Market Segmentation This document prepared and presented by
Business Resource Software, Inc.
The purpose for segmenting a market is to allow your marketing/sales
program to focus on the subset of prospects that are "most likely" to
purchase your offering. If done properly this will help to insure the
highest return for your marketing/sales expenditures. Depending on whether
you are selling your offering to individual consumers or a business, there
are definite differences in what you will consider when defining market
Category of Need
The first thing you can establish is a category of need that your offering
satisfies. The following classifications may help.
Strategic - your offering is in some way important to the enterprise
mission, objectives and operational oversight. For example, a service
that helped evaluate capital investment opportunities would fall into
this domain of influence. The purchase decision for this category of
offering will be made by the prospect's top level executive management.
Operations - your offering affects the general operating policies and
procedures. Examples might be, an employee insurance plan or a corporate
wide communications system. This purchase decision will be made by the
prospect's top level operations management.
Functional - your offering deals with a specific function within the
enterprise such as data processing, accounting, human resources, plant
maintenance, engineering design, manufacturing, inventory control, etc.
This is the most likely domain for a product or service, but you must
recognize that the other domains may also get involved if the purchase
of the product or service becomes a high profile decision. This purchase
decision will be made by the prospect's functional management.
For the individual consumer:
Social Esteem or Pleasure - your offering satisfies a purely emotional
need in the consumer. Examples are a mink coat or a diamond ring. There
are some products that are on the boundary between this category and the
Functional category such as a Rolex watch (a Timex would satisfy the
functional requirement and probably keep time just as well).
Functional - your offering meets a functional requirement of the
consumer such as a broom, breakfast cereal or lawnmower.
Segmentation of Needs
Then you should establish what the need is and who is most likely to
experience that need. Your segmentation will be determined by a match
between the benefits offered by your offering and the need of the
prospect. Some "need" categories for segmentation include:
Reduction in expenses
Prospects might be businesses that are downsizing (right sizing),
businesses that have products in the mature stage of their life cycle or
individuals with credit rating problems.
Improved cash flow
Prospects might be businesses that have traditionally low profit
margins, businesses that have traditionally high...