worked with many start-up and even established businesses to solve this problem. We take the time to find out what our clients’ unique selling points are, what their customer needs are, and how to align these two to gain new, and more from their potential customers.
Market segmentation consultancy is not a new concept. In fact, the very foundations of market segmentation can be found in this Harvard Business Review article from the 1960’s. Businesses have always. to some degree, naturally realised that different customer types have different wants and needs. It is those businesses who target and adapt to their chosen segments most effectively, that generally have the most success. In this article we will outline two key concepts from our recent Chamber of Commerce webinar. If you are interested in this subject, you can view the full webinar above.
When starting any business the focus should be to decide what type of business you want it to be. Sounds simple right? After all, an electrician is an electrician. A florist is a florist and so on and so forth. Of course, as we know, this simply isn’t the case. When thinking about what type of business you want to be, think about how you will portray this to your customers. Do you have the fastest response time? Will you be offering a high price product, or an entry level option? A good way to imagine the beginning of your value proposition is to think of the car industry. How does a Tesla differ from a Citroe? Are they both aimed at the same customer segments?
One of the key things to remember is that we create mutual value for our business and our customers where our value proposition meets their needs. Gaining customers is all about understanding their needs and giving them a reason to want to buy. There are lots of ways to ensure you can be in the front and centre of their mind when that buying decision is being made, but that is for another time. What all new companies and growing companies who want to attract new customers need to focus on, is making sure the customers that value their product, know they exist. That’s where market segmentation comes in. By using segmentation, you can put your customers into groups, that all act and behave in the same way, and use the same marketing message and channels to let them know you exist, and how you can create value for them.
As with any process, market segmentation has some rules and steps that ensure you deliver a great outcome. Here are some must haves to any segment, to make sure you can use this approach to deliver your message.
You should be able to identify customers in each segment and measure their characteristics, like demographics or usage behaviour. If you can’t do that, how can you treat them any differently to any other customer?
It’s usually not cost-effective to target small segments — a segment, therefore, must be large enough to be potentially profitable. If you want new customers and lots of them, its better to make a segment not only identifiable, but worth the time and money to target.
It sounds obvious, but your company should be able to reach its segments via communication and distribution channels. When it comes to young people, for example, your company should have access to Twitter and Tumblr and know how to use them authentically.
I always joke and say if your target market is 32 year old, single men who collect fidget spinners, you probably have an issue with your segmentation. Whilst some trends may be a flash in the pan, and of course, there was money to be made in the fidget spinner business. Long term businesses don’t generally segment based on current, on-point trends. Even a toy company, who may have sold fidget spinners would have marketed them to a specific segment.
A question I get asked a lot is, “when should I spend time segmenting my customers?” The truth is, that market segmentation is an ongoing pursuit. You cannot simply do it once and expect that to be your lot. Start-ups generally look to conduct market segmentation as a method of attracting new customers. This doesn’t mean established businesses should ignore it. In fact, segmenting or re-evaluating your segmentation should be conducted at the annual planning phase. Even if it is just a light touch compared to a bigger review every two to three years.