Most companies (of any size or type or location) use some form of market segmentation in their strategies. They recognize that they should not try to market to everyone but rather focus on a specific group or groups with offerings and marketing communications targeting a specific segment of customers. BUT, are all companies targeting the right customers — and are they doing so properly? Of course, the answer is no. So, how can we do better?
As Ira Kalb, a professor at the Marshall School of Business (University of Southern California), writes for Business Insider:
“As a first step, businesses should find the right ‘ballpark’ in which to operate. An effective way to begin this process is to do a SWOT analysis. For those that do not already know, SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.”
“While you already have to have some idea of the market opportunities you want to pursue when you do the SWOT analysis, it is very important to define the marketplace your company is going to target. This may require some trial and error experimentation. Defining the right market follows the Goldilocks and the Three Bears metaphor. If the market you define is too big, you will be wasting your marketing resources trying to cover it. If it is too small, you will not make enough money (based on the share of the market you can capture). You need to define your market so it is just right. That is, you’ll make enough money to produce a sufficient return on investment, and will be able to cover the market with the marketing resources you can invest.”
“Whatever criteria a business uses, the way a company defines the market for its business could mean the difference between profit and loss. While there are often greater costs to service larger markets, there can also be larger returns and economies of scale. The more a business thinks about how it will define its marketplace, the better it will be able to succeed and scale the business as it grows. Hopefully, you will get it right, and if you don’t, all is not lost. A good marketing information system can help you to fine tune your market definition so you can get back on the right track — as P&G did with Febreze.”
Photo credit: Flickr/Geoff Gallice