Better understand markets and customers

1. Segmentation Fundamentals
Thomas Emrich
Managing Director at ValMark Group
(401) 450-2841
tlemrich@valmarkgroup.net
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2. Why Segment Markets or Customers?
“To sell more products and services, to
more people, more often, more efficiently;
at the highest possible price.”
~ Sergio Zyman
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3. Segmentation Can Take Different
Forms Depending on Your Objectives
Market Segmentation
•Fairly consistent process for most companies
•Where you play
Customer Typing
•Fairly consistent process for most companies
•Who’s on the course
Customer Segmentation
•A variable process aligned with what you’re trying to do
•How you play
Role Segmentation
•A standard process for most companies
•What position customers are playing
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4. Market Segmentation Divides High
Level Opportunity Into Relevant Parts
Total Market
Potential Market
Available Market
Qualified Available
Market
Target Market(s)
Penetrated
Market(s)
 Total Market – total population
 Potential Market – those in total market that
have interest in buying the product
 Available Market – those in the Potential
Market who have access and resources to buy
the product
 Qualified Available Market – those in the
Available Market who are legally permitted to
buy the product
 Target Market – segments or groups within
Qualified Available Market that you decide to
serve
 Penetrated Market – those in the Target Market
who have purchased the product before
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5. Customers Within The Same Target
Market Can And Do Vary By Type
Sales Rep
Broker Rep
Distributor
Retailer
Influencer
Original
Equipment
Manufacturer
Consumer
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6. There Are Segmentation Options If
You Primarily Sell To Other Businesses
Demographics
 Industry: Which industries should we focus on?
 Company size: What size companies should we focus on?
 Location: What geographical areas should we focus on?
Operating Variables
 Technology: What customer technologies should we focus on?
 User status: Should we focus on heavy, medium, or light users
 Customer capabilities: Should we focus on customers needing many or
few services?
Situational Factors
 Urgency: Should we focus on companies that need quick delivery and
service?
 Specific application: Should we focus on certain applications of our
product?
 Size of order: Should we focus on large or small orders?
Purchasing Approaches
 Purchasing organization: Should we focus on companies with highly
centralized or decentralized purchasing organizations?
 Power structure: Should we focus on companies that are engineering
dominated, financially dominated, etc.?
 Nature of existing relationships: Should we focus on companies where we
have the strongest relationships or simply go after the most desirable
companies?
 Purchase policies: Should we focus on companies that prefer leasing?
service contracts? systems purchases? sealed bidding?
 Purchase criteria: Should we focus on companies that are seeking
quality? service? price?
Personal Characteristics
 Buyer-seller similarity: Should we focus on companies whose people and
values are similar to ours?
 Attitudes toward risk: Should we focus on risk-taking or risk-avoiding
customers?
 Loyalty: Should we focus on companies that show high loyalty to their
suppliers?
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7. Even More Options If You Market And
Sell To Consumers
Method Pro Con
Need/Benefit • So-called natural segmentation because buyer needs is simple…basic
• Easy to do
• Intellectually interesting
• Needs (importance ratings) should not be mistaken for problems
• Different techniques for measuring needs yields different outcomes
• Common approaches understate importance of emotional attributes
Behavior • Easy to find a small group of customers who account for lion’s share of
category volume
• Managers love to talk about 80/20 rule
• Very easy to do
• Heavy buyers are often price conscious and psychologically locked into
whatever brands are available on sale
• Product usage often correlated with organization size
• Generally, segments have similar brand preferences, consumption patterns,
demographics and
Psychographic • Like need/benefit segmentation, attitude and personality characteristics are
fun to work with
• Managers like to name the groups
• Simple and capable of being understood by everyone in the organization
• Attitudes are often weak predictors of buyer behavior and brand choice
• Segments have similar brand preferences, consumption patterns,
demographics and media exposure patterns
• Segments can’t be found in databases
Demographic • Simple and capable of being understood by everyone in the organization
• Describes people or stakeholders that you’re typically familiar with
• Media services and agencies find demographics easy to work with
• Demographics rarely predict buyer behavior
• Little understanding of the differential needs between targets
• Segments have similar brand preferences, consumption patterns,
demographics and media exposure patterns
Job/Outcome • Popular with top management; featured in Harvard Business Review
• So commonsensical, it’s a wonder marketers haven’t discovered it before
• Simple and capable of being understood by everyone in the organization
• Can slant toward rational drivers of brand choice and ignore role of
emotional triggers
• Overlaps with occasion-based and needs-based segmentation
• Segments have similar brand preferences, consumption patterns,
demographics and media exposure patterns
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8. Whether B2B Or B2C Different Customers
Can And Do Assume Different Roles
Purchase Initiator Purchase Gatekeeper Purchase Influencer
Purchase Decision Maker End-User
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9. Call To Action
If it’s been a while since you
checked the fundamentals
of your segmentation game,
please contact me at
anytime.
After all, a phone call or
email doesn’t really cost
anything.
I look forward to hearing from
you.
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Thomas Emrich, Managing Director at ValMark Group
Phone: (401) 450-2841
Email: tlemrich@valmarkgroup.net