Minivans, for instance, are often marketed to couples in their 20s to 40s who have children, middle-class income, and professional occupations. Using demographics for segmentation doesn't make as much sense if your target market is more diverse on these qualities. In lieu of clear demographic qualities, companies often turn to shared lifestyle interests and hobbies to target customers.
Companies that sell camping equipment, for instance, might find it difficult to target customers demographically, since a wide range of people participate in outdoor recreation. Thus, trying to find TV shows, magazines and other media that camping enthusiasts use in common makes more sense. Outdoor living magazines or programming provides an efficient communication channel. Companies that have a relatively broad audience concentrated in a specific geographic location can benefit from geographic segmentation.
While regional and national companies use geographic segments to run regional or national campaigns, this strategy is especially useful for local businesses. A local supermarket, for instance, would get more value from targeting the local community through newspapers and radio than it would trying to hone in on a demographic segment. Geographic focus helps you increase awareness among the public in particular markets.
The third demographic factor, location, is an important variable in decisions related to deployment and organization of sales staff. A manufacturer of heavy-duty pumps for the petrochemical industry, for example, would want to provide good coverage in the Gulf Coast, where customers are concentrated, while putting little effort into New England.
Customer location is especially important when proximity is a requirement for doing business, as in marketing products of low value-per-unit-weight or volume such as corrugated boxes or prestressed concrete , or in situations where personal service is essential as in job shop printing.
As noted, a marketer can determine all of these demographic variables easily. Industry-oriented and general directories are useful in developing lists of customers in terms of industry, size, and location. Government statistics, reports by market research companies, and industry and trade association publications provide a great deal of demographic data.
Many companies base their industrial marketing segmentation approach on demographic data alone. But while demographics are useful and easily obtained, they do not exhaust the possibilities of segmentation. They are often only a beginning. Soda ash, for example, can be produced by two methods that require different capital equipment and supplies. The production of Japanese color televisions is highly automated and uses a few large, integrated circuits.
In the United States, on the other hand, color TV production once involved many discrete components, manual assembly, and fine tuning. In Europe, production techniques made use of a hybrid of integrated circuits and discrete components. One of the easiest ways, and in some situations the only obvious way, to segment a market is by product and brand use. Users of a particular product or brand generally have some characteristics in common; at the very least, they have a common experience with a product or brand.
Manufacturers who replace metal gears with nylon gears in capital equipment probably share perception so frisk, manufacturing process or cost structure, or marketing strategy.
They probably have experienced similar sales presentations. Having used nylon gears, they share common experiences including, perhaps, similar changes in manufacturing approaches. One supplier of nylon gears might argue that companies that have already committed themselves to replace metal gears with nylon gears are better customer prospects than those that have not yet done so, since it is usually easier to generate demand for a new brand than for a new product.
But another supplier might reason that manufacturers that have not yet shifted to nylon are better prospects because they have not experienced its benefits and have not developed a working relationship with a supplier.
A third marketer might choose to approach both users and nonusers with different strategies. Current customers are a different segment from prospective customers using a similar product purchased elsewhere. Sometimes it is useful to segment customers not only on the basis of whether they buy from the company or from its competitors, but also, in the latter case, on the identity of competitors. This in formation can be useful in several ways. Sellers may find it easier to lure customers from competitors that are weak in certain respects.
When Bethlehem Steel opened its state-of-the-art Burns Harbor plant in the Chicago area, for example, it went after the customers of one local competitor known to offer poor quality. Marketers might find companies with known operating, technical, or financial strengths and weaknesses to be an attractive market. For example, accompany operating with tight materials inventories would greatly appreciate a supplier with are liable delivery record. And customers unable to perform quality-control tests on incoming materials might be willing to pay for supplier quality checks.
Some raw materials suppliers might choose to develop a thriving business among less sophisticated companies, for which lower-than-usual average discounts well compensate added services. Technically weak customers in the chemical industry have traditionally depended on suppliers for formulation assistance and technical support. Some suppliers have been astute in identifying customers needing such support and in providing it in a highly effective manner.
Technical strength can also differentiate customers. Both companies used segmentation for market selection. Many operating variables are easily researched. In a quick drive around a soda ash plant, for example, a vendor might be able to identify the type of technology being used.
Data on financial strength is at least partially available from credit-rating services. The factors in this middle segmentation nest include the formal organization of the purchasing function, the power structures, the nature of buyer-seller relationships, the general purchasing policies, and the purchasing criteria. A centralized approach may merge individual purchasing units into a single group, and vendors with decentralized manufacturing operations may find it difficult to meet centralized buying patterns.
These also vary widely among customers. The impact of influential organizational units varies and often affects purchasing approaches. The powerful financial analysis units at General Motors and Ford may, for example, have made these companies unusually price-oriented in their purchasing decisions. Or a company may have a powerful engineering department that strongly influences purchases; a supplier with strong technical skills would suit such a customer.
A vendor might find it useful to adapt its marketing program to customer strengths, using one approach for customers with strong engineering operations and another for customers lacking these. A supplier probably has stronger ties with some customers than with others. The link may be clearly stated. A lawyer, commercial banker, or investment banker, for example, might define as an unattractive market segment all companies having as a board member the representative of a competitor.
A financially strong company that offers a lease program might want to identify prospective customers who prefer to lease capital equipment or who have meticulous asset management. Or they may prefer to buy systems rather than individual components.
Some purchasers require an agreement based on supplier cost, particularly the auto companies, the U. Other purchasers negotiate from a market-based price, and some use bids.
Bidding is an important method for obtaining government and quasi-government business, but because it emphasizes price, bidding tends to favor suppliers that, perhaps because of a cost advantage, prefer to compete on price. Some vendors might view purchasers who choose suppliers via bidding as desirable, while others might avoid them.
The power structure, the nature of buyer-seller relationships, and general purchasing policies all affect purchasing criteria. Benefit segmentation in the consumer goods market is the process of segmenting a market in terms of the reasons why customers buy.
It is, in fact, the most insightful form of consumer goods segmentation because it deals directly with customer needs. In the industrial market, consideration of the criteria used to make purchases and the application for these purchases, which we consider later, approximate the benefit segmentation approach.
Why should market segmentation be considered a strategy? A strategy is a considered plan that takes you from point A to point B in an effective and useful way. Market segmentation is similar, as there will be times you need to revisit your market segments, such as:. If your customers change, then your market segmentation should as well, so you can understand clearly what your new customers need and want from you.
For example, natural disasters caused by global warming may impact whether a family chooses to stay living in an area prone to more of these events. On a larger scale, if your target customer segment moves away from one of your sales regions, you may want to consider re-focussing your sales activities in more populated areas. For example, Winter has several holidays, with Christmas being a huge influence on families.
Knowing this information can help you predict and prepare for this period. For more information on how Qualtrics helps brands master market segmentation from start to finish, check out our Segmentation Research Service.
Where can you use market segmentation in your business? When your business wants to enter into a new market or look for growth opportunities, market segmentation can help you understand the sales potential. It can assist in breaking down your research, by aligning your findings to your target audience groups. If you have your entire market separated into different customer segments, then you have defined them by set criteria, like demographics, needs, priorities, common interests, or behaviour preferences.
When you know a lot about your customers, you can understand where your business is connecting well with them and where there can be improvements. Market segmentation can help with customer needs research also known as habits and practices research to deliver information about customer needs, preferences, and product or service usage.
This helps you identify and understand gaps in your offerings that can be scheduled for development or follow-up.
Proven Results : Discover five proven practices that will enhance your business research. Use market segmentation to understand your customers clearly , so that you can save time and money developing products and services that your customers will want to purchase.
Marketing and content teams will value having detailed information on each segment, as this allows them to personalise their campaigns and strategies at scale. This may lead to variations in messaging that they know will connect with audiences better, making their campaign results more effective.
If the campaigns are combined with strong calls to action, the marketing campaigns will be a powerful tool that drives your target market segments towards your sales channels.
A good segmentation analysis should pass the following tests:. Market segmentation is not an exact science. How can you meet the expectations of your customers today? We would advise, though, to get automated from the beginning.
Forget spreadsheets — choose market segmentation software to measure and streamline your marketing strategy; as you grow, the technology will scale with you. Innovative features such as XM Directory allow you to build your own customer segments and start personalising experiences at scale based on the rich insights into your critical customer groups. If you want to get a feel for your market segmentation upfront, before taking a step towards a streamlined and integrated system, trust us to take you through the research with our Market Segmentation Research service.
You get the same level of expertise and guidance that comes from helping hundreds of brands go through the market segmentation process, plus our advice and best practice tips at the end to keep you moving forward. Find out more here. Download now. Market Segmentation. Brand Perception. Brand Experience. Brand Equity. Just a minute! It looks like you entered an academic email.
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