Market Segmentation for the SMB

Market Segmentation-Defined

I recently met with a client who has built a successful business selling mobile phones, accessories and services to consumers via a retail, ‘brick and mortar’ storefront. It’s the perfect example of a B2C business, or Business-to-Consumer. As part of our my agency’s strategic marketing planning exercise, we dug deeper into learning more about the business, helping formulate a comprehensive marketing plan prior to recommendation and tactical execution. I was excited to learn about a unique B2B (Business to Business) opportunity that included reaching and selling to a new audience of customers; small businesses in the area, a “segment” not pursued to date. This new market segment shed some light on potential new revenues and sales/marketing benefits. It’s likely it would require a dedicated sales resource and potentially targeted messaging and marketing. However, the idea of opening up new profitable customer relationships came in as pretty exciting news especially during a time when nearly every business is looking to earn more for less or with what they have.

It got me thinking about how many other small businesses are either to caught up in their own day-to-day to consider other audience segments that could generate new revenues, offset current losses and/or potentially be spun off into completely new businesses….

Investopedia cites and explains the definition of market segmentation as “the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another. Generally three criteria can be used to identify different market segments:

  1. Homogeneity (common needs within segment)
  2. Distinction (unique from other groups)
  3. Reaction (similar response to market)

For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners will respond to very different advertisements.”

Why Focus on Different Markets?

When there are notable differences and profitable opportunities in a market, it’s best to consider market segmentation. Businesses focus on those market segments as they are those “most likely” to purchase your offering and, in turn, offer the highest return for those specific marketing and sales expenditures. In some cases, segmenting your market can lead to a competitive advantage, as well.

Laura Lake in her article on “Market Segmentation for the Small Business,” states that markets can be segmented or targeted using a variety of factors. The bases for segmenting consumer markets include:

  • Demographic bases (age, family size, life cycle, occupation)
  • Geographic bases (states, regions, countries)
  • Behavior bases (product knowledge, usage, attitudes, responses)
  • Psychographic bases (lifestyle, values, personality)

She goes on to suggest that a business must analyze the needs and wants of different market segments before determining their own niche. To be effective in market segmentation, keep the following things in mind:

  • Segments or target markets should be accessible to the business.
  • Each segmented group must be large enough to provide a solid customer base.
  • Each segmented group requires a separate marketing plan.

I would add that the market segment of interest also be qualified for profitability. As in the case of our client, an investment of direct sales and specific marketing resources would need to be allocated to pursue this new market. It might turn out that that investment compared to the return is simply not feasible given the business’ cash flow or marketing-to-sales risk tolerance. On the flipside, if you are operating a franchise or are owned by a larger company, pursuit of a new market segment may qualify you and your business for specially allocated co-opt funding to market and sell to that segment.

Qualifying a New Market Segment

The way you can qualify the profitability of a new market segment is with formal and informal research. Here are some tips:

  1. Seek quantities of your segment by searching trade association and Chamber of Commerce information to get a good sense of the size of the market.
  2. Research what your competition is doing with regards to this segment. Are they pursuing them as well? To what extent? And, with what degree of success?
  3. Pay close attention to other sales and services provided to this segment to get a sense of how they typically buy. For example, do they make sweeping purchases for the company? Do they have a set ordering cycle? When do they make their decisions (i.e. fiscal or calendar)?
  4. Create an informal mini focus group with one or more of your new audience segment. In other words, get close to a potential customer. Offer them an incentive for their time in return for answering valuable questions.
  5. Assuming #4 goes well, consider setting up a specific use-case where products and services are transferred (either pro bono, at a discount or as a true sale) to test the validity of your solution and the satisfaction of your products/services to their need. Once you have a use-case, you can print that up and use it to help sell packages to other prospects within the segment.

Wrap Up

You could be sitting on a goldmine with a new market segment and simply not know it yet. So, take a minute to step away and re-think your business opportunities and customers. Your business may change dramatically for the better!

About the Author

Angelo Biasi is General Manager of SMART Marketing Solutions, LLC, a leading full-service integrated marketing company in Florida and New York since 2001. He has helped create and execute marketing plans and integrated marketing solutions for companies such as Playtex, Bic, Rogaine, Tauck, and over 35 colleges and universities, to name a few. Angelo has an MBA in Marketing from the University of Connecticut and teaches Marketing at New York University where he has for over six years. He has been quoted and/or featured in USA Today, Mobile Marketer magazine, Mobile Commerce Daily, Luxury Marketing magazine, BNET TV and Business Currents magazine, to name a few. For more information or to learn more, email him at abiasiatsmartmarketingllcdotcom  (abiasiatsmartmarketingllcdotcom)  , visit or call 239.963.9396.


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