Segmentation

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Question - Why do I have to segment my market? Why cannot I just aim for everyone?

Answer - In the early days of a market, you probably can aim for everyone. However, as more and more competitors enter the market, they will be targeting specific groups of people and will win them over because their messages will be more precisely addressed to the needs of those groups. So, gradually, you will be beaten in an ever-growing number of segments as being less relevant than your competitors. You must therefore lay claim to your own target customer groups before the competition does

Key Action Points

The foundation of a successful branding strategy is compelling segmentation, answering the following questions:

• With whom are you going to build long term relationships and on what basis?
• What will make these customers special to you, and what will make you special to them?
• Above all, how will you recognise them when you see them?

You can use at least four levels of segmentation:

1. Demographic segmentation
2. Behavioral segmentation
3. Needs and values segmentation
4. Sitatuational segmentation

In more detail…..

1. Demographic segmentation

This is the standard segmentation of the "broken down by age and sex" variety. Additional demographic segmentations would include socio-economic class, life stage, geographical region, number of people in a household, income and, in business-to-business markets, industry classification, number of employees and turnover.

Demographic segmentations tell you a lot about how to recognise people, but are much less helpful in identifying motivations. For instance, people in a certain income bracket do not all behave the same way, nor do those of the same sex or those living in the same part of the country.

2. Behavioral segmentation

Examples of behavioral segmentations would be Internet shoppers, frequent flyers, night workers, buyers of competitive products/services or special offer seekers. They often tell you how and where to find people, but not what to say to them when you do (except perhaps in the case of special offer seekers).

3. Needs and values segmentation

Needs and values segmentations answer why customers behave as they do, and therefore indicate how you should position your brand. There are many highly sophisticated market research techniques, often based on psychological theories, aimed at uncovering customers' hidden needs and values.

These needs and values will usually work at several levels, from what customers volunteer as being their motivations through to deep psychological needs which they would be most uncomfortable discussing. A customer may say "I am prepared to pay for exceptional service", but may well fail to add, or even fail to recognise that it is "because I am a control freak". Indeed, issues that customers state to be important are sometimes much less influential on their buying decisions than issues, especially emotional issues, that they claim are not very important

4. Situational segmentation

It has been argued that the same people behave more differently in different situations than do different people in the same situations. Situational segmentations recognise, for instance, that when people have plenty of time to browse the shelves they will behave differently than when they are in a hurry. Indeed, they may be happy to buy products when they are in a hurry that they would not dream of buying at any other time.

A striking example of the use of a situational segmentation is the food retailer in Japan who recognised that its customers came into its stores at different times of day for different reasons. On the way to work they had one approach. At lunchtime they had another. On the way home they had yet another. The result was that this retailer changed the layout and pricing of the goods in its stores several times a day to reflect the different requirements and opportunities.

Next steps

Having identified the segmentations in your market at several levels, there is a need to ensure three things:

• That the segment is large enough and profitable enough to be worth your while. If not, you may have to combine segments
• That the segment is recognisable. If you cannot find them by way of demographics, a communication channel, or a short screening exercise, can they find you?
• That your chosen segment(s) will choose to do business with you

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