How to Choose the Right Target Segments for Your Company in 5 Steps

Segmentation – Targeting – Positioning are the three phases of the strategic marketing process defined by Philip Kotler, the father of modern marketing.

Without a proper definition and selection of the customer types (segments) we want to serve, we risk being ineffective and wasting resources.

This risk is even greater if your company operates in multiple countries, where customers may have different traits and needs.

Unfortunately, choosing target customer segments in foreign markets is often skipped by companies—due either to lack of time or, more often, lack of a solid method.

After identifying all the potential customer segments that might use your products, how do you pick the most promising and receptive ones?

To make a targeted choice based on objective data—not gut feeling—use this 5-step process:

1. Define key indicators that reveal the situation and trends in each segment.
2. Assess each indicator for every segment to create an overall attractiveness index.
3. Define a competitiveness index for your company in each segment compared to competitors, using marketing KPIs such as product quality, brand strength, sales/service capability.
4. Use the attractiveness and competitiveness indices as coordinates to place each segment on an attractiveness/competitiveness matrix.
5. Finally, to make your selection, for the segments with highest attractiveness and competitiveness, ask yourself: How much are you willing to invest?How strategic is this segment?What is the impact of the external environment?

Once you've chosen your target segments—which, for an SME, means selecting the niches to operate in—you’ll need to move on to the third phase of strategic marketing: positioning.

To do this, you must understand your target segments’ buyer journey, so you can design a targeted and distinctive offering compared to competitors.

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