5 Reasons to Use Market Segmentation Strategies for Small Businesses in 2022


You’ve spent the last five years working on your web development skills and are now ready to establish yourself in the industry. You start a business with two of your closest friends that caters to all web development and design needs. And with the small number of connections you have, you land your first three clients.

It’s the start of a new venture, and you’re looking for growth. But being a small business in an already crowded market, you’re finding it challenging to find the type of clients you want, and revenue is flowing in extremely slowly. And although you’re ambitious enough to keep pushing through, you’re struggling to find the right solutions to help your business get the boost it needs. So what do you do? A proven solution that can help is market segmentation.

What is Market Segmentation?

Market segmentation is simply the process of identifying a target set of people who can be converted into customers. It is a market strategy undertaken that helps businesses understand their potential customers, their needs, characteristics and actions. They collect information about these target groups and study them to make relevant decisions. It further helps carry out necessary operations to build tailored products and services that appeal to the target consumer interests and needs.

5 Reasons to Use Market Segmentation Strategies for Small Businesses

There are four types of market segmentation practices, namely – demographic, psychographic, geographical and behavioral. Each category can help a business narrow down its target group of customers and how to respond to them. With new and newer businesses coming up with every passing day, market segmentation is turning into an essential for their growth and development. If you’re still confused as to why you should use market segmentation, here are five reasons to show you how it can grow your small business.

  1. Understand your customers: Market segmentation not only helps you identify your potential customers it also allows you to understand them better. You could be dealing with one specific product or service or multiple products and services. With market segmentation, you can identify the group of customers who can potentially respond to what your business has to offer, and understand how to appeal to them. When you get to know your customer base well, it becomes easier to cater to their needs and demands and serve them accordingly.
  2. Better sales and revenue: Since market segmentation helps to identify and understand a target group of customers, it raises the potential of selling your products and services to a larger audience. It could be in a B2B sales environment or a B2C sales environment. With market segmentation, there is an increased chance of making better sales and earning a higher revenue as well.
  3. Build better customer relationships: With market segmentation, building a clear strategy to attract your target customers becomes simplified. Marketing that relates to customer needs or addresses their grievances can bring in better responses. Customers feel like they have been heard and understood, which in turn makes them have a positive outlook towards your business. It also helps convert people into paying customers, which can help boost the business’s growth.
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  1. Improves brand loyalty: The goal of any business is to make customers feel connected to their brand. Since market segmentation helps with getting to know the target customer base, it becomes easier to tailor products and services in a personalized manner. When customers find products that fit well with what they’re looking for, they are more likely to trust your brand, and possibly come back again.
  2. Controlled spending: Marketing practices can cost a business a significant amount of money. Undertaking advertising, and developing relevant material can prove to be quite costly, especially for small businesses that do not have a high inflow of revenue. Taking up market segmentation to identify customers can also help reduce unnecessary costs. Businesses can take up the most effective marketing practices that can get maximum reach to customers instead of trying different ones that may not work.

7 Ways How Small Businesses Can Benefit Neighboring Communities and the Economy

A small business forms a part of the backbone of an economy. They are able to connect with neighboring communities closely and solve their problems as well. A small business can contribute significantly to the growth of the community around them and in turn, add to a growing economy.

  1. Create employment: Small businesses contribute towards increasing the employment rate by providing jobs to locals. When an organization employs its locals, it is able to increase its efficiency and grow at a better pace. The employment also helps workers increase their income, thus contributing to improved standards of living.
  2. Adapting to changing environments: Business environments are constantly changing, which means being able to conform to a new setting is vital for a business to survive and grow. Since a small business is generally closely connected with the neighboring community, it can respond quickly to any change that takes place and keep moving forward.
  3. Support to other local businesses: Beyond employment, a small business can contribute to the growth of other local businesses in the community. With the aim of staying connected to people, they work with local vendors to acquire local goods, which allows them to grow and generate better income too.
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  1. Contributing to taxes: When a small business is able to thrive in its relevant market, it is more likely to generate higher revenue and in turn, pay higher taxes. These taxes later then contribute towards the development and growth of the economy.
  2. Greater innovation and diversification: In order for small businesses to stand out in their relevant market, they need to come up with innovative ideas to work against their competition. It could be coming up with a new, never-seen-before product or service, or a new way to develop an already existing product. When small businesses get innovative, they open doors for new opportunities and also give the community a unique personality.
  3. Environment friendly: With recent changes in the environment, many small businesses are choosing to focus on environmentally friendly operations. Saving on high-end infrastructure, using locally sourced materials, and developing sustainable practices are some ways in which small businesses contribute towards a better, green environment.
  4. Improve community living: A small business can contribute significantly to a community’s growth. When a business builds its reputation, it attracts more customers who are willing to visit new areas to buy from the business. When people visit, they are also more likely to check out local attractions and other establishments, thus adding to overall community growth.


In an already crowded market, a small business may struggle to establish itself and raise favorable revenue at the start. With high competition and costs, taking the necessary steps to stand out may not be possible, thereby slowing down the growth of the business in the relevant market. In order to be able to thrive, taking up market segmentation can help discover possible solutions.

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With market segmentation, a small business can improve their operations, find what works for them and take the necessary steps to move forward. With the information collected from the segmentation process, businesses can use this data to understand what they might be doing wrong to attract customers. They can then work on the next steps that will help them to improve their business. If small businesses take up market segmentation and make the most of the process, they can overcome hurdles and grow consistently in the market.

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