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Segmentation is when you take something that is large and you divide it into smaller chunks. Generally speaking this is breaking down a larger market into smaller identifiable groups of users who share specific needs and who reference each other.
Look at your market and the people who may buy your products or use your services and begin to segment them into the different groups which you consider relevant to improving your business target sales. You can segment them in a lot of different ways. Usually demographics and psychographics are the most common ways, but it is generally people who tend to have a common problem or a common need that would be classified under the same segment. The idea is that when you are working with a segment you have to get the segment small enough so that you can identify it and you can begin to talk to representatives enabling you to find out what are their needs. It should be big enough to be sorted in a viable group to actually build business on.
What is the best segmentation method?
Segmentation is an important part of market research and your techniques should be very unique. Why do you think they are the best for the purpose of innovation? Companies use demographics, psychographics, product segmentation schemes to help them execute a variety of business activities. For example marketing communications team may segment a market by region to help execute a mailing campaign. A finance department may use a segmentation scheme such as a vertical industry to report sales figures. But when it comes to innovation the goal of segmentation is to discover segments of customers who have different unmet needs.
Finding these unique segments of opportunity if they exist can transform an entire industry especially for companies such as e-Trade, the network marketing industry just to mention a few. Let us look at some of the successful techniques which can be used:
- For the purpose of innovation it makes sense to make use of unmet needs as a basis around which to segment the market. Many of you may be thinking well was this not the idea behind needs based segmentation? This was tried years back and proved not to be successful
- In order to find a segment of the population with unmet needs you must agree on what these unmet needs mean. Unmet need in the outcome is to define the desired outcome as important and as well satisfying it.
You will need to research information regarding your customers. Not all customers like or purchase the same things. We do not all like the same music, books or shops, which makes it necessary for businesses to find out somehow how to group people with similar tastes together. Once you have done this, you can market products to them more successfully.
For example, the magazine market offers a wide range of magazines targeting various population groups like teenage girls, women in their twenties, some for young males etc. In this case, the publishers have segmented their market by age. In addition they have also segmented their market for magazines by lifestyle and interest. Another example that we can look at is the car market. Let us see some classical segmenting process which has been done here. You will notice that certain brands will be targeting a specific group of people or segment for example:
- Age: The new Mini versa the Micra
- Income: The BMW vs. Ford Mondeo
- Gender: Kia vs. Seat Ibiza
Here age has been used to segment the car market. The new Mini is a car for young people, as opposed to the Micra. Looking at the segmentation using income – the BMW will be targeting people with higher income as opposed to the Mondeo. The Gender segmentation; the Kia advertisement shows women who have come from a shopping spree are able to fit all their shopping bags in the car.
These are of course generalization but it is what marketers should do doing by knowing which segment they are targeting so that they can better decide When, Where and How to advertise to attract those people.
Looking at the different suggestion on segmentation criteria you need to think about the product or service. The consequences of using segmentation for example knowing When, Where and How to advertise can mean the business spends less on advertising and will derive better sales results.