Divide and Conquer or Right Approach to Market Segmentation
Segmentation is one of marketing fundamentals in any company. Moreover, it is a compass, and its correct setting determines the way chosen by the company, and its ability to remain afloat after the first attack of consumer demands. Each businessman, project manager, irrespectively of scope and type of his business, has to know and apply the principles of proper market segmentation.
Segmentation: What Is It?
We often hear “target segment”, “market segmentation should be performed”, but what is the actual meaning of this term? Market segmentation is a process of market division in consumer groups, the segments. Work with the segments makes it possible to determine target audience of the company, its main competitors, to understand particularities of manufactured product, its strong and weak points. Main objective is to determine as clear as possible the segment for which the company is working.
Important Recommendations
There are no doubts that segmentation is really needed. But how to make the process of market division in segments more efficient and fitting to your company. There are several key recommendations which may be helpful for that:
· At the beginning set clear segmentation objectives and determine the main issues - hypotheses. The best way to spend time and money for nothing is to make segmentation for the sake of segmentation, that’s why segmentation should be performed reasonably.
· In process of segmentation you have to see the market as a whole. Start from the “clear page”, description of market structure and main market trends.
· It is logic that general description should be followed by more detailed market research, so, due to this fact, the issues and hypotheses examined earlier should be added and developed, but without rough change of their direction.
· The main thing is that segmentation is a creative process. Implementation of non-standard ideas and practices will help to make it more efficient.
Segmentation Criteria
1. Segment size. Segment capacity may be determined by different factors: total number of manufactured products, sold products, the number of potential clients.
2. Access to the segment. Accessibility is determined by the company’s capacity to get access to the product sale and distribution channels, and to store and stock products for this segment.
3. Segment prospects. For the company it is important to have selected market segment conforming to the main direction with prospects for future development.
4. Segment efficiency and profitability. This criterion is used to determine the level of profitability of the company’s operation in case of work in this segment. The methods of assessment of financial attractiveness of the business are usually used for calculations.
5. Competition in the segment. This criterion helps to understand to what extent the competitors worry about your appearance on this market and what actions may be taken by them, to what extent they are capable to let you have this part of the market and on what terms and conditions.
6. Efficiency of operation. During analysis of this criterion you will come to the conclusions on necessary experience of work of your employees, you will understand to what extent you will be capable to satisfy their demands and on what level.
7. Level of segment conformity to the company’s mission. Irrespectively of your area of responsibilities at this moment, you should always have a clear understanding of strategic goals and ways to achieve them.
You have to remember that segmentation is not only analytical, but also creative process. So, different approaches to segmentation and selection of right criteria are required. The standards may not be readily helpful; sometimes you have to find new solutions and implement them in practice.
