One of the key aspects of marketing planning is choosing the right customers to focus on. Few companies can successfully be ‘all things to all people’, and it is therefore necessary to define in precise and actionable terms just who are the organization's customers, both now and in the future. Knowing where sales and profits are coming from is key to understanding current market positions and assessing potential market directions.
Market segmentation enables a firm to target its limited resources on the most promising opportunities by sorting customers into economically manageable and ‘prioritizable’ groups. Segmentation can be based on a myriad of criteria regarding customer characteristics and buying behaviour, thus covering the critical issues of ‘who buys’, ‘what they buy’ and ‘why they buy’. The bases for market segmentation are summarized as follows:
1) What is bought
Price categories, outlets used, physical characteristics of different products. Analysis of product and purchase characteristics clarifies market structure and market mechanics.
2) Who buys
Demographic/socio-economic/geographic/cultural factors. Analysis of customer attributes aids communication programme design.
3) Why
Benefits, attitudes/beliefs, personality/lifestyle. Analysis of customer behaviour underpins marketing strategy.
A market segment is a group of customers with similar requirements which can be satisfied by a distinct marketing mix.
A market segment should be a group of customers with the same or similar requirements, which can be satisfied by a distinct marketing mix. The universally accepted criteria concerning what constitutes a viable market segment are:
segments should be of an adequate size to provide the organization with the desired return for its effort;
members of each segment should have a high degree of similarity in their requirements, yet be distinct from the rest of the market.
criteria for describing segments must be relevant to the purchase situation;
segments must be reachable.
To be useful for segmentation, a benefit has to appeal to a significant number of customers. Benefit analysis, or the listing of features of major products together with what they mean to the customer, is a way of identifying which are the most important benefits to which customers. To get from a feature to an advantage, and then to a benefit, the phrases ‘which means that?’ and ‘so what?’ can be helpful. For example, ‘Our products are handmade by experts (feature), which means that they are better quality than machine-made ones’ (advantage) — so what? — ‘which means that they last longer’ (the real benefit).
Market segmentation enables a firm to target its limited resources on the most promising opportunities by sorting customers into economically manageable and ‘prioritizable’ groups. Segmentation can be based on a myriad of criteria regarding customer characteristics and buying behaviour, thus covering the critical issues of ‘who buys’, ‘what they buy’ and ‘why they buy’. The bases for market segmentation are summarized as follows:
1) What is bought
Price categories, outlets used, physical characteristics of different products. Analysis of product and purchase characteristics clarifies market structure and market mechanics.
2) Who buys
Demographic/socio-economic/geographic/cultural factors. Analysis of customer attributes aids communication programme design.
3) Why
Benefits, attitudes/beliefs, personality/lifestyle. Analysis of customer behaviour underpins marketing strategy.
A market segment is a group of customers with similar requirements which can be satisfied by a distinct marketing mix.
A market segment should be a group of customers with the same or similar requirements, which can be satisfied by a distinct marketing mix. The universally accepted criteria concerning what constitutes a viable market segment are:
segments should be of an adequate size to provide the organization with the desired return for its effort;
members of each segment should have a high degree of similarity in their requirements, yet be distinct from the rest of the market.
criteria for describing segments must be relevant to the purchase situation;
segments must be reachable.
To be useful for segmentation, a benefit has to appeal to a significant number of customers. Benefit analysis, or the listing of features of major products together with what they mean to the customer, is a way of identifying which are the most important benefits to which customers. To get from a feature to an advantage, and then to a benefit, the phrases ‘which means that?’ and ‘so what?’ can be helpful. For example, ‘Our products are handmade by experts (feature), which means that they are better quality than machine-made ones’ (advantage) — so what? — ‘which means that they last longer’ (the real benefit).
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