I speak to a lot of businesses and this is the one thing most of them get wrong: how they segment their market place.
When I ask the inevitable question, “Who buys your stuff?”, I invariably get an answer like this:
“Most of our customers are small businesses with a turnover of up to £250k and a team of five people.”
“Women, aged 40 to 50 with older children and the husband as the main breadwinner”.
These businesses then go on to develop marketing and sales plans aimed at these “segments”, with the goal of getting them to buy from them. It kind of works. Kind of. But in all honesty, they are wasting their money. Why? Because they aren’t segmenting smartly.
What smart segmentation looks like
Smart segmentation of your market place should be primarily based upon the problems you are solving.
Then you can pop all the geo-demographic stuff on top of it. But start with problems first. This takes the principles of “multi-level segmentation”, choosing customer need as the first segmentation level then descriptions of who they are next (so you can actually find them).
Let’s look at one of those inevitable answers I get and see how we can improve it.
Example 1. IT Solutions company – Who buys your stuff?
Typical answer: “Most of our customers are small businesses with a turnover of up to £250k and a team of five people.”
Smart segmentation answer:
Conscientious strugglers: Our clients are struggling SMEs who have been trying to get away from the owner-led start-up phase and begin to make money that doesn’t depend on the owner working 70 hours a week. The business owners are hard-working, conscientious people who have a family to support and a few team members. They are really time poor as they are working so hard “in” their business to earn the money.
Geo-demographic detail: Typically, they provide professional services e.g. accountancy, consultancy or creative services e.g. graphic design, web design and have their own small office in a serviced office complex. They have a budget of about £5k to spend on IT Solutions but are unsure what will work best for them. Given our location, we are targeting these Conscientious strugglers who are within a 50 mile radius of Southampton.
Breaking it down
Problems they want to solve: trying to get away from the owner-led start-up phase and begin to make money that doesn’t depend on the owner working 70 hours a week. We can solve these problems with our IT Solutions helping them earn the same amount and more money in less time.
Your marketing messages: need to be about “saving time” and “using IT to help you move up to the next level”, “giving you the success you want and the time back you need”.
Their attitude: hard-working, conscientious people who are struggling to break the cycle of working longer hours to earn more. We know this means a lot to them, so we have to really prove how this will help as they can’t afford to waste time or money. Lots of testimonials, client references and case-studies.
Barriers to overcome: really time poor so they need help to make the right decision and have it laid out easily for them
Where we are going to look for them: target all business centres and serviced offices within a 50 mile radius of Southampton.
Which is going to help your marketing be more effective?
Now, imagine your company had multi-level segments based on the problems you were solving first then applying some attitudinal approaches then finally figuring out the geo-demographic data. How much more powerful will your marketing be? You’ll be developing marketing that will really speak to these people and show them that you understand them. Equally important, you will be wasting less money.
Or you could start targeting all small businesses in your area with a turnover of up to £250k and some generic marketing messages about helping them use IT to make their business better. It’s your choice. But, unless you have time and money to waste, best to make it the smart one.
Kara Stanford is a Strategic Marketing Consultant.
She helps growing, ambitious businesses determine who they are really selling to and then create meaningful segments. This means her clients’ have more effective marketing and are more successful.
Contact her so she can help you.