Market Segments

A market segment, also called a market niche, is a group of potential customers that exhibit similar characteristics. The characteristics include, but aren't limited to: age, geographic location, income level, gender, lifestyle and interests. Growth in sales to the market segment takes place through a variety of methods. While there is no magic numerical equation to forecast segment growth there are formulas for increasing the revenues generated from a segment, increasing the number of potential customers, and expanding the market segment.

Market Segment Growth

Organic growth in the aging population is increasing as the baby boomers reach retirement age. Geographic locations increase and decrease in population as residents move in and out. The segment can also increase based on outside influences such as the popularity of an athlete encouraging others to take up the sport. Media exposure and social networks also have the potential to increase or decrease a market segment based on lifestyle or interests. Businesses can't control age or geographic location but they can increase a market segment by developing a formula to implement an online presence, publicity and advertising.

Price

Price influences sales. If the market segment doesn't have the financial wherewithal to purchase a product because it's perceived as being too high priced, the company has to either lower the price, or bring up the perceived value of the product. The equation of supply and demand is at work here. The higher the demand, and the lower the supply, the higher the price can be. Increasing the demand for the product can be the result of increasing the perceived value of the product. Decreasing the price makes the product more affordable to a larger portion of the market segment and increases the market segment as well. Knowing whether to lower prices or increase the perceived value is tricky. Pick the right price and you reach the optimum sales level in the market segment.

Promotion

Increasing the demand from a market segment works to increase the number of units sold, even if the price remains unchanged. If potential customers don't know about a product they can't purchase it. Companies can solve that equation by increasing the promotion of the product through advertising, publicity, exhibition at trade shows, and sponsoring community activities. Where the promotional activities take place is an important factor. For example, if the market segment for the product is parents of young children, it won't be effective to advertise in television programs which have an older viewing audience. Advertise on programs directed toward young children. Increase the visibility of the product and you increase the market segment.

Distribution

The final factor in the market segment sales equation is distribution. The potential customer base has to be able to access the product in order to buy it. Companies set up distribution channels by hiring a sales force, utilizing a wholesaler, working directly with retailers and offering the product online. For example, if you're a book publisher you would offer your books at the major online booksellers and from your website. But if that's the only places your books are available, you're missing sales from the portion of your market segment that shops in bookstores, big box retailers, grocery and drug stores. You would also miss sales to libraries. Increase the number and types of sales outlets to increase the market segment.