Just because we want to please all of our customers does not mean that we go about doing so in the exact same way. In fact, with some consideration, we might see two or more sets or groups of customers with different needs or wants. In marketing this approach is known as segmentation, which is a three-step process: segmentation, target marketing, and positioning.
First, collect information to determine how many “pieces” of the market you can detect. This is segmentation. You might use internal data, such as sales results, customer interviews, discussions with employees, or data from your industry’s trade association(s). You might study competitors to determine what they seem to be doing regarding their approach to serving a market. These sources of information can help us better understand the market and any differences between and among customers and potential customers of our products and services. In the segmentation process these groups of customers are called market segments.
After determining the number of segments and capturing a description of them, you will then analyze details about the segments to try to determine which of them are the most appealing to you. What stands out as appealing will differ by the organization doing the analysis and its plans and goals. Typical measures used are segment size, growth rate, level of competition, and whether your current operations, such as distribution or marketing communications, can already reach a particular segment. You can use tools such as a Fishbein model and/or a product-market growth matrix (aka Ansoff matrix) to analyze the segments and rate or rank them. You can then decide whether or not to target one or more of them. The end result is one or more segments that we wish to serve; these are then known as target markets.
The third and final step in segmentation is designing a marketing mix for each target market. From your understanding achieved in determining the segments and the desirability of serving them you have information you can use to develop a new product or service, or to customize an existing one. Likewise, you can use your knowledge to decide where best to make the offering available (i.e., distribution channel), determine the price for it, and design a promotional message(s) that will inform people and/or organizations (for business markets) about the benefits you are making available for them. This final step is called positioning. Positioning simply means the “position” you wish to occupy in the minds of your target market members–i.e., what they think when they hear about or see your brand.
The most successful organizations practice market segmentation. This is true for nonprofit operations as well as for profit ones. The end result of the process is the ability to “hit the target” more accurately, with a focused aim, as opposed to hitting all over and around the target where a few of your offerings will be acceptable, but many will languish, being seen as not having the right benefit(s) for a particular customer(s).
Related concepts that can help you in your segmentation efforts are also available here on the Resources page. Some are also described more fully in our book: Better Customer Service: Simple Rules You Can Apply Today (Routledge 2021). Try the tools and concepts and you could see improved results with your current customers and the prospects you hope to serve.
Click here to watch a brief video with a description of the segmentation process.