Segmenting seems straightforward but is something that most companies fail at. Gretchen Gavett explains in her article that it is harder than it appears to break down segments. Segmenting is the separation of customers with different needs into a subgroup of customers with similar needs.
John Forsyth, of Mckinsey's, describes three pitfalls that companies fall into when thinking about segmentation:
1. Companies rarely create a segment, they usually uncover one
2. Segmentation and demographics are very different things
3. Asking why you want to segment and what decisions will be made based on the info
There are six characteristics to consider when coming up with a useful segmentation.
1. Identifiable - You should be able to identify customers in each segment and be able to measure their characteristics
2. Substantial - A segment must be large enough to be profitable
3. Accessible - You should be able to reach you segment via communication channels
4. Stable - A segment should be stable enough to be marketed to effectively
5. Differentiable - The people should have needs that are visibly different from other segments
6. Actionable - You have to be able to produce products catered to your segment
These are basic explanations for a more complex set of characteristics, but they are essential in figuring out segments. There are other things to consider when searching for a segment including such as learning from prominent failures. Forsyth also mentions that focus groups are antiquated and the best way to learn about customers is to spend time with them in their homes. Segmentation is far more difficult than people assume and companies are not even close to being adequate at it yet.
About the Author:
Ryan Polachi is a contributing
writer concentrating his focus on Marketing, Finance and Innovation. He can be
reached at rpolachi@IIRUSA.com.