Choosing the best business market or customer group to target when your innovation has many potential opportunities - without wasting time and money - can be tricky. Here’s a simple market segmentation exercise that can really help.
Who is your target market? Market segmentation activity
This market segmentation activity is one of many offered as part of the Innovate UK EDGE programme and has generated significant results. I have recently seen a company, which had spent months trying to break into one particular market, reassess its strategy and save itself considerable time and money as well as reduce its risk.
Firstly, select three to five different markets or customer segments that might be suitable for your product. While you should always be as narrow as possible in marketing, it’s OK in this test to cast your net wide. So it could be a sector (such as aerospace) or a demographic (Instagram users in the south-east), but they should be a group of people that share common characteristics.
Then write down these three or more types of customer segments as a list, alongside four columns, headed Value, Access, Growth and Test. Score each of your selected segments in these four categories from 1-5.
Value
How much would this potential customer segment value your product? Does it represent something that’s missing for them? Does it have qualities that would enhance their day-to-day life or business? A score of 5 says they would derive a lot of value from your product; a 1 shows you think there’s less demand.
Access
Access is related to how easy it is to access this sector. If you’re a B2B medical product supplier for example, is it easier to access private practices or public sector organisations such as the NHS? How would you score the difficulty of gaining the attention of this segment?
Growth
Growth ranks how fast this sector or client group is growing in number. We have an increasingly ageing population for instance, but we are losing population in rural towns. Does this have an impact on the demand for your goods and services?
Test
Test ranks the ease of testing each segment to see if it is a good match for your product. Do you have access to representatives from this group to let them sample your MVP (Minimum Viable Product) and provide feedback?
Score
Then add up the four scores for each segment. You will have a score from 5 to 20 for each of your segments. The highest score indicates which segment should be your focus.
Clients are often surprised at the results of this short test – don’t let your preconceived ideas prevent you from trying this out. You might learn that it will save you time, money and reduce risk to pivot your focus towards an unexpected market.
As a result of going through this process, one high-tech manufacturing company decided to focus entirely on a smaller market that was growing rapidly – and they have since hired new staff to keep up with demand.
What is a target market?
A target market is a particular group that fits your business’s innovation. A target market can vary in size depending on your offering. Some examples could include;
- Car owners
- Men over 50
- Women working in healthcare
Types of target market
A Business to Consumer or B2C market targets individuals buying products and services for their own use.
A Business to Business or B2B market is one that sells goods or services between businesses.
An industrial market sells products and services for industry, for example, raw materials for manufacturing.
Target markets can also be segmented into;
- Demographics (who)
- Psychographics (why)
- Geography (where)
- Behaviour (how)
How to define your target market
Follow these steps for defining your target audience.
Market research and competitor research
Undertake innovation market research as well as competitor research to see who other players in your field are targeting and if you can spot any gaps.
Analyse your current customer base
Who are your existing customers? What are their needs, challenges and pain points? Which customers generate the most business or revenue? If you have it, draw on data, research tools and consumer insights to inform your report.
Create target personas
A target or buyer persona is an example template of your typical or target customer. You may have more than one. It will include;
- Personal information
- Professional information
- Education and income level
- Geographical information
- Values and goals
- Challenges and pain points
- Lifestyle habits
- Where they hang out - social media networks, websites, physical locations etc.
Identify a niche market
The more you can narrow down your target customer, the less competition you will have for your product.
Refine your innovation and marketing strategy
Once you’ve collated all of your research and identified the best fit, you can refine your product or service and marketing efforts to fit your best target market.
You can also start to identify market opportunities.
Bringing your innovation to market
Innovate UK EDGE can help you discover how to enter a new market. Our specialist sector guidance has been indispensable to a number of different businesses, helping them to grow.
