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Market
segmentation
In all markets, different groups
of customers have different needs. The market for any product can
be split into individual segments, comprising clusters of users
and customers who have similar requirements, characteristics and
tastes. In a well-defined market segment, customers can be viewed
as having a similar response to the marketing mix (Product characteristics, Promotional
approach, Pricing strategy and Place of purchase).
Market segmentation and
positioning are critical activities in product design and are
crucial to ensure that the product features match the
requirements of the target customers. The process can be
considered in four stages:
- Defining the total market
- Segmenting the market
- Targeting an opportunity
- Positioning a potential
solution
Defining
the total market
It is impossible to segment a market unless it is first clearly
defined. A market can be defined very tightly (for example the
small car market) or much more generally (the personal transport
market). How a market is defined impacts on the way in which it
can be segmented. Thus a segmentation of the personal transport
market may include segments called 'small car' and 'bicycle'.
Whereas, a segmentation of the bicycle market may result in
'sporting male', 'office worker' and 'family shopping' segments.
It is preferable to define a market in a way that will yield
useful and definable segments.
Segmenting
the market
A market can be segmented in many ways. Effective
segmentation aims to identify the needs, purchasing
motivations and desires of different clusters of
customers. The choices of the bases of segmentation are
critical. There is no one correct approach and a market
can be segmented by dimensions such as demographics,
behavioural characteristics and purchase behaviour,
psychographics, geography or benefits. Benefits based segmentation is
often effective as it focuses the mind on why particular
groups of customers are motivated to buy your product. It
is useful to explore different approaches to segmenting
your core market, especially if you traditionally view
your products as 'entry level', 'mid-range' and 'high
performance'.
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perceptual map
The perceptual map provides a visual way of representing
a market and the way in which different clusters of
customers or users perceive the importance of different
product attributes. Typically, two bases of segmentation
are chosen as X and Y-axis of a chart, to enable
proposed, current and competitive offerings so be
compared. The most effective charts explore the benefits
which customers may gain from the product and avoid the
need for a 'price' axis, which reinforces the 'entry
level, mid-range and premium' perspective.
An alternative approach is
to select critical product attributes or elements of the
design mix, to enable comparison of the primary
competitive characteristics. This can be most appropriate
in technology driven products.
An effective perceptual
map will enable clusters of users to be identified and
preferably named. This is a prime driver in identifying
customers to interview, observe or involve in the design
of a new product.
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Targeting
an opportunity & positioning a solution
The primary goal of market segmentation is to target interesting
or attractive market segments and position proposed products as
closely as possibly to the ideal requirements of the typical
customers within that segment. The perceptual map provides a
powerful visual tool for identifying gaps in the market place
where there is either little or poor competition and provides a
focus for careful positioning of potential solutions. Useful
segmentation always enables the needs and characteristics of
specific groups of customers to be established.
Further information
- Cooper R G, (1993), Winning
at new products: accelerating the process from idea to
launch 2nd edition, Perseus Books Publishing, USA
- Hague P, (1992), The
industrial market research handbook 3rd edition, Kogan
Page, UK
- Urban G L, Hauser J R,
(1993), Design and marketing of new products 2nd edition,
Prentice Hall, USA
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