Market segmentation process example 1
The first example, a business-to-business project, is captured in the following diagram. This diagram also summarizes the segmentation process and includes the market map.
The 'route' through this diagram (and any segmentation project) is as follows:
In this particular example the company had been operating a three-segment strategy with customers divided into Corporates, Groups and Private Companies. A progressive decline in market share over a number of years was causing this structure to be questioned. The process is rigorous enough to test the validity of such 'Preliminary Segments' (see 'Market Mapping' on the diagram) without prejudicing the outcome in any way.
By implementing sales and marketing strategies targeted at specific segments, this company succeeded in increasing both its margins and market share within a few months of completing its segmentation project.
Market segmentation process example 2
This is a brief outline of how one particular company progressed its segmentation project. The project kicked off with an in-company workshop at the end of which an action plan was drawn up. This action plan had two primary objectives:
- To verify the conclusions of the workshop.
- To fill in the information 'holes' uncovered during the workshop.
Once the segments had been finalized and the corresponding sales and marketing plans put in place, the company achieved major gains in its market share.
The market in question is one in which the customer's need is currently being met by employing very expensive, specialized technical equipment. The map of this market is as follows (it is based on the second map in the Market Mapping Examples section of this website and now includes company share and details by route to market):
Notes: The total size of this market is 1300 units. Guidelines on how to develop these more informative market maps can be found in Chapter 11 of Market Segmentation: How to do it and how to profit from it (2012 edition published by John Wiley & Sons, ISBN 978-1-1184-3267-9).
Once this map had been drawn up the company took each of the decision-making groups in turn and determined for each of them the key features on which the decision-makers tended to base their decisions and their relative importance to each other. Rather than assuming that all the individual decision-makers found in each group focused on these key features in the same way the company drew up a cross-section of companies found in each group and checked out this hypothesis. Where meaningful differences occurred they recorded them and also noted the profiling characteristics that could be associated with each of them. So, for example, if 'Technicians' fell into two camps when it came to the features they focused on, then this group was split into two, each sized and each identified by the characteristics that described who they were.
The company then developed an understanding of the real customer needs the features (on their own and in combination with other features) were satisfying for each of the groups. Price was then added to the list of needs and their relative importance to each other determined. Again, rather than assuming that all the individual decision-makers found in each group rated these needs in the same way the company referred back to its cross-section of companies to check out this hypothesis. Where meaningful differences occurred they recorded them, sized the resulting sub-groups and also noted the profiling characteristics that could be associated with each of them.
At this stage the company had both developed a picture of the different decision-makers found in its market and established a framework that would enable them to compare one decision-maker with another. Segments were then formed by bringing together like-minded decision-makers and, because of the information fed in beforehand, the resulting segments were sized and their identifying characteristics noted. Inevitably, while running through the latter stages of this exercise like-minded decision-makers were spotted well before the formal clustering procedure was conducted.