Segments to Find a New Target Markets:- Commonly used by companies of rather large size, strategic segmentation is a great tool for finding new markets or new activities. We explain in this article how to take advantage of it. It is a question of relying on a method of elaboration of segments. A creative method based on the work of Derek F. Abell of Harvard. This post focuses on the key points for a truly operational approach.
Segments to Find a New Target Markets
Let’s see how to proceed with finding a new target markets. First of all it is necessary to define the criteria selected. There are three of them:
Who? Customer groups served
What? The applications of the products in other words the functions fulfilled at the customers’ premises or their needs
How? Technologies implemented in products
The idea is to take individually each criterion of segmentation and reason by separating the items that compose it.
For customer groups, the focus is on the markets served. Example: individuals, professionals, small business, large companies, administrations, industries.
The applications concern the use of the products, in other words the generic problems to be solved. Example: solder metal parts. The technology used to solve applications. Example: arc welding, brazing.
- Cross Criteria
The crossing of different criteria generates theoretical elementary activities. It is the creative part that will create new relationships that are not necessarily obvious.
- Eliminate impossible Activities
Some crossings have no meaning, they must be eliminated. It is not uncommon that at this stage of thinking, new ideas spring up. In this case, it is enough to integrate the new items in the matrix and to redo a small cycle.
- Identify the key Success factors for each Activity
As a reminder, a key factor of success (FCS) is a commercial or technological element that the company must master to succeed in a given activity. They are few.
These are the elements seen on the client side (or market). For example: to solicit the engineering firms, the sales team must consist of salesmen with high technical skills. This is a key success factor.
In particular, mastering an FCS can give the company a competitive advantage. It has a real strategic value in the same example. To outsource engineering firms, a manufacturer has salespeople with highly technical expertise far ahead of what other competitors have. Expertise acquired through a high level of studies of sales people and accumulated experience on the market.
- Grouping Elementary Activities
For this purpose, activities with common FCS should be included. This means mastering the same elements to succeed in these activities. You have just created strategic business areas (DAS).
Again, it all depends on the size of the structure. For an SME, often an activity will be a DAS alone.
- Describe the Areas of Activity Selected (DAS)
Now that you have identified your DAS, you must name them; describe them by listing their FCS, their share in the turnover of the company if the activity already exists, the main direct and indirect competitors, the reference market … and all useful information for analysis and strategic actions.
First of all, a little clarification is needed. We are talking about new markets and new activities. Why such a difference? Strategic segmentation by definition divides the company’s activities into parts that are homogeneous. Who says activity, says a set of technologies, customer group and applications. We go beyond the notion of marketing, which is more about product-market couples. After all, it’s all about sizing. What will be strategic for an SME will fall within the marketing domain for large companies?
This approach has the advantage of revealing new potential spaces to exploit. It makes think about associations that we would not have spontaneously thought. The best way to lead such a reflection is to build a multidisciplinary team.
Even an SME or a TPE can use this method. This is a canvas that helps to find new crossings. These confrontations are conducive to innovation. To search for additional information, go to our dedicated sections: strategic segmentation – DAS and segment your market