The intricacies of running a business are many and varied; but in a broad sense, effectively running a business entails offering specific value in the form of products and/or services to a group of customers who actually want what you have to offer and are “willing to pay” for what you’ve got.

Most business leaders and experts will agree that some sort of customer segmentation is necessary before you actually launch out. Here’s why.

First off, you can’t serve the whole world, or at least, not yet because you just started business. You need to do some prioritization in terms of picking who to serve, determining what these people actually want and delivering what they want at a price point and place that makes sense to them. This process of prioritization is called “segmentation” and it happens to be one of the cornerstones of marketing.

Even if you’re in the booming smartphone industry which definitely has a large market, you still need to segment the market into categories. Upon doing this, you’ll realize that the consumers have different tastes. The price sensitive ones will be severely attracted to low prices, so giving them the cheapest smartphone on earth will win their hearts almost permanently. Others may be less price sensitive, preferring, instead, phones with high-end aesthetics. These ones will value beauty, texture and how the phone fits into their lifestyle; when they find the right product, they usually would not mind paying a higher price just to secure it. Lastly, you’ll find those who just want a phone that lasts, irrespective of price point or aesthetics. They prefer to pay a fixed cost upfront, knowing that they would spend next to nothing on maintaining or repairing the phone after purchasing it.

The next lines show why segmentation must absolutely precede production. If you did not segment the smartphone market before penetrating it, you may produce a phone that is average on all three dimensions and “will end up pleasing nobody.” A smartphone that is neither cheap nor beautiful nor durable will hardly sell in a market whose customers love these same three cardinal factors because this average smartphone will not be at a low enough price for the price sensitive customers, not be durable enough for those who believe in “long life” and not show enough beauty for those who are crazy about aesthetics. The end result is a product that the market will reject, period!

The segment you eventually choose introduces all sorts of imperatives for the structure and strategy of the resulting business unit. For instance, if you choose to serve the customers who love beauty, you will end up spending higher on research and development (R&D) in order to keep ahead of the competition, you will absolutely have to hire deeply creative people who have an eye for design and style and your organization must be “flatter” than most others because deeply creative people would usually detest bureaucratic structures but thrive with less hierarchy.

Perhaps the best way to conclude will be an elaborate definition of segmentation. According to the University of Pennsylvania, Market Segmentation is the process of dividing a market into distinct subsets where any subset may be conceivably selected as a marketing target to be reached with a distinct marketing mix.

Do not kill your chances of success before launching out, do the necessary due diligence of segmenting your market before actually engaging the market.

By Emmanuel Iruobe

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