Segment the Target Market in Your Business Plan

The market segmentation concept is crucial to market assessment and market strategy. Divide the market into workable market segments -- age, income, product type, geography, buying patterns, customer needs, or other classifications. Define your terms, and define your market.

Segmentation can make a huge difference in understanding your market. For example, when a local computer store business defines its customer segments as "high-end home office" and "high-technology small business," its segmentation says a lot about its customers. The segmentation helps the company plan focus on the different types of potential customers. When I was consulting for Apple Computer in the mid-1980s, we divided the markets into workable categories, including home, education, small business, large business, and all others. Some other groups in Apple also focused on government as a specific market segment. As you define the segment, you point toward an understanding of the market. In the 1970s, I knew a company that was selling candy bars through retail channels. They segmented the market in a way that defined a range of products as "oral satisfacters" (their term, not mine). That included candy, cookies, soft drinks, and bagged chips. The segmentation helped the marketers understand their real competition, which wasn't just other candy bars, but also other products targeting the same customer money. That understanding of competition improved the marketing and sales programs.