How to Choose an Established Segment or Go After a New Segment to Market Your Product
In developing its marketing plan, a company seeks to identify its target market -- the group of customer prospects who have the strongest need for the products being sold by the company. Within the overall prospect group, there are smaller groups referred to as segments. Each segment has different characteristics, such as age, location, income level or primary language spoken. An established segment is one that is already using the type of product being marketed. A new segment is one that has a need for the product but is not currently using it.
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Instructions
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Determine the size of each segment and the projected growth rate. Look for larger segments that are now growing rapidly or will in the near future. Consider choosing a smaller segment with enormous growth potential over one that is large and stagnant.
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Evaluate the strength of the competition. Just because a segment is new doesn't mean your company will not be facing competition if you enter it. Other companies may have identified the same opportunity. If the established segment has large, entrenched competitors that have competitive advantages over yours, such as being a more recognizable brand, going after the untapped new segment with fewer competitors is a sound alternative.
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Assess your company's marketing and financial resources. Building a customer base in a new segment requires an education process -- you have to show customer prospects why they need your product or service and build awareness of your company's brand. This requires both marketing skill and the deployment of financial resources. An established market segment is aware of the need for your product but may not be aware of your company.
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Evaluate whether the benefits you offer prospective customers closely match their real and most urgent needs. The risk of entering the new segment is that customers may not view the benefits you are offering as important enough to motivate a purchase. The established segment may view post-purchase service level as the most significant factor in the purchase decision whereas another market segment may be primarily looking to save money.
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Tips & Warnings
Companies that maintain a steady upward trend in revenue growth make it a part of their strategic planning process to continually look for new market segments in which to expand. They recognize that established market segments may reach a saturation point where there are too many companies fighting for a limited number of new customers.
Before committing large amounts of time and making financial commitments to go after a new market segment, do some test marketing to evaluate its true potential. If you get a lukewarm response from customer prospects in the new segment, you may want to rethink your marketing approach to reaching the new segment or not pursue the segment at all.
