What Are Submarkets and Why Do They Matter?
Consumer markets may appear uniform, but upon closer examination they reveal an intricate patchwork of subgroups. These micro-segments within broader markets are known as submarkets. They possess distinct characteristics, needs and behaviors compared to the general market. Identifying the right submarkets allows companies to deeply connect with the most relevant consumer clusters.
Submarkets should not be confused with market segmentation, which divides markets into groups based on attributes like demographics or usage. Submarkets occur naturally due to inherent customer differences. Segmentation proactively creates groupings, while submarkets reflect pre-existing divides.
For example, within the broad athletic gear market, basketball players represent an attractive submarket. They have very specific needs—lightweight jerseys, grippy sneakers, protective gear—that differ from the general sports apparel and footwear space. Baseball players fall into a wholly separate submarket. Companies can capture greater value by precisely targeting either niche over the broader market.
The most compelling submarkets exhibit clarity, coherence and commitment. In other words, members recognize themselves as a definable group, are quite similar in needs/behaviors, and strongly identify with the submarket. Identifying subgroups that display such characteristics allows for accurately tailored products and messaging.
Effectively targeting submarkets provides many tangible business benefits:
- Tailored Messaging: Submarket-specific communication resonates more deeply because it reflects member priorities and values. Customers feel understood.
- Optimized Products & Services: Offerings can address submarket pain points rather than diluting resources trying to satisfy diverse general market needs.
- Superior Customer Targeting: Less scattershot efforts and wasted budget trying to appeal to disparate groups with competing needs and interests.
- Rich Consumer Insights: Analyzing submarket beliefs and behaviors reveals precise customer requirements to inform positioning and branding.
- First Mover Potential: Often submarkets are underserved relative to their potential size and value. Early movers can capture significant share.
Submarkets allow businesses to parse distinct consumer tribes from the general market noise. Interacting with subgroups on their level breeds loyalty and referrals. Converting apathy into advocacy hinges on truly understanding submarkets as the most relevant level for actionable customer insights and tailored strategies.
Types of Submarkets
On the surface, consumer markets may appear relatively homogeneous. However, upon closer examination distinct divides emerge based on inherent attributes, behaviors and psychographics. There are several major means of carving submarkets from the broader customer landscape:
Demographics provide a straightforward starting point for uncovering subgroups. Typical demographic delineations include:
- Age: Different generations often display unique preferences
- Income Level: Product price points and messaging must align with budget realities
- Education Level: Impacts decision-making priorities and process
- Gender: From cosmetics to consumer electronics, needs often vary by gender
- Family Status: Kids, no kids and empty nesters represent distinct submarkets
- Nationality: Cultural values inform consumer behavior
The benefit of demographic submarket analysis lies in easily quantifiable attributes to reveal major subgroups for initial opportunity assessment.
Where customers physically reside introduces various macro and micro divides including:
- Countries: Per capita income, technology access, infrastructure vary dramatically between regions
- States/Provinces: Demographics, attitudes and industry mix impacts needs
- Cities: Urban vs rural and suburban environments call for tailored approaches
- Neighborhoods: Hyperlocal cultural nuances even within cities
Geography can define quite distinct submarkets based on localized consumer dynamics.
Psychographics analyze the harder-to-quantify attributes that inform customer behavior such as:
- Attitudes: Feelings and perceptions toward issues, institutions, brands
- Lifestyles: How people live day-to-day based on interests and activities
- Values: Personal guiding principles and priorities
- Personality Traits: Distinct patterns of thinking, communicating and relating
These subjective drivers offer rich insights into lifestyle and branding appeal.
Finally, consumer behaviors themselves reveal attractive subgroups:
- Purchase Frequency: Light, medium and heavy user groups
- Channel Preferences: Brick-and-mortar vs online vs omnichannel shoppers
- Usage Occasion: Weekday commute vs weekend recreation
In many cases, behavioral attributes act as the most pivotal submarket factors for aligning positioning, offerings, and customer engagement.
This overview of major submarket categories provides a model for identifying meaningful segments based on inherent consumer attributes and tendencies. The next step lies in assessing submarket viability and attractiveness for precision targeting.
Analyzing the Submarket Potential
With an understanding of major submarket categories, companies can start mapping their industry landscape to reveal the niche segments holding the most value. A rigorous analysis process determines which submarkets deserve prioritization for product and brand investment.
The first step is identifying all submarkets nested within the broader market, however small. There are several effective methods for initial submarket discovery: conducting customer interviews to clearly identify distinct consumer needs groups; gathering sales channel insights across various buyer categories and purchasing behaviors; examining competitor product offerings catering to specific segments; and leveraging existing market research firm submarket models.
Next, assess submarket viability through two major analyses: market attractiveness analysis and unmet needs analysis.
The market attractiveness analysis evaluates critical submarket demand factors: total addressable market size based on the potential number of buyers and reasonable market share; current and forecasted market growth rates indicating expansion possibilities; average profitability per submarket customer providing revenue and margin implications; and alignment of the submarket needs profile with internal company capabilities and strengths for serving the segment. Attractive submarkets exhibit rapidly increasing demand, strong profit margins per customer, and a fit with existing competencies.
Similarly, the unmet needs analysis gauges the intensity of consumer pain points going unaddressed within each submarket. Tactics include directly interviewing submarket consumers on their dissatisfactions; monitoring discussions in submarket online communities to identify recurring complaints; and surveying members to prioritize urgency of needs. Submarkets demonstrating intense pain points around poorly solved needs in markets with minimal competition offer significant greenfield opportunities to capture share.
Together these analytical processes contrast the market size, growth outlook, competitive climate, and unmet needs intensity between submarkets to identify the ones delivering the most total value potential. The outputs inform a prioritized list of the most compelling submarkets providing large addressable demand, expansion possibilities as needs evolve, limited direct competition, and true feasibility to deliver tailored offerings.
While rigorous submarket analysis requires upfront investment, it pays long-term dividends through precisely focused strategies and offerings. Prioritizing analytics illuminates the most profitable segments aligned to internal capabilities for unlocking the next stage of business growth.
Developing Submarket-Tailored Approaches
With clearly defined priority submarkets backed by diligent analysis, companies can shift focus to developing uniquely tailored strategies and offerings. The goal is positioning that feels handcrafted for the target segment.
This starts with products and services directly addressing submarket consumer pain points and dissatisfactions. Truly solving problems through a dedicated solution engenders tremendous goodwill and referrals.
Additionally, craft messaging content and style resonate with how submarkets make decisions and view the world. Marketing should embody submarket communication preferences from imagery and vocabulary to channel selection and influencers.
Likewise, brand identity and packaging should reflect colors, shapes, icons and textures that appeal specifically to the submarket. Design choices send cues about the brand’s understanding of consumer aesthetic tastes and lifestyle.
Even factors like pricing and distribution channels should sync with submarket expectations and access barriers. Premium pricing can alienate some subgroups yet confer status for others. Limited distribution through specialized channels implies exclusivity that certain segments covet as a badge of honor.
Essentially, the brand experience across every consumer touchpoint aims to signal a deep understanding of the hopes, values and concerns defining the submarket mindset. Members feel acknowledged on an individual level, forging intensely personal connections.
Achieving this level of relevancy requires investigating behavioral and psychographic nuances that go beyond surface demographics. Truly embedding within the subculture reveals the symbols, language and experiences that will resonate most powerfully.
While submarket participants make up a small slice of the total market pie, they tend to demonstrate outsized brand loyalty and higher lifetime value once captured. A niche focus lays the groundwork for leadership within a tightly defined space.
Moreover, a rabid submarket fan base radiates influence outward, attracting broader consumers to the brand halo. Subcultures often set trends that eventually diffuse into mass culture. Identifying and energizing submarkets provides first-mover status to ride the wave.
Obsessing over submarkets in strategy development and execution breeds expertise and authenticity. Consumers sense a sincere commitment beyond exploiting a passing trend. This cultivation of connections generates immense submarket advocacy and leadership clout – the foundations for enduring brands.
Submarkets need a seperate strategy
While mass marketing retains advantages in terms of broad reach and maximizing awareness, truly homogeneous markets prove rare. In reality, diverse subgroups exist based on demographics, behaviors, attitudes, geography and more. These submarkets present too large an opportunity to ignore.
Dedicated submarket participants represent engaged, vocal customer clusters. They crave recognition and solutions tailored to their specific needs versus watered-down compromise offerings. The passion and influence radiating from effectively targeted submarkets creates an outsized halo effect attracting mainstream consumers.
However, capitalizing on this potential requires diligent upfront investment. Companies must dedicate resources to uncover viable submarkets through both market analysis and cultural embedding. The legwork informs precise customer insights and submarket archetypes to guide strategy and positioning.
With such intrinsics-led foundations in place, businesses can develop products, messaging and experiences that feel handcrafted for submarket identity and preferences. Solutions directly addressing pain points previously going unmet fosters immense goodwill. Design choices signaling a deep understanding of aesthetic taste reinforces relevancy.
Essentially, the brand interacts with submarket consumers on an individual emotional level rather than as a generic grouped mass. This cultivation turns customers into vocal brand advocates and influencers. A niche focus lays the groundwork for leadership within a tightly defined space from which influence radiates outwards.
While submarket strategies demand greater research intensity, the long-term dividends justify the effort. The approach enables brands to parse distinct consumer tribes from the general market noise. Interacting with subgroups on their level is the critical ingredient for unlocking affinity and leadership. Matching precision targeting with precision delivery breeds loyalty and referrals converting apathy into vocal advocacy. For enduring brands, embracing submarkets provides a steady compass for navigating markets too large and fractured to capture otherwise.