As a marketing professional addicted to understanding consumer behavior, I am fascinated by the critical importance of segmentation. If your category is a pie, which slice are you focused on?
If you ask a question about what consumers think, you better be certain that you have defined which consumers you are talking about. Not all consumers’ opinion has equal weight and importance if you are trying to understand segmentation. Someone who buys your product or service once a year is not the same as the daily user.
If you read the Wikipedia definition:
A market segment is a subset of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria:
- it is distinct from other segments (different segments have different needs),
- it is homogeneous within the segment (exhibits common needs);
- it responds similarly to a market stimulus,
- it can be reached by a market intervention.
The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts for the services.
The people in a given segment are supposed to be similar in terms of criteria by which they are segmented and different from other segments in terms of these criteria. These can be broadly viewed as ‘positive’ and ‘negative’ applications of the same idea, splitting up the market into smaller groups.
Examples: Gender Price Interests Location Religion Income Size of Household
U.S.Wine Consumption
A real-life example will help illustrate this interesting way to look at business opportunities.I’m currently studying the US wine consumer to try and get a deeper perspective on some issues that relate to attitudes and usage for different types of wine closures. Sounds pretty esoteric but I worked for a company (
Nomacorc) who designs and engineers closures (corcs, as we call them) for more than 40% of the US still wine market and closes 13% of the still wine globally.
What has me intrigued is the segmentation of the market into the heavy and frequent consumers who drink at least 1 bottle of wine per week or more. This group represents 17% of the US population, 50% of wine consumers and they consume 90% of the wine (by volume) in the United States.
Think of it, if you want to understand this slice of the purple pie, you don’t need to get too deeply immersed in the opinions of everyone- just 17% of the US population or 50% of wine consumers. They are so important to the category, that you could waste your time (and money) studying the entire group instead of this segment.
By cross-tabulating the data from some recent research, I can look at attitudes and opinions by finite segments of the most important part of the market. I may glean an insight or two from patterns that emerge by looking closely at this segment and it may even require more research to go deeper into what is a critical lever in the dynamic of the market. Moreover, it may be that as I understand when certain attitudes occur (say by usage occasion- like every day versus special event), other patterns emerge. Using multiple sources of data, patterns emerge long before I put a marketing plan into place.
How does this apply to you and the product or services that you market?Here are a few things to consider?
- How is the category you are interested in organized?
- How do you define the segments within your category?
- How do heavy and frequent users define the category?
- What other characteristics (age, gender, geography, education, income, etc) create commonality among the important segments?
- What commonality exists among that slice of the market that might be psychological in nature or behavioral? (they like to watch a lot of sports, they frequently go dancing clubs, they bowl)
- How is that group differences in behavior, in media consumption, in age/gender, etc. from the rest of the category?
- Do you deeply understand what makes them tick? (politics, religion, passions?)
- Have you done both qualitative and quantitative assessment of this section of the market?
- Does this group respond differently and how can you refine your message, offering, pricing or promotion to attract them.
- Why do they over-index against the general population? (If they buy 5X more than the average consumer, what motivates this difference?)
Summing it up
The first step in a market assessment is segmentation. You need to have some clarity about this before you begin targeting or positioning work. Think STP. Segment. Target. Position.
Segmenting helps you determine what part of the market you plan to approach since it makes clear if you are going after a niche or a bigger slice of your market pie. Through research which should include both qualitative and quantitative assessments, you begin to see the market more clearly and to assess where your product or service might fill a gap. As you do the added work of targeting and positioning, you have your sights clearly focused on who you are trying to reach and what your value proposition is for that segment.
I wonder what flavor ice cream I would like with my slice of the pie!
Photo by Element5 Digital on Unsplash
Jeff: Thoughtful post. I think, thanks to the collaborative tools of Web 2.0 segmentation is getting even more critical. Now for the million dollar question. As a result, do you think marketers should have more than one position statement?