You have probably heard about market segmentation a million times.
How a market should be divided according to age, demography, behavior or psychology to “attack” it better.
But, as on any trip, you must first establish your starting position by checking:
- What you offer.
- Whether it is a service, a manufactured product, a blog…
- What is the average costumer that might be interested without developing any marketing strategy.
- If it is a niche product, a mainstream product…
- Demography, Behavior, Psychology, Geography factors, etc.
Again, it seems quite obvious, but what we mean by this is: don’t stick to a certain market segmentation before you have analyzed your product and its “natural environment”.
From that position, you’ll be able to start “attacking” other nearby market positions with the appropriate marketing strategies (we’ll explain them now).
* You’ll find an open Excel Template within the “Marketing Templates” section with the complete and detailed Coca-Cola Market Segmentation example we’re about to explain.
Niches in Market segmentation
Once you have found your Starting Point, you must identify the Market Niches that “touch” the “natural environment” of your product.
- Then, you’ll be able to start building a proper market segmentation for your product.
To better understand why are we propose this procedure, we’ll explain the strategy used by Coca-Cola:
Coca-Cola Marketing Strategy
You surely know Diet Coke. But, do you know Tab?
In 1963, Coke launched this drink, thinking about the dietetic niche within the beverage sector:
- People with diabetes or similar.
In the sixties people were not worried about the daily amount of sugar consumed and, therefore, this product had a reduced target niche.
But, years went by and people started to care about sugar consumption.
Women were the first to worry, because of their greater concern for health and also because of the greater social pressure to be fit, especially in those days.
Then, Coca-Cola moved its target customer from a product focused on customers with medical conditions to a small-but-growing “health and fit niche”.
Once Coca-Cola, saw the potential of this new whole sugar-free market (it was not a niche anymore) they re-branded the product to “Diet Coke”.
In addition, they openly addressed women and “healthy people”(in commercials, the client was a women, but also a construction worker).
Here is an example of one of the first Diet Coke commercials:
Although “Diet Coke” consumption increased in all consumer profiles, Coca-Cola, realized there was customer profile that was not perfectly covered:
- Men who don’t like to admit that they care about being healthy or thin.
What did they do? Coke Zero. Practically the same product as Diet coke, but with the most men-oriented brand possible.
And “voilà”: you have practically the same product, covering the entire spectrum of customers with three different approaches.
This is the perfect example of how the same product can cover the entire market by correctly modifying its market positioning.
First, find your starting place, and then check the markets or customers that you can “easily” approach or drag to your “domains”.
How to do a Market Segmentation
We propose you our 3 x 3 matrix.
It is easy and very useful:
As you can deduce from the matrix:
- First: find your Starting Point.
- Where your product would be without marketing positioning or any kind of proactive effort.
- Second: Niches approachable that borders your natural environment.
- Important: you won’t target all of them, only those that would be of less effort for you or your product.
It is important to apply the principle of Minimum effort: If a Market position implies a great effort, don’t do it. It must be natural.
Coke and Apple can spend millions of dollars, but you don’t.
It is better to move from one place to another fluently than trying to build a huge bridge that will eventually collapse.
Within these “Niches approachable”, you can establish the traditional “market segmentation”:
- Where are your customers from, where you are able to sell your product… everything related to the word “Where”.
- How this group behaves, their hobbies, how they spend their money and time… everything related to the word “How” (they behave).
- How old they are, if they grow in number… it is a description of the population of your customer.
- They desires, fears… “How” (they think).
- Third: New New Potential customers.
- Some niches can drag more “potential external customers” than others.
Coca-Cola could have commercialized a special drink for cats, but this product would have not been able to approach the huge market they covered, so this niche would have been worthless.
* Remember: in the “Marketing Templates” section you’ll find a useful Excel sheet with the complete Market Segmentation of the Coca-Cola example. Check it out.
To develop a Market segmentation is not easy but, if you do it correctly, you have a greater chance of success.
For developing a successful Market segmentation, you should:
- Define your Starting Point.
- Identify approachable Niches with good potential.
- Approach new customers from that Niches.
You can use the traditional Market Segmentation categories within the different Niches you find:
- Geographic factors.
- Behavioral factors.
- Demographic factors.
- Psychological factors.
Remember the Golden rule: If a Market position implies a great effort, don’t do it. It must be natural.