Loughborough

Market Segmentation

It is more than 80 years since Henry Ford wrote:

“Any customer can have a car painted any colour that he wants so long as it is black.”
Ford, My Life and Work, Chapter IV.

In the 21st century, we have all grown used to an infinite choice in anything we consider buying. With this in mind, new and growing businesses have to think differently about their offer and how they promote it. Market Segmentation is the science of splitting your target customers into smaller groups with similar buying habits. Then you can tailor your offer to each group. By doing this you:

• Increase the proportion of people you convert into customers – because your offer is better tailored to their needs.
• Reduce your promotional costs by using messages and mechanisms better suited to each group;

Why Bother?

The marketing process is about understanding customers and then satisfying their needs better than the competition. Different customers have different needs. It is rarely possible to satisfy all customers by treating them in the same way.

If you ignore differing customer needs, your competitor can easily launch a product that serves a specific group. Then you lose customers and you lose money.

Useful Segments

• Identifiable
  • You can easily determine the attributes that differentiate segments;
• Accessible
  • You can communicate with your chosen segments;
• Substantial
  • Segments are large enough to justify the effort required to target them;
• Unique Needs
  • Segments behave differently to differing marketing mixes;
• Durable
  • Last long enough to justify the cost and effort in addressing their needs.

Consumer Segmentation

• Geographic
• Demographic
  • Age
  • Gender
  • Family
  • Income
  • Occupation
  • …
• Psychographic
• Pets
• Hobbies
• …
• Behavioural

Industrial Segmentation

• Location
• Company Type
  • Size
  • Industry
  • Decision making unit
  • Purchase Criteria
• Behavioural Characteristics
  • Usage
  • Buying status (new, regular etc)
  • Buying process (tenders, approvals etc)

Segmentation Process

1. Define the market
• Target customers – some examples:
• Car Owners in Loughborough
• Parents in Loughborough
• Business owners in Charnwood
2. Market mapping
• Who decides
• How is the market structured
• Do you address your market directly or through intermediaries?
• Who pays the bills?
3. Who specifies what and why?
• Exactly who are we talking to?
• What are they buying – think widely
• Transport
• Status
• Housing
• Why are they buying?
• Grudge purchase – something they have to have
• Luxury
• Wanting something better
4. Forming segments
• Group like-minded decision makers
• Name the groups
• Memorable words
• Polite words – the word might be used in public
• Avoid telling customers their segment – it is easy to offend
5. Formulate segment based plan
• Tailor your offer for each group
• Promote your different offers correctly for each group
6. Deliver plan
7. Measure success
8. Refine plan

# 4 – 21st September 2007

Paul Fileman MIET CEng MCIM
Chartered Marketer
paul.fileman@talktosps.com
Tel:  01509 854447
Mob: 07969 188820
www.talktosps.com