Small businesses are a vital part of this economy. Your success, like ours, will help fuel this country’s economic recovery. Where should you start?
T. Boone Pickens has said, “A fool with a plan is better than a genius with no plan.”
Businesses have been hit by a double whammy: the economic downturn and the increasing complexity of marketing.
Before the Internet came on the scene, marketing methods had become so established that anyone with an average head on their shoulders could get the job done—run some ads, do a few direct mail pieces, get the sales staff on the phone and voila, revenue began to flow.
Things are different today. Customers are throwing around money like they have glue in their hands, and the Internet has created a new and confusing marketing landscape.
The saving grace of a down economy is that money is still spent. You just need to work harder and market smarter to get it.
Working harder is easy to understand; everyone stays focused during the day and puts in more hours each week, sometimes for less pay. But what does it mean to market smarter?
Marketing smarter starts with understanding marketing’s fundamentals. Just like accounting has underlying principles, so does marketing. And like accounting, if you don’t understand the underlying principles, marketing can get very confusing, very fast.
One marketing concept that is important to understand today is having a Market Segmentation Strategy. Without the knowledge of this concept you are at risk of a common mistake we see all the time. We call it the marketing golden goose chase. It happens when marketers follow whatever good idea pops into their head that day. Chasing the idea de jour is a sure way to water down the effectiveness of precious marketing dollars.
Having a Market Segmentation Strategy will keep both your staffing and marketing budget focused on your most profitable prospective customers.
Here’s how it works
The first step is to understand the definition of a market; a market is anyone who has or may one day have the need for your product or has the ability to make or influence the purchase.
People within a market often buy the same product for many different reasons. Think of an haircut for a teenage boy. As moms, we have very different reasons for wanting the haircut than our kids. Because of this, companies segment the market into like-minded groups and create promotional campaigns designed to speak specifically to their needs. Therein lies the seed of the problem. Unless you have a Market Segmentation Strategy, every submarket looks like a golden goose, and off you go creating unique promotions for every little submarket that’s dreamt up.
The problem with creating unique messages for each submarket is that it’s expensive and time consuming. Is it right to segment your market and communicate with each submarket differently? Maybe, but probably not.
There are four Market Segmentation Strategies, each with its own pros and cons. As you learn about them, you can choose the one that is right for you. They are 1) Undifferentiated 2) Concentrated 3) Multisegmented, and 4) Microsegmented. The first two are by far the most common, the most practical and the most cost efficient.
Undifferentiated marketing strategy
Using an undifferentiated marketing strategy means that while you acknowledge your market can be broken into submarkets, you just don’t do it. Rather than create individual promotional messages tailored to individual submarkets, one message is developed for the entire market. This general message doesn’t appeal specifically to the unique needs of each submarket but it covers the general benefits and reasons most customers buy the product. The purpose for following an undifferentiated strategy is that it is the least expensive and requires less manpower to implement. If cash and manpower are tight, consider simplifying to this strategy.
Concentrated marketing strategy
Another smart strategy for a pinched budget is to choose the top one or two submarkets and create tailored messages specific to each groups needs. This is called a concentrated marketing strategy. Usually the top one or two submarkets are the most lucrative and make up a big percentage of the overall market. The message you create may not play perfectly to all of the other submarkets but this strategy is about reducing expenses and maximizing profit, not market share. Like the undifferentiated strategy, this is a cost saving, profit maximizing strategy. It’s much less expensive and time consuming to manage one or two messages than ten or fifteen.
Multisegmented and Microsegmented strategies
Multisegmenting and Microsegementing are expensive and usually practiced by large companies that have dominant market share. Amazon is an example of a company that Microsegements. We are both avid readers. When we order a book, an offer that is unique to us is generated based on our past orders and others who have made similar purchases.
Unless you have vast resources, the more submarkets you create messages for, the thinner you spread your money and manpower. Going off in too many directions can be a crippling mistake. It’s like the monkey that has its arms full of bananas but just can’t resist reaching for one more. As he picks up one, he drops three.
Even Fortune 500 companies start out using an undifferentiated or concentrated strategy. As a new product gains traction they then expand into multisegmenting and microsegmenting.
There are about ten to fifteen key concepts all marketers should know, but most don’t. Our CEO, Lonny Kocina, has written a short book called Teaching Consumers to Buy and created a companion poster that covers many key marketing concepts. He uses them as a basis for a marketing seminar he conducts called Ready Aim Marketing. You can get a copy of both the book and the poster free at our website publicity.com. If you are serious about marketing, you should have them.
Except for brief periods when customers are so plentiful they seem to walk in the door from every direction, being an aggressive marketer is the only way to prosper. Pragmatically, if business is down 25%, you’ll need to work 25% harder and market 25% smarter.
