Segmentation is a technique by which a market or a set of customers is partitioned to meet a strategic or tactical objective.
Market segmentation can be conducted using a number of approaches including demographic, geographic, attitudinal, psychographic, and behavioral. Customer segmentation is often used for tactical objectives, and is used most frequently in direct marketing.
The underpinnings of market segmentation exist in microeconomic theory that allows optimization of demand by creating oligopolistic conditions. By segmenting the market, a company can develop an offer that is distinct from others tailoring the offering to the needs of a specific group or market segment. By doing this, it offers a value that is so different from competing offers that it creates near monopoly conditions and so it is better equipped to command a higher price or claim superiority in the newly segmented category.
Segmentation also allows a firm to maximize use of its resources. This is, to focus on a portion of the market applying available resources where maximum outcomes can be achieved. This aspect of segmentation examines how to make best use of resources and company capabilities given a particular market.
Market segmentation has many strategic and tactical uses. Some of them are
- Examining the underlying structure of a market to identify unoccupied niches
- Optimize offers for services or products
- Maximize market share, maximize revenue or profit
- Identify a group of core followers or ultra-loyal customers
- Maximize market coverage in a competitive space
- Increase the level of focus of a market or messaging strategy for greater impact.
- Uncover underserved populations, most profitable markets, core loyal audiences, non-responders.
- Prioritize efforts in outreach and public education campaigns
- Optimize marketing mix
- Identify core groups and develop customer profiles and personas
At EurekaFacts we have expertise in conducting segmentation analysis and interpreting the results from a strategic and tactical perspective. We follow a consultative approach to learn about your business objectives and recommend the segmentation approaches, methods and techniques best suited to deliver maximum value. We examine viable segmentation schemas, evaluate them and present options; within each segmentation approach, we identify the segments, prioritize them and make recommendations for targeting and positioning as well as for appropriate tactical uses that maximize value. Once target segments are identified we develop robust segment characterizations (customer profiles) that describe the demographics, attitudes, preferences, drivers and behavior of each segment.
Our capabilities include strong understanding of business and marketing sciences, microeconomic theory, and a team of experts in advanced analytics, survey methodology, geo-demographics and database integration and data collection.
“A marketer can rarely satisfy everyone in a market. Not everyone likes the same soft drink, hotel room, automobile, college and movie. Therefore marketers start by dividing the market. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes.” Philip Kotler; Marketing Management, 11th edition, Prentice Hall