A business’s offer cannot satisfy the entire market. Not all people like the same things and have the same interests and preferences. It is therefore necessary to segment the market. What does market segmentation mean ?
Market Segmentation involves identifying distinct groups of customers who will react in the same way to the company’s offering. The market must be divided into homogeneous, significant subsets that are accessible to a specific marketing action. The company identifies the criteria according to which the market is structured and studies the profiles of the segments thus generated.
The company assesses the relative attractiveness of each segment and choose those on which it will focus its efforts. They must choose the segment or segments which represent the best potential, that is to say, those which it can satisfy in a particularly effective way. These segments constitute the company’s target. For each target, a specific offer should be drawn up.
Steps of the segmentation process
1. Identify the segments: Identify the groups of consumers with homogeneous needs and behaviors with regard to a given product.
2. Study the segments: Study the geographic, socio-demographic, psychographic and behavioral characteristics of each segment, in order to better identify it.
3. Evaluate the segments: Evaluate the value of each segment based on its general appeal and consistency with company goals and resources.
4. Choose the targets : choose the segment (s) to which the company will to address its efforts
The segments can be defined on the basis of different criteria, which generates various types of market segmentation .
The 4 basic types of market segmentation are:
– Demographic segmentation: consists of grouping customers according to their social or demographic characteristics: sex, age, profession, revenue, family composition, etc.
– The socio-demographic segmentation: has the advantage of being easy to implement and can take place directly in the satisfaction survey thanks to a qualifying question such as: “How old are you?”
– Psychographic segmentation: consists of segmenting your clientele according to their personality traits, values, interests, psychological influences and lifestyles. The analysis of customer satisfaction based on these traits is useful in the sense that you will be able to discover new ways to market or promote your products. – Geographic segmentation: customer satisfaction strongly depends on the geographic region in which the customers surveyed are located.
Other geographic criteria can also influence customer satisfaction: this is the case in particular with the type of home (apartment / house) or even the climate.
– Behavioral segmentation: is based on the behavior of customers and prospects vis-à-vis the products and services you offer and their purchasing/ spending habits. These behaviors can be observed directly or identified through customer surveys conducted upstream. The main behavioral criteria concern the purchase: these are for example the date of the last purchase, the frequency of purchases, the number and type of products purchased, the average shopping cart, the purchase channel used, the means of payment or the chosen delivery system.
The characteristics of an effective segmentation.
An effective segmentation must fulfill five characteristics:
– The possibility of measurement: the size of the segments must be measurable and obtainable in terms of data.
– Sufficient volume: segments must be large and / or profitable enough to justify the development of a specific marketing strategy.
– The possibility of access: the segments must be accessible to the company’s marketing efforts by knowing the habits of the target segment in terms of product selection criteria, price sensitivity, frequentation of distribution networks, exposure to media … etc.
– Relevance: the segments must be really different from each other from the point of view of the studied variable and react differently to the marketing actions envisaged.
– The feasibility by the company.
Based on the impossibility of the company to respond to the demands of the entire market with the different tastes and aspirations of the people, it finds itself forced to draw up a strategy to segment the market according to specific criteria that generates various segments and after studying and evaluating the company chooses the one(s) on which it will focus its efforts.