Small businesses have to compete not only with the big businesses but also with other existing small businesses for a share in the modern market place. Usually as the resources of a small business is limited and it cannot absorb big losses it has to invest its money very carefully. The most important asset of a small business is its existing customers as well as potential customers. The secret to retaining loyal customers as well as attracting new ones is to give better quality services and/or products than the existing competition at affordable and reasonable rates. Diligent market research needs to be done not only about the value proposition offered by the competitors but also the customers’ preferences and requirements. The market is not a homogenous whole but can be segregated into smaller subsets. The small business can then target different market segments by offering products and/or services customized to the tastes and needs of a specific market segment.
What is Market Segmentation
Market segmentation divides the whole market into smaller subsets consisting of customers with common likes, demands and inclinations. Remember that each market segment is completely distinct from the remaining segments. A particular market segment consists of persons having the same shopping mentality and have common interests. The persons from the same segment react in an identical manner to developments and changes in the market.
Types of Market segmentation and How Small Businesses Can Use That to Their Advantage
There are 4 main types of market segmentation.
- Geographic Segmentation- The market is divided as per geographical boundaries. For example, a small business can operate at a global, national, regional or local level. If you are a web content portal you will be impacted by a global audience. If you are a grocery store you will be impacted by developments in the vicinity or in the neighborhood. Global small businesses can add value by offering something that adds value globally. For example, making efforts to reduce the planet’s carbon footprint. On the other hand, local small businesses can offer value added services like home delivery or discounts to folks in the neighborhood.
- Demographic Segmentation- It classifies the market into different categories by using democratic indicators such as gender, age group, type of household, level of education, race, religion, nationality, ethnicity and more. Small businesses catering to a particular demographic subgroup can dole out inducements and blandishments to attract customers from other subgroups. For example, a ladies only cosmetic store can offer cosmetics for men. A small business operating in certain countries can have a presence /open outlets in other nations/territories.
- Psychographic Segmentation- It segregates the market by lifestyles, values and opinions. Small businesses can develop and distribute powerful marketing content to attract customers from other segments by attempting to alter their values and opinions. For example, a health food store could assert and prove with authentic scientific evidence that inexpensive food items have as much as nutritional value as the expensive super foods offered by the giant corporations.
- Behavioural Segmentation- It categories a market into subunits based on shopping and purchasing behaviour. By analysing the mentality of different subgroups small businesses can take advantage of their likely behaviour. For example, for attracting customers who frequent stores with good ambience, a small business can invest some money, time and effort into renovating their physical store. For people who research for purchasing decisions a small business can launch a website with comprehensive details of its products and/or services as well as the enterprise’s USP.
It is a well-known fact that small businesses have limited resources and the competition is pretty fierce in the marketplace. By identifying different market segments and coming up with innovative as well as practical ideas to retain old customers and draw in new ones a small business is laying a good and stable foundation for long-term success.