Segmentation

• Segmentation, Targeting and Positioning (STP): identifies potential customers, selects specific customers to pursue and formulates its value proposition for its target customers.

Definition

The separation of a heterogeneous group of customers with different needs into homogeneous subgroups or segments of customers with similar needs and preferences.

• Companies don’t create segments, they find them.

Purpose

• Benefits to the customer
  • Tailored products/services
  • Convenience and time savings
  • Personalized experience
• Benefits to the company
  • Identification of unfilled needs
  • Increased customer satisfaction
  • More targeted promotions
  • Better product designs value-chain
• Market Segmentation Strategy drives the entire value chain — the entire company needs to act in harmony (FIT) and align every activity.

Variables

• Geographic
• Demographic
• Psychographic
• Behavioral: Usage rate, loyalty, product knowledge, involvement, purchase occasion, buying stage
• Benefits Sought

For selling to businesses:

• Firmographics: Industry, firm size, global/regional, ownership
• Buying Approach: Centralized or decentralized purchase, purchase policies, involvement of decision makers
• Behavioral: Volume, purchase frequency, attitude toward risk, loyalty, urgency

Characteristics

• Identifiable
• Substantial
• Differentiable
• Accessible
• Stable
• Actionable

Targeting

Targeting involves evaluating the attractiveness of each market segment, selecting one or more to pursue and designing marketing programs to serve them.

Deciding a segment based on:

• Characteristics
  • Size
  • Growth Rate
  • Profitability
• Competition
  • Strengths
  • Intensity
  • Resources
• Company Fit
  • Objectives
  • Competencies
  • Resources