newfocus has extensive experience in conducting large-scale segmentation research across a broad range of industries.
A strategic market segmentation approach is based on the principle that groups of very similar people will behave in similar ways with respect to choices about products in a market. If very similar groups of people can be identified, then these groups can be used to focus products, service and marketing communications and to gain a better understanding of the needs of the marketplace. When identifying major growth markets it is important to make strategic decisions about investing the appropriate resources so as to gain a practical market share.
The more a market is segmented the more precise the understanding and the better customer needs to be satisfied. However the more highly segmented the more dived the market is which can reach a point of financial sustainability. In considering this, a decision must be made of how far to segment. newfocus can help in determining this decision. The success of segmentation can be judged by its ability to stimulate marketers by assisting them in detecting new market opportunities. A more objective measure of the success of segmentation is that it leads to identifying commercially viable market segments.
In understanding how market segments are defined there a few objectives that can help in a market segmentation process. These include:
- Identifying a segment that differs from the other segments – identify similar groups of prospective customers considering their wants and needs and responses to differences in the elements of product, price, promotion, place, physical environment, people and processes. Differences within one segment should be smaller than differences between various segments.
- Define the features of the segment – features should describe the segment clearly enough so that the members within that segment can be easily contacted or identified. Having differences between the members in a segment is useful in that it can help us a newfocus determine whether a prospective customer is or isn’t in the target market and will help determine methods in how to reach the prospective customer through the marketing communications strategies.
- Determine segment potential and size – This will help with identifying and prioritising which segments to track
Segmentation analysis reveals groups of like individuals on the basis of attributes or attitudes they have in common. A person’s attributes can be based on any information that is available about them (eg people can be judged as similar because they report similar attitudes towards life, lifestyles, demographics, product preferences, product perceptions and benefits, or consumption levels). The principal decision that the user of segmentation must make is what kind of information to use. If segmentation is to successfully predict consumer purchase behaviour, then it is most likely to succeed when the basis for forming groups of people is related to attitudes and behaviour. Therefore it is critical to understand which questions are the right ones to ask.