Actionable Market Segmentation Guaranteed

Savvy companies are demanding market segmentation research as a key component of the strategic planning process. Industry leaders use market segmentation to cut through the clutter of an increasingly competitive marketplace and develop strategies that will give their products and services the edge. Market segmentation can help senior management understand the marketplace, improve competitive positioning, shape the marketing mix, realize economies, simplify marketing effort, improve marketing efficiency, maximize the lifetime value of the product and identify opportunities or niches. But with market segmentation frequently regarded as the "holy grail," why does it so often fail to provide actionable results?

A proven approach to survey-based market research focuses on the appropriateness and goals of segmentation, variables to segment, profiling segments, and evaluating targets of segmentation studies to provide actionable market segments--guaranteed. The value of segmentation will be realized by following the four-step design process:

Step 1: Is segmentation research appropriate? The fundamental question of whether market segmentation research is appropriate is often overlooked in pursuit of anticipated benefits. For example, segmentation research would not be appropriate for mass marketed commodities. Likewise, highly differentiated products and services that are independently targeted, or micro-marketed, wouldn't benefit from segmentation research. By establishing clear goals--such as improving the company's competitive position, better serving customer needs, and positively impacting profitability--the method for actionable market segmentation research can be designed.

Step 2: Segment the market using demand variables. Profile the segments. To accomplish the established goals, it is critical to select the right questions (variables) and decide which of the variables need to be included in the analysis. Is the purpose of the variable to classify the respondents, describe the segments, or evaluate the attractiveness of the segments? The identified market segments are then summarized using profiles from which the attractiveness of each segment can be evaluated, a target market segment selected, and its viability determined.

Step 3: Evaluate attractiveness of segments and select targets. Strategic choices must be made to pursue the segment that offers the greatest opportunity, which can only be done if the study provides data that measures the segments' potential. Care must be taken to measure the attractiveness of the segments both quantitatively and qualitatively before finally selecting the segment to be targeted.

Step 4: Develop marketing mix for targets. To guarantee that segmentation research will be actionable, a marketing mix must be developed and implemented. With the use of choice modeling and similar tools it can be determined which elements of the marketing mix are fundamental to success and which levels of those elements satisfy specific targets.

By systematically following the four-step design process, market segmentation becomes an invaluable tool that produces useful, meaningful results to drive strategic marketing plans. Whether introducing a new product, identifying new markets, or increasing brand equity, an actionable market segmentation process can guarantee success.

Actionable Market Segmentation Guaranteed (White Paper)

Part one of a two-part series on market segmentation Part two of a two-part series on market segmentation