Market segmentation is one of the basic building blocks of market development. Not only do you have to understand the precise needs of the market but also, if the market is sizeable, you need to be able to segment it in to sub-groups with similar characteristics.
Never assume your market is like you. Just because you listen to a certain radio station or read a particular newspaper does not mean your buyers do. You have to start with a solid understanding of the target markets, either through meticulous market research or through close relationships and detailed experience.
The first step is to treat everyone as unique. Then, as you understand potential buyers and customers you start to put them in groups that exhibit the same characteristics. Typical characteristics include:
• Product relationships – brand loyalty, interest in luxury, brand status etc.
• Demographics – age, gender, family status, work, income, language etc.
• Psychographic – opinions, values, attitudes etc.
• Geographic – location, postcode/zip code, climate, infrastructure etc.
• Customer type – industry type, size of organization, buyer type, order size etc.
The two biggest mistakes I have seen when conducting segmentation exercises with clients are (1) researching the characteristics of existing customers and ignoring people who do not currently buy the product; (2) assuming the old market segmentation examples identified years ago are still valid.
Market segmentation was brought home to me the other day when I was reading the Ottawa Citizen. There was a pull-out section with photographs of babies born in 2010. I didn’t give it a moment’s thought and tossed it aside. After all, our own babies have morphed in to money-gobbling teenagers so I don’t deal with babies much these days. Later my wife was reading the paper, went through the baby photographs one-by-one and brought me over to look at a particularly cute photo. Two people; same newspaper; same day; same postcode; completely different interests!
Just a thought.
Tim
Other articles on market segmentation
Apple’s segmentation strategy and the folly of conventional wisdom, Mark Sigal
Segment migration: where your customers were, where they went and why, Mark Klein
The cute photo of Maximum baby is taken and licensed by Brad K.
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