How to Master Market Segmentation: Strategies for Success

Let’s dive into market segmentation, get tips and AI prompts to tailor your strategies and boost your product's success in this week’s edition.

Teams can often struggle to balance resource allocation, either doing too much or too little. If you have worked in tech, you might be familiar with this problem in project planning, when a manager decides to assign too many or just a few software developers for a specific task.

This issue can happen in all areas of product development during the entire development cycle. For startups, it is incredibly important to fine-tune their decision-making to the right focus, since resources tend to be scarce and limited.

At Apptimist Studio we understand that conducting market segmentation research can seem daunting if you don't know where to begin and are unsure about what exactly you need to understand to help develop your product.

By creating a research plan, you can save a lot of time and effort trying to understand who the customers are that you're building for and what they want and need from you. It helps you stay focused on your goal and avoid getting distracted.

Market Segmentation

Tech Target defines it as when a company divides its total addressable market into smaller groups depending on their shared characteristics. This allows companies to create targeted-driven products that employ these strategies throughout the development life cycle.

Segmentation for Marketing vs. Product Development

Market segmentation helps marketing teams figure out who to target and how to reach them effectively. It’s all about understanding different groups within your audience to tailor messages that resonate.

On the flip side, when it comes to creating products, segmentation gets more personal. Product teams use segmentation to create detailed user personas. By assigning names, backgrounds, and even visual identities to these personas, product teams can better visualize and understand the end-user.

This personalization helps in designing and developing products that specifically cater to the preferences and requirements of these personas, resulting in product relevance, brand loyalty, and user satisfaction.

Types of Market Segmentation

There are four main types of market segmentation:

Demographic: This type of segmentation focuses on personal characteristics such as age, gender, race, etc., as well as lifestyle characteristics like level of education, income, occupation, marital status, etc.

Psychographic: This refers to the process of grouping people together based on similar personal beliefs systems, values, morals, political affiliations, social status, interests, and other psychological criteria.

Geographic: It only looks at the location of the consumer. This type of segmentation groups users by place, whether they shop in the same city or live in the same postal code.

Behavioral: As the title explains, customers are grouped by their common behaviors when they interact with a product or service. For example, shopping habits or product feedback.

Navigating the Segmentation Process: A Practical Approach

Understand where you are at the moment.

Before you start planning how to approach this research, it would be useful to ask yourself a few questions first. Have?already decided on a market? have you already launched a product? Have you talked to customers? Have you done some research already, how much and about what?

Being aware of your progress and the things you've done that might help you with this research will save you time.

What do you need to understand about the market?

The book “The Personal MBA”?by Josh Kaufman?mentions?The 10 Ways to Evaluate a Market,?a checklist that’s helpful in identifying the overall attractiveness of a new market.

• Urgency?— how badly do people want or need this right now?
• Market Size?— How many people are actively purchasing things like this
• Pricing Potential?— what is the highest average price a purchaser would be willing to spend for a solution.
• Cost of Customer Acquisition?— how easy is it to acquire a new customer? On average, how much will it cost to generate a sale, both in money and effort?
• Cost of Value-Delivery?— how much would it cost to create and deliver the value offered, both in money and effort?
• Uniqueness of Offer?— how unique is your offer versus competing offerings in the market, and how easy is it for potential competitors to copy you?
• Speed to Market?— how quickly can you create something to sell?
• Up-Front Investment?— how much will you have to invest before you’re ready to sell?
• Up-Sell Potential?— are there related secondary offers that you could also present to purchasing customers?
• Evergreen Potential?— once the initial offer has been created, how much additional work will you have to put into it in order to continue selling?

Leverage Your Existing Resources

If you have existing customers, it would be a good idea to talk to them and understand what makes them choose your product. We go more in depth in our article about?defining who your customers are; you can read it here.

On the other hand, if you have already launched a product and are using a tool to track user behavior, you might want to analyze the data as part of your research.

If you really think about what you've done so far, you might be surprised at how much you probably already know about your market, and, if you are just thinking about it, do not worry. Starting from a blank slate can give you a lot of freedom to research, dig deep, and select a market you might've overlooked otherwise.

Other ways of carrying out research

There are many ways of finding information, some resources will provide more information than others, will be more time effective or completely free. Here’s a comprehensive view of the different tools you can use yourself even without experience.

There are many moments during product development, including launching the product or service, when you'll have to make decisions while thinking about the unique needs and desires of your target market.

Neglecting to understand the market you’re targeting can result in ineffective marketing strategies, waste of resources, poor product market fitness, issues with customer retention, difficulty scaling the product, and missed innovation potential.

When you speak your target customer's language, you increase their satisfaction with your product, therefore increasing your profitability.?A paying customer is what keeps the business going and creates opportunities for growth. This is the first condition for a business to succeed.

By implementing market segmentation, a company is capable of analyzing the factors that make each type of customer satisfied, integrating all aspects of the product offering. It also employs marketing techniques to explain the reasons why that market segment should purchase their product.

The Challenge!

If this is the first time you’re conducting this type of research it can feel overwhelming to pick and choose which way to go. We challenge you to run your own research planing workshop to get going!

Schedule a block of time so you can focus on planing, we advice you take between 30 min - 1 hour but this can be longer if you need a bit more time on a section. Here are the steps:

Step 1

Start by answering the following: have I already selected a market?

• If the answer is no, you can start by selecting it using the PVP Index as we explain in our article clicking here.
• If the answer is yes, write down all you know about your current market. Everything you can think of, including details you may believe irrelevant or unnecessary.

Step 2

Continue by downloading and filling out the questions in?The 10 Ways to Evaluate a Market?checklist and try answering them using only the facts you currently know about the market. It is important you stick to this so you don’t fall into confirmation bias down the line by answering based only on your own perceptions and beliefs.

Step 3

Take a look at the questions and answers. Were you able to answer everything? Are the answers enough to help you make informed decisions? Paying close attention to the questions you couldn’t answer and the answers you were able to provide will help you know what information you still need to research.

Step 4

Then you'd want to highlight or write down a list of all the questions that are blank and the ones you'd like to do more research on. This is when you want to pair a research tool or method to a question. For example:

• If you couldn’t answer “Urgency?— how badly do people want or need this right now?” take a look at the tool and methods table and pair it with one. Since this question is all about what people are saying check the “What information can I find on it?” section to the tools that gather this particular information.

Step 5

Go all out! Now that you know exactly what you need to answer and where to find those answers you just need to start the research. Remember this will be information you will come back to every once and in a while, specially during decision making.

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