Do You Need Market Segmentation to Define Your Target Market?

A full market segmentation offers multiple priority targets, deprioritizes less promising groups, and allows you to optimize your marketing resources.

Consumer behaviors, beliefs, and needs have been radically altered since the events of 2020. As you look at the market and your business, it’s important to ask yourself if you still understand who your best target segments are.

As a marketer, your job is to position your brand to sell as much of your product or service as possible — but smart marketers know their chances of doing this increase if they paradoxically focus their efforts on just a part of the market. It is a rare brand (typically a first-mover in a new category) that can be all things to all people and succeed without a differentiated offering or position.

Most brands compete in existing categories and do so by carving out their own niche ― the portion of the market that wants (or can be encouraged to want) their brand or offering the most.

Market segmentation research is commonly used to identify and understand the types of customers within your target market. They’re the portion of the total addressable market you plan to attract, in comparison to other market segments you won’t invest as heavily in capturing.

For smaller brands — or for those with a new product or service to launch — identifying just a single target market segment can offer a smart way to focus time, energy, and resources for maximum impact. For larger established brands, having multiple targets may be required to meet revenue goals.

Do you need a market segmentation, or just a target segment?

A market segmentation study is a foundational piece of research that lets you understand the full lay of the land in which your product or service is operating. It sub-divides your market into a set of mutually exclusive groups which are differentiated from each other in actionable ways to help you set strategies, drive innovation and messaging, and deliver targeted or personalized messages.

Some segmentations are defined by concrete traits, such as demographics or business characteristics. Others are characterized by less tangible metrics, such as attitudes toward the category and the needs it is used to fulfill.

Most segmentations generate 4-8 mutually exclusive groups from which marketers typically pick 1-3 target segments for their brand. They do this since they want to devote more of their resources against those groups that represent the greatest economic potential and where they believe their brand has the greatest chance of winning.

Some marketers choose a “North Star” with the goal of retaining and supporting the position where their brand is already strong, coupled with another segment or two that represents growth or innovation targets.

Other marketers manage product or brand portfolios and use their market segmentation to set disparate targets for each to maximize reach and avoid cannibalization.

In either case, the richness of a full market segmentation is helpful since it offers multiple priority targets, and lets you set aside the lower priority groups that will not receive precious resources.

How do you define a target segment without a market segmentation?

Some marketers really only need to understand one group of consumers, or a singular target segment.

As an alternative to a full-scale market segmentation, an existing brand with a clear positioning and a set of loyal consumers might choose to do a “Prime Prospect” study.

In this approach, we create predictive models to identify a common attitude and needs profile for the group of current “Core Consumers”. We then size and profile the members of the group who display these traits; they are the target segment. Within this group, those who are not yet embracing the brand are considered “Prime Prospects” for acquisition and conversion efforts.

In contrast to a traditional market segmentation study, we identify a single target segment and make no attempt to understand the several different types of non-targets that exist in the market.

Alternatively, a new brand from an engineering- or creative-driven company may have a muse in mind for whom they have developed a product or service. Still, they’ll need quantitative research to find out how large that segment actually is, how much market potential it offers the new product, and what other needs and traits this group possesses. A “Design Target” study can quantitatively identify and profile this target segment.

How to use your target market to better personalize your digital marketing

Unlike simply profiling core consumers on their attitudes, needs, or other traits, executing a Prime Prospect or Design Target study can also set you up for future research.

By providing a typing tool with a set of “golden questions,” you can use this type of study to classify future research participants into the target vs. non-target segments.

You can then do additional research around positioning, messaging, pricing, or feature optimization among just the target segment, increasing your chances of success.

Once you’ve quantitatively defined your target segment, you can build a custom audience to activate in market by targeting advertising to those most likely to belong to your target segment.

Not only do you get to know your customers better, but you can focus your limited marketing resources where they’ll create the greatest impact.