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Today we are going to talk about the concept and the market segmentation examples.
I divided this topic into two sections.
We’ve talked about:
5 ATTRIBUTES OF A SUCCESSFUL ENTREPRENEUR,
3 BEST WAYS TO IDENTIFY YOUR TARGET MARKET and HOW TO MAKE YOUR BUSINESS IDEA A REALITY.
Now, segmentation is by far the most important thing that you will do in your company in terms of figuring out who your customers are.
There are a lot of different ways to segment.
We are going to use ISLIP Media company as a case study later in this book, meaning how they segmented their market.
And I believe that you will also learn from that.
#1: one of the market segmentation examples is geography.
I sell to the United States, I sell to Nigeria that’s pretty straightforward, or I sell to English-speaking countries in the world.
Or I sell to my local area, just my city.
There are many professional businesses who just sell locally, okay?
#2: of the market segmentation examples is by industry meaning, my customers are in a certain industry.
For example, my customers could be doctors who reside in the hospitals, that’s the medical industry, the hospital industry.
There are many other market segmentation examples, again I sell to this steel industry.
And it’s a pretty round segmentation, but it’s one target.
It might be the steel industry in Lagos Nigeria (Steel Mills) etc; so we are going to segment it down.
#3: another market segmentation example is an application – let’s use the doctors for instance. I might sell MRI; imaging equipment to doctors in the hospitals. So the application of my technology is MRI (Magnetic Resonance Imaging).
So I sell the software that fits into MRI, that’s the application for it. The other obvious one for the application is computer software. So in a database management or software company, okay? That’s an application.
Again, businesses use to act differently. Think of yourself, if you are a business person and you think of the thing you’re buying in your business you probably have different types of products you buy for your home.
For example, you might buy a laptop for your business because you travel, and you might want to spend $3000 or $4000 because you need to show some fancy video clips in terms of what you use it for.
But at home, you might buy the laptop worth of $500 that just has a few pieces of software. You’re the most concern of using it for the internet, and doing IM (Instant Messaging), some other basics and you don’t need more ability.
Again, it is very, very different if you go to Dell website checking some computers. The first thing the Dell computers ask you on their homepage is, “are you a business? Or are you an individual?
Then you will fall into a segment of small business versus large business etc.
Again, businesses and consumers are very differently divided, most companies can not sell to both parties. Selling to business typically means a sort of what they call, “a high-touch”.
You have to have a direct sale, it might be of the telephone, it might be the internet, but you are touching your customers directly. But you can’t touch consumers individually, it’s too expensive.
So you have to not have a lot of salespeople, but instead, you want to have something that leverages to consumers. So like a website where you can sell to millions of consumers.
#5: A high-end vs low-end – it’s another key segmentation; you think of a bigger business vs a tiny restaurant. They are targeting different people.
We are targeting low end now. What is low end saying? You are the low end; cheaper, less quality product because people buy a less quality product.
Now, on the other hand, you want to be let’s say, “Mercedes” okay? Or a better example, “Kia” or you could be the BMW. Each has its own market, and there are dozens of other ways to segment.
How ISLIP Media Segmented By Application
Let me give you a brief description of ISLIP Media. What ISLIP Media did was it had a video search engine basically.
So it could go inside a video, and it could search the words in the video by using pitch recognition, face matching, image matching and things like that.
So they have to determine who will be the customers. Now it wasn’t in the days of YouTube, this was the days when media was all generated by big media companies.
So what about first segmentation? There is the business market for industry,
- the business/corporate
- the entertainment industry
- the government
which is an industry in itself and
Those are the four main industries. We further segmented entertainment into:
Again we are talking about video. So what they said was to target their search engine product for news which would be very different than targeting features like films, okay? So those were all the choices.
What they did was they actually crossed out the business and corporate market that mostly has to do with training videos. And they didn’t feel there was a large market enough there for them.
They also crossed out education for similar reasons; it’s just the willingness to pay and building for those people to pay.
Their software was probably $50,000 to $100,000 range which was not going to be something that you could not afford.
Then the government – they didn’t just feel they had the contacts, and again that the applications weren’t right. So they chose the entertainment industry, again with the further segmentation.
They thought about people searching inside of videos and then playing the videos.
So inside the entertainment, they ruled out future films because they said, that’s not what people want to do. People just don’t want to play a clip when a certain word is on the screen.
Well, as the news set clearly, there is the ability to search videos with “in the news” such as CNN and then play the video from there.
So with all that industry segmentation, they chose entertainment and sub-segment which was news, broadcasting, and sports as I mentioned in the “a, b, c, d “above.
In this case, in each of these different industries, there were different applications.
There is what they call, (a) Real-time application – what that meant was instantaneous searching of videos, okay?
And obviously, something like news if you want to search it right away. Something like broadcast, let’s say a show on a history channel which could be different; then news station.
(b) The second application was archiving – this was to take large quantities of archives that were in the video out of the archives.
Then index them so that they could be searched. And then there was (c) Training – and then there was the
They ruled out archiving because in talking to people it was pretty obvious.
People weren’t going to talk as they said in the industry literally, take this out of the libraries and spend all this time interviewing and indexing them.
So they ruled that out. Real-time made much sense because there was a lot of videos being generated literally by the second, by tv stations, news stations.
And people would want to search that and play video. The internet was also another one that I think made a lot of sense. As in application, because video back then was really just started on the internet.
But people would put in video clips on the web, and the ability to search them was very important.
Training was the one they actually ruled out, and that again is a good application in terms of the usage of their technology.
They didn’t just make enough money in training business at that particular time. So again, segmenting the entertainment, then news, broadcasting, and sports within that real-time/internet.
So that was ISLIP segmentation in terms of targeting their customers as one of the market segmentation examples.
Finally, ISLIP Media is a typical example of a market segmentation to target your customers. So if you want to sell your products, you may target locally or globally depending on the level of your business. Most companies don’t sell to both customers and businesses. They either sell to businesses or customers.
Let me tell you a short story on how Sunday Steinkirchner started her business with $1.
Thirteen years ago, Sunday Steinkirchner and her husband picked an old tattered copy of Alice’s Adventures in Wonderland at a street sale for $1.
Their find became a business idea, and they made that business idea a reality. The couple bought books at estate sales, $1 per book when they started the book business, though it was not easy.
You know what I mean; when starting a new business there tend to be ups and downs, ins and outs, but you need to persevere.
So one day, they picked a Portrait of the Artist as a young man; a popular novelist which was the first US edition. And they bought it at the rate of $10, when they got home they researched on the title and find out that they had the true first edition in their hands.
It was first published in the US, and it worth $4000. Immediately, they sold it to a customer they had met online at $4000. So they used their profit to buy more of their usual books per $1. You can imagine how many books they would have on their shelf.
She said, “we went from having 9-5 day jobs and selling books part-time out of a studio apartment, to opening a gallery on 20th Street in Manhattan just this march.
We went from two employees – just my husband and me – to four employees”.
3 Major Questions You Should Answer
Start as little as you can depending on the type of business, hence your products or services are marketable.
But before you can make your business idea a reality there are three major questions you should look at first:
#1: How did you create the idea? #2: Did you evaluate the idea? #3: How did other people in that line of business start?
But before we continue let’s look at those simple questions above in a bit details. Because they can also add to bringing into reality your business idea.
#1: How did you create the idea? So where your idea came from is very important. A study has it that most business ideas come directly from personal experience meaning, your occupation. Right? You understand the people who tend to buy your products, the competition.
And generally, you understand the market. Again, for example, in this particular Street, or place nobody else is doing this kind of business.
#2: Did you evaluate the idea? Okay, now you’ve got the idea, how do you know is a good idea? So before you make the business idea a reality, I believe you might have also answered the previous question.
#3: How did other people in that line of business start? At least before you kick-start the business, I think you might have as well check out other people in that type of business.
I mean how they started because some companies have been in that type of business before you. For example, you can research their beginning days, the hurdles, the challenges they conquered and many other ups and downs as I mentioned in the story above.
Then from there, you can avoid some possible mistakes you learn from their past, and also the wise decisions they took that make them successful today.
A Step-By-Step Guide
There are necessary things you need to put to note that will make your business idea a reality. Before you start any business you should think of people first, whether they be employees or customers even yourself.
- The first one is risk-taking – We talked about the 5 attributes of a successful entrepreneur earlier. In that post we talked about being a risk taker as an entrepreneur, I don’t mean gambling in Las Vegas like most people do. I mean a well-calculated risk which means, you are ready to bet your finances or the firm.
- Courage – another thing is that you need to be courageous. They say, “there is no harm in trying”. You have to take a bold step when you want to establish a business. One of the key reasons why your business may not come to reality is when you don’t have any experience, or you’ve not had any training in that type of business. So what you need to do is, ask around, get to know the right place to acquire the necessary information on that business type you desire.
- Skill – now as a person I believe you know what you can do very well? Are you a marketing kind of person? Or a sales kind of guy? Finance person? management kind of person? etc. If you don’t have some of these skills you go and get somebody who is good at that depending on the type of business idea. Just be realistic, get the necessary things done and show me why your business idea will not be a reality. That takes us to the next one.
- Decision making – you know yourself better than anybody else. You make some decisions and apply them yourself. So like as I said earlier, after evaluating your idea and you find out it was good, then make that decision by putting it to work.
I mean, take a bold step to establishing the business.
1. Rent or buy a business space
2. Register the business with the Corporate Affairs Commission of your city
3. Print you Brochure
4. Print your business Cards
and other marketing documents.
Make sure you have some few skillful guys to work with. You can even start alone in some businesses, and still, come out successful. You have your products or services already in place, then start your operation. So with those things in place, your business idea will be a reality.
Answer The Start-up Questions + The Step-By-Step Guide = Business Idea, a Reality
Finally, if you take the necessary steps I outlined above you will surely ride on the Eagle’s Wing of your new business. The questions and the steps. You can also learn from the story above to make your business idea a reality.
It is true that to hit a target with eye closed is hard.
So to really identify your target market is very important for your products or services. Without your target market’s goal is like joining a train randomly.
You know you are going somewhere, but you don’t know the place you are going to. You only hope it’s somewhere beneficial if you don’t book your destination.
“Perhaps we’ll never know how far the path can go, how much a human being can truly achieve until we realize that the ultimate reward is not a gold medal but the path itself” George Leonard
Don’t stop reading, we are getting closer.
So in this short post today, you are going to discover the best ways (formulas) to identify your target market.
We used the term formulas because there are many different products, but you can apply them to your product or services’ type. It is a roadmap and I believe you will understand them and apply them correctly to your industry.
The Big Market
Let’s continue on the concept – the target market. Companies like China Mobile Limited, Verizon, AT&T etc target big market. For example, here is China Mobile’s operating data:
You may say, “what do you mean by the market”. Believe me, a lot of people have difficulty with that concept. when I say “market” I don’t mean marketing.
The target market is sort of collection of people who will buy your product. I know that most of you already know about that but don’t worry, we are heading somewhere.
So, when there are people who you sold to last year, let me say, there were 500,000,000 cell phones sold, that’s the market for cell phones ( i.e the industry as a whole). That is the total market for that particular product.
The Small Market
Now, the market can also be very small, and again we often use the restaurant as an example because people can understand them. This is another one from The Japan Times LIFE:
And a market for a restaurant might be what the total sales, or revenues of all the restaurants in my particular area. That could be the available market that I am selling into, and obviously, it’s my goal to get some percentage of that market that I will sell to. It is the people I am going after.
So answering the following question, “who will buy your product? Who will specifically buy your product? That is very important. So you don’t have to say, “after all, I am selling to many women under the age of 60”. It’s absurd, there are too many people; you have to segment them.
You can also read, “the target market segmentation” but who is going to buy your product? one of the best formulas is on this question “Who has the most pain or gain?”
Now the best ways to identify your target market:
#1: Pain is more important if you can really solve the pain that someone has. For example, something is very expensive and you can make it a lot cheaper that’s a serious pain. The gain, on the other hand, tend to mean, how can I improve say, my company?
So if you buy my software product you will be able to double your profit. That’s the example of the gain as a post to you being able to lose fewer customers of that pain. Or your network won’t have many security bridges, that’s pain.
#2: Target – If you want to answer the previous question, you also want to look at who is the most likely first target? Do you want to answer the question which is, how big is the market? Meaning, what is the size of the market in terms of the number of customers? What is the size of it in terms of the number of revenues or sales?
#3: Defining The Characteristics of The Buyers – Okay, now, when we figure out the total market and then going to figure out our piece of that particular market. We need to really define the characteristics of these buyers.
You can’t just again, say male or female under the age of whatever, or students who attend college. It is not good enough, you have to pick a group that is similar to one another. Students in colleges are just too broad.
Let me give you an example of a target market to break it down. Students in the top quartile of grade, who are in engineering programs, at the top private universities in the west coast.
That’s a very definable market. You can figure out the engineering schools, you can figure out students who are getting better grades. You may list out their names to target them; west coast is pretty obvious as in US universities. You can use any country for this analogy.
Again you are segmenting your market, and the key to success is to quote on the market. Meaning, to have a significant percent of the sales in that market. Let’s assume, for example, in this particular market, I am selling pocket protectors.
It is good for engineering students. Pocket protectors are containers designed to hold writing instruments, such as slide rules, pens preventing them from staining wearer’s shirt pocket like leaky pen etc. Great!
So it will be a lot better, frankly, if I own 40% of this top quartile of students in the west coast in the US universities. Then if I owned 1% of all of the private universities in the world, and I just insignificantly drop from that 1%, I can’t make a profit.
There are too many other companies that are going to dominate that market, who are going to basically dictate to me what to do. So it’s much better to start with the definable market that is frankly smaller and then grows that market.
Conclusion: like as I said before, this is a roadmap to how you can identify your target market. So you should know the group of people you are targeting, their demographics, psychographics, geographic and what have you.
And again if you are a manufacturer you already know your target market before you even manufacture anything. Or you sell products, as long as you understand the product you sell, what it can do for me as a writer, you are good to go!
So which other methods you think that can help somebody correctly segment their market?
Most people ask questions like, what is the purpose of having a business plan? What is the purpose of writing it?
What are the purposes of an executive summary of a business plan and things like that?
You do not need to overlook those things, they are very important. Little things you overlook at the early stage of your business could become a huge mountain that appears magnified and could make you overwhelmed.
Therefore, this kind of overload to the brain could just be the negligence of this simple thing “the business plan document”. When you finish reading this post, you will become more organized, trust me.
The executive summary is very, very important, it should be the first part of the business plan. It is something you give out to people just as it is called “the summary” not the whole plan for a number of reasons such as financial information or things like that.
So let us take a look at the 3 main purposes of the business plan.
The business plan develops focus so that everybody in the company is on the same page, everybody is in focus as soon as you explain the plan. It gets you on what you should be thinking at the moment, things that relate to the business.
Investors require the document, they might scan it and put out specific details. They would also want to see the forecast for your company in terms of financials.
The document as a marketing tool should look good, polished, have diagrams in it and should be edited well. Pictures worth a thousand words in any document and little things really matter.
Do you have any other business plan purposes that you want to contribute? Or you want to learn how to write an executive summary? Bplans has how to write one here. You are free to say your mind. There is a comment space below; use it, and do not forget to share with your friends or fans.
Challenge is one of the key reasons you consider becoming an entrepreneur. I mean the idea that things are not just easy in this country today, trying to overcome your Goliath, the way to win and succeed.
Now you are going to pick some important facts as you consider applying any business ideas in Nigeria. “the science of human psychology still works perfectly today”
Let me tell you a short story on how a very close friend of mine used this principle to start a business that he has never run before.
He was into a stationery business in Aba, Abia state and things were not working out at all for over 2 years in that business, in the sense that there were high levels of competition.
Where there is high levels of competition customers tend to be at an advantage. You bring in your product, they either delay the cash or they complain about little things; you know what I mean.
So he started planning to change to another business. The first step he took was to consider 3 things:
#1: Location—he moved temporarily to a close by a major city (Calabar), he took the time to analyze the market. What I mean by the market is the people who would likely buy the product you want to sell.
#2: Demographics—meaning, male or female of about maybe the age of 25-30 or 30-45, income and things like that. So he had gone to a particular location and find a marketplace where there were many women.
He looked around and asked himself some simple questions such as, which other business are they not trading or is not common here?
Which service could women be interested in? The next one answered his questions.
#3: Psychology—if you study the lifestyle of average Nigerian men you would notice one thing in common. If it comes to sports and you mention Football, they would respond in mars compared to other sports.
I hope you figured things out psychologically here? Likewise, women they tend to love movies so much.
So my friend applied this principle “the science of human psychology”, and came up with an idea to sell and also rent Nigerian current films (home movies). Where there was little or nobody doing it.
The Testimonial: an Encouragement
Now my friend trained himself and his two younger brothers in the University through the business of the film. And as I am talking to you now, he is a graduate from Unical, happily married with a kid.
You can apply the same principle and believe you me, it can work out for you perfectly too.
I recommend this powerful business boosting book to you here “The Business School, Robert T. Kiyosaki” when you get to the page just type in the Item ID: 479284 in the search bar and get a copy.
As I researched on a topic this morning, I came across a lot of Nigerian bloggers who listed the business ideas in Nigeria. Some listed 10, some 20, some 100 and so on, I was very impressed to see Nigerians really coming up with great resources.
But the question is, do you know that you may not succeed on just any of those business ideas in Nigeria if you don’t consider some basic facts?
What if you start a restaurant business and you do not have the management skills? Or you want to start the sales of Cement and other building materials, and you do not know how to segment the market?
Again, you want to start an internet business, and you don’t know the different channels to promote it so that you can get a lot of traffic, leads or sales? Don’t quote me wrong, I am not trying to discourage you rather; I wrote this piece to support you make right decisions before starting up any business you never run before.
So let us iron out each of those questions above.
Now, check out the list of the important facts you need to consider before you apply any of those business ideas in Nigeria:
#1: Passion—do you have the passion for that business? Or do you allow what I call the voice of conformity spring up from your mind? Why I asked those questions is because People with passion make themselves good entrepreneurs.
The Co-founder and C.E.O, Infusionsoft CLATE MASK said, “Passion, Freedom, and Impact are the 3 Ingredients of Business Success”
The voice of conformity means that you want to be like Mr. A, or Mr. B. Because you see that this person is really making it in a particular business doesn’t necessarily mean you can too.
That particular enterprise might not be for you, for various reasons.
So check yourself very well whether you have the passion for the biz before you even think of starting it.
#2: Lifestyle—your lifestyle could be a roadblock to any business you may want to kick-start, or an open door depending on the type of biz. Let’s look at this example, somebody who is not settled can not personally run or manage a digital marketing business.
Because digital marketing needs focus and consistency.
So, you have to choose a business base on your lifestyle except, if you can make a U-Turn to your lifestyle.
#3: Environment—environment matters a lot for business oriented people. A particular environment might not be good for your chosen business, that is why you need to segment your market.
We will talk about segmenting a bit later. So you should choose your startup environment wisely.
#4: To Prove it to Yourself—I can tell you from a personal experience. When I was part of a successful business, being able to look at myself and said, wow! I was part of this business. Things like:
I know the effort I made for the success, now as I want to be my own boss I won’t find things difficult because I’ve really gathered much experience to run mine. So the question is have you been into that type of business before?
You need some training in that particular enterprise, you can take these Individual Training Courses online depending on its nature.
#5: Management Skills—when I say management skills, I am talking about people’s skills. If you interview a number of C.E.Os about how they spend their time, their responses are:
mainly managing people, solving people’s problem. Again, internal plans and everything that has to do with people. You might not be the man or the woman of the people, you might not be good in some areas.
You will need somebody or people who are good in those areas for managing your business such as finance, marketing, sales and things like that.
#6: Segmenting The Market—who are the people you want to sell your product/services to? The market may be big or very small, like as I said before market means people who are going to buy your goods. So you are going to do direct market research meaning, going to meet your customers face to face to tell them why they should buy your product.
For example, you want to sell this product specifically to students. But when we say, “students” the market is still broad you need to segment it further.
You should target either the high or low-level University students; Junior or Senior secondary school students if you must be realistic.
Let’s take another example, remember the story I told above about my bosom friend. He segmented the market by targeting women, you can target men of any age limit base on your type of product/service.
#7: Marketing—You need to go for marketing to let customers know that your business exists, or you hire marketing people. Who are your customers? What are they finding difficult?
Who are your competitors? How can you solve customers problems even slightly better than those competitors? Those are the questions you must have in your mind when we talk about marketing.
3 Steps to Taking to Market Online
Do you want to market online? If you say “yes” here are 3 basic steps to take:
#1. Distribution channel—so you need to choose your distribution channel, a blog, or a website or community forums. That means you should have a website or blog where you want to talk about your business.
#2. Promotion—social networks like Facebook, Google+ etc are where your fans and friends will know about your products or services. So those are the places to promote online, you can also use advertising like PPC (pay per click) if you are ready to pay for advertising online.
#3. Search engine optimization—most entrepreneurs are yet to know the power in search engine optimization (S.E.O). It is very important in today’s online marketing to make your products visible to millions of customers. So you need to optimize your blog or website.
Conclusion: if you have gathered some business ideas in Nigeria today, you should check your passion for the business, your knowledge about it, how to promote it, capitalize on the weaknesses of your competitors.
You should be able to analyze different things about your customers, and people who will also work with you. You should consider the location of the business, how is it in terms of competition and buyers.