• Edfolio

In Focus: Customers are like oranges, they're best in segments.

Our In Focus series of articles originally appeared in The Leadership Bulletin, a free weekly bulletin for leaders and managers. You can subscribe here.

As a leader, how do you know who your customers are?

Sometimes it’s obvious. The business I used to run was an End-Point Assessment Organisation for apprenticeships, which is to say we delivered independent assessments - tests, discussions, observations etc - for apprentices. In our case, in a regulated industry, our customers were obvious: apprentices’ employers and their training providers.

Sometimes, it isn’t quite so clear, usually because almost anyone could be interested in what you do. This might be because you sell goods - food, books, gift items, etc - that almost anyone will need to buy at one time or another. But whether you’re a focused business in a regulated industry or a business with unlimited potential clients, you will still want to understand your target market.

The Segmentation, Targeting and Positioning (STP) model is one way of doing just that. It doesn’t do anything that you don’t, at some level, already know. But thinking through the process and clearly identifying your audience and how you’re targeting them can help to keep you focused on what matters most. In the coming weeks, I’ll be looking at the different elements of it but this week I’m starting with segmenting.

No company or product can be all things to all people. Take UK supermarkets, for example. Everybody in the UK eats food, so everybody is a potential customer of a UK supermarket. What’s more, on the face of it, Aldi, Tesco, Sainsbury’s, Waitrose and Booths are all selling similar, or even the same, products. So they have the same potential customers and are serving them the same product. But as we all know, they’re not selling their goods in the same way and rarely to the same people. They’re targeting a segment of their potential customers.

How do they, and how should you, segment your target customers? Here are some key ways to segment your market:

  • Demographics - are you targeting people of a certain age, gender, educational level, family status or wealth? You don’t have to be segmenting among these groups, but doing so can help you focus on an audience and appear relevant to them.

  • Location - where does your audience live? You might want to focus in closely on people in one area, such as the UK or the county of Lancashire, or you may be set up to sell globally. The broader the market, the harder to understand and deliver, so make sure you’re clear where you’re targeting and why.

  • Behaviours - how do your target market access you and/or use what you sell? Will they find you online or in a shop? Is your product for use at work or home? What benefits do you want to emphasise based on the behaviours of your ideal customers?

Imagine what this process might mean to you if you run a handmade toy shop in Southampton. You may conclude that you are targeting new parents, with a significant amount of disposable income, in the Hampshire area, who tend to do the majority of their shopping in-person. This isn’t to say you’re limited to those people alone, but it does mean you can better target them in your advertising by asking “Where will they see us? What messages are most relevant to them? And what do they want from this product?”

I’ll expand on targeting and positioning in future weeks, but to wrap up this “in focus”, here’s my key takeaway: segmenting your target market is essential if you’re going to speak to your audience in a way that resonates with them, converts them into customers and, in fact, makes them devotees of your business.