Introduction to Segmentation
Episode 01
Market Segmentation: Episode 01 Transcript
Hi. My name is Jerry Thomas, and I’m President/CEO of Decision Analyst, of one of the leading analytical companies in the world, and today I’m introducing a series on market segmentation. And market segmentation is probably one of the most widely pursued business strategies in the world and virtually every business pursues market segmentation in some way as a strategy. And market segmentation is based on the military strategy principle of concentration of force and the goal is to have all of your forces in one place against a smaller force. So it’s concentrating all of your resources on one segment of the market, so you can overpower your competition.
Segmentation answers four basic questions that almost every business faces. The first question is: what is the optimal target market for our brand? or our business? The next big question is what should our product strategy be? And then, how do we position ourselves, and what messaging, and themes support that positioning? And then what advertising strategy should we explore to try to achieve competitive advantage? So those are the four main topics that, questions that can be answered by market segmentation studies.
There are many, many, ways to segment markets. Geographic segmentation is probably the most widely practiced segmentation technique. That is, you only market your product, or your service, in the limited geographic area, and because you’re putting all of your resources in that small geographic area you achieve dominance or competitive advantage. Demographic segmentation by sex, or, for example, there are men’s clothing and women’s clothing—well, that’s segmenting a market by gender.
Some markets can be segmented by age. Others by education. You can segment a market by media consumption. You may target your product only to people who are heavy consumers of radio, for example. There’s price level segmentation, General Motors is most famous for their Chevrolet through Cadillac automobiles, and the intent was to segment the automotive market in the U.S. by price levels. Some people have more money than other people. And they did a wonderful job for many years in segmenting the market by price level.
You can also segment market by distribution channel. You may only sell your product in drugstores, for example, and put all of your energy in doing the best job possible in drugstores. And again you get an advantage, because you’re concentrating resources. Markets can be segmented by type of packaging, they can be segmented by politics. Fox News is a perfect example of market segmentation based on political outlook or viewpoint. Markets are segmented by religion, at times. So you’re really only limited by your imagination in the different ways that markets can be segmented
But when most people in marketing today talk about market segmentation, they’re really referring to attitudinal or perceptual segmentation, and there are many different terms used to describe this type of segmentation; lifestyle, values, needs, need states, motives, motivations. There are many, many different terms used to describe attitudinal segmentation, but the core idea in attitudinal segmentation is that we’re going to group people by attitudinal similarities, so that the people in a segment or a group tend to share the same outlook on life, or the same attitudes or the same perceptions. For example, if we were segmenting the automotive market, we might find that there’s a group of people in the U.S. who believe that safety is the most important thing; we might find another group that believes that speed and power is most important, and we might find another group where the driving force is frugality. So if we had segmented the automotive market and we had those three segments, then that could be a template or become a template for our product planning. (So we’d have a car for safety, one for speed, and one for high mileage or miles per gallon), or to become a template for our advertising. We might choose to focus all of our advertising on the safety market because it was bigger, and perhaps higher income and that could be another way we would apply segmentation.
One final, or a couple of final thoughts, and I’ve been talking primarily to this point about mass advertised markets, but if you are segmenting a market in a direct marketing environment, that is, you are delivering your messages or you are attacking through direct marketing, then you can actually have quite a large number of segments because you can actually have a different message for each segment. If you’re in a mass-advertised market (mass advertising by definition is pretty broad based, like going hunting with a shotgun), so you can only have four or five segments because of potential message conflict across those segments.
But summing up, market segmentation is all about trying to become a big fish in a little pond, or a specific market segment. Our next [episode] in market segmentation [series] is going to deal with the pitfalls and errors that people trying to do segmentation studies commonly fall into.
Presenter
Jerry W. Thomas
Chief Executive Officer
Jerry is deeply involved in the firm’s development of new research methods and techniques and in the design of new software systems. He plays a key role in the development of Decision Analyst’s proprietary research services and related mathematical models.
Jerry describes himself as a student of marketing strategy, new product development, mathematical modeling, business survival, and economic growth. In his spare time, he likes to work on his farm in East Texas where he grows grapes, apples, pears, pecans, plums, and peaches; a forest of native trees, grasses, and insects; and wild plants of many types.
He graduated from the University of Texas at Arlington, earned his MBA at the University of Texas at Austin, and studied graduate economics at SMU.
