Markets Are Contexts: An Idea Every Entrepreneur Should Understand

Target Audiences and Target Customers and Target Markets, Oh My!

Markets are contexts. Context is a situation, place, or setting that surrounds something and gives it meaning. You could say that the meaning of a sentence is contextualized by the environment in which you hear it spoken. Contexts shape the way we perceive, act, and feel. They are the environments in which we live, work, and play. Entrepreneurs need to understand context to succeed.

A market is an aggregate. It’s a big group that shares features or interests that make them different from the rest of society. An important thing to remember about markets is that they are contexts. They’re places where people buy and sell in pursuit of their own goals and values.

Types of Markets

There are two major types of markets, consumer and industrial (also known as B2B). Consumer markets are where individuals buy goods or services for personal use — for example, grocery stores. Industrial markets are where businesses sell to other companies — like my brand storytelling agency, StorySimple.

Markets are not some collective will. In no way does a market force anything on anyone or take control away from anyone. A market is merely an aggregate of people who share an interest in something.

Market Segments

Drilling down further, we get into market segments. A market segment is just as contextual as any other thing. Understanding how different market segments behave helps an entrepreneur better understand their customers. Then they can take steps to increase revenue and decrease customer acquisition costs.

There are many market segments in a typical business. Each segment has different needs, desires, and expectations. If a company tries to sell the same thing to everybody without considering their individual needs as contexts, they will fail.

The context, not the product, defines the market and the position of a new entrant. It tells you: how many companies are serving this market, what customers they are serving, what your competitors are doing, what price customers will pay for your offering, how they buy, and what channels they use to purchase; who makes the buying decisions; and much more.

Market Segmentation Strategy

Marketing campaigns typically use four major categories of market segments: geographic, demographic, psychographic, and behavioral. Each category has its subcategories that further define what we know about that context. The type of market segmentation you choose will depend on your product, services, budget, and the rest of your plan. Here is a quick summary of each category:

Geographic Segmentation

Geographic segments are where we go to find geographically similar contexts. We often divide them into places we are in, like cities, counties, zip codes, etc. Geographic segmentation is usually the easiest type of marketing segmentation to accomplish.

Demographic Segmentation

Demographic segments are a general grouping of people according to shared demographic variables. These variables include age, gender, income, occupation, education level, and family situation (i.e., married with children vs. single) in consumer markets. In B2B, we classify things like company size, industry, and job title.

Psychographic Segmentation

We divide psychographic segments by lifestyle preferences and attitudes. Some of the most common psychographic variables include media usage habits (i.e., which channels consumers prefer to view at what time of day), social class (i.e., upper class vs. middle class), cultural interests (i.e., type of music or television shows an individual likes), or political views (i.e., liberal vs. conservative).

Behavioral Segmentation

Behavioral segments are groups of people that have similar buying behaviors. They are the most “action”-oriented of the three segments. They help a business understand its customer’s wants and needs as they relate to purchasing behavior, brand loyalty, and cross-purchase behavior (i.e., how likely a customer is also to buy another company’s version of the product or service).

Companies usually segment markets with data provided by primary market research methods. They use questionnaires or observational research. It can even be a simple form on your website asking segmentation questions in a small company.

Markets are Contexts

When people talk about market segments, they’re talking about contexts. Contexts outline the specific needs of a business and its customers. Marketers need to know how potential consumers think and behave to target the right market segment.

Your product or service must align with the needs of a specific type of customer. That’s why it’s essential to be aware of context, break your potential customers into segments, and offer products that best suit their needs. Understanding your context is a critical idea every entrepreneur should master.