Poor Sales Despite Increased Marketing Spend? Proper Segmentation Could Be Your Answer…..

  • 8 August, 2014
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  • Blog

Market segmentation is another marketing jargon word that has been used and abused. The most common challenge we see with segmentation, if it has been considered at all, is that organisations have simply divided up their market by descriptive factors such as age, sex and geographical location. All the customers within such categories however may have very different needs and it can be hit and miss, in other words costly, to reach those that we want to do business with and who want to do business with us. True market segments should be defined by customer needs.

In order to constitute a true segment they should be distinct and definable, consistent in terms of sharing the identified need or motivation, accessible for us to practically reach those customers and be profitable to serve. In reality, the simple descriptors commonly used to divide up markets are really just proxies to help with targeting customer groups i.e. more concerned with accessibility than customer needs. There’s nothing wrong in using practical surrogates for customer targeting later in the planning cycle. I just take issue with it when it is confused true marketing segmentation, which should come first.

Why do we care about true customer need-based segments? – Because, in order to make a profit, we are trying to develop a product or service that will be acquired, at the right price, by customers who share a common need. In a world of limitless resources we may not care so much about being hit and miss, but unfortunately this is not our reality. In order to drive optimal shareholder value we are aiming to efficiently meet the needs of our chosen customer group(s) within our available resources. We should avoid thinking we can develop fully bespoke offerings for each individual customer as it would not be economically viable, unless we are in a super premium setting where price is no object.

Each need-based segment we identify through our market insights, that we think we could serve or better serve than our competition, represents an opportunity for growth for our business. We then need to consider which segments are underserved, over-served or perhaps not served at all. The question is ultimately whether we can be a first mover, or do things better than competition or be disruptive to the status quo. However there is another key challenge in that we can’t typically target all segments or at least all at once. In order to have a clear strategy, we need to prioritise which opportunities for growth we will invest our valuable resources in, to drive double digit growth.

So next time you think about segmenting your market, make sure you have understood what your customer needs are. Which of those needs are unmet and might constitute a segment which you could profitably serve with your product(s) or service(s). Only then can you design and implement a customer targeting strategy. From a practical perspective you can then develop a portrait of your typical customer and use factors such as age, sex, what they read, where they are located and so on to help you reach them with your offering that has been tailored to better meet their needs compared to competitor alternatives.

David Allmond

 

David Allmond

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