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Market
segmentation
Supports market
understanding and is a critical input to product definition and
market research. Helps the team visualise the motivations of
different clusters of users & customers.
Description
For all product types and markets, different groups of customers
will have different requirements. The market for any product can
be split into individual segments, where each segment describes a
number of customers with similar requirements, tastes,
characteristics, interests, lifestyles or responses toto the
'marketing mix'.
Effective segmentation can indicate gaps in the market and
provides insights into the requirements of different types of
users, enabling potential product offerings to be carefully
positioned to meet those needs.
Method
The process of market segmentation can considered in four stages:
Define the total market
The way a market is defined impacts upon how it can be
segmented. For example, a market could be called 'small
cars' or 'personal transport', depending upon the
definition, the segments which emerge could be very
different.
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A market can be segmented in many different ways. For the
small car market, many bases of segmentation may be
appropriate, including age, lifestyle, distance
travelled, occupation etc. There is no correct approach,
but well chosen bases help to describe the motivations,
desires or characteristics of users and reflect the
benefits which different clusters of users may derive
from the product. It is useful to try a range of
different bases. Where possible avoid bases which
describe price and chose bases which reflect the
demographics or behaviour of users.
Draw chart & map products and
segments
The perceptual map (illustrated) provides a visual way of
representing the market and mapping your own and
competitive products. An effective map will enable
clusters of users to be identified and where possible,
named. This is especially helpful when trying to
determine who to involve in customer research. The
relative position of products is dependent upon the
perceptions of users & customers.
Target an opportunity and position a
solution
Having positioned the different competitive offerings, it
should be possible to identify gaps in the market and
target opportunities for new products. By understanding
the needs of a segment, it is possible to closely
position a new product to match these user requirements.
Notes
For all product types and markets, different groups of customers
will have different requirements. The market for any product can
be split into individual segments, where each segment describes a
number of customers with similar requirements, tastes,
characteristics, interests, lifestyles or responses toto the
'marketing mix'.
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