What Is Segmentation?
Segmentation is when you take something that is larger 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 of 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 its generally people who tend to have a common problem or a common need set would be classified under the same segment.
The idea is that when you are working with a segment is to get the segment small enough that you can identify it and you can begin to talk to representatives to be enable to find out what their needs are and then big enough to be sort of a viable group to actually build a 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 for companies such as eTrade, Network Marketing 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 a company must agree on what unmet means. Unmet need in the outcome is to define the desired outcome as important and as well satisfying.
You will need to research information regarding your customers. Not all customers like or buy the same things. We do not all like the same music, books or shops, which makes it necessary for businesses to find out somewhere of grouping people with similar tastes together. Once they have done this, they can market products to them more successfully.
For example, the magazine market offers a wide range of magazines targeting various population groups for example teenage girls, some of 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 segmention 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 high income as opposed to the Mondeo. The Gender segmentation looking at the Kia women you will see the advert showing women will be able to fit their clothes shopping into the car.
These are of course generalization but it is what marketers should do 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 andwill derive better sales results.