Summary: To segment a market you need to identify groups of consumers with similar jobs and outcomes.
As we’ve said, any firm that is able to target a specific group of consumers with an offer best aligned to the jobs and outcomes they prioritise is more likely to win their business.
It is therefore important when segmenting the market to maximise the differences between segments whilst simultaneously minimising the differences within them. Remember if two segments will respond identically to the same offer they are not separate segments.
So exactly how do we segment effectively?
- The first step is get the right software – it takes a lot of work out of the job!
- Enter the data you have collected to define the market.
- You should now have results. Can you see groups of people with similar priorities of jobs and outcomes? If so you are now in a position to form segments from like minded decision makers. That is to say that they show a similar level of interest and place similar importance on the same, or comparable set of jobs and outcomes across the Consumer Value Line. Each segment will be a group of consumers within a market who share similar priorities.We now look at the identifier variables to see if they share any particular variables in common. For example, one jobs/outcomes based segment might be made up of a majority young male professionals living in the city, another made up of retired couples living in the country. A very useful method is giving these segments human personas, even drawing what they look like! This helps visualise them and helps us get into their world and think like them!
- Look at the famous 4 from your market research. How well are the jobs and outcomes of this segment already been served?
- What are the famous 4 of the segment for buyers, users, payers, decision makers and key influencers – the
- What different Consumer Value Lines are there? Can we out execute on any Consumer Value Line? What Value Creators are
- What Value Creators of current competitors or prospective competitors for segments are at first sight Value Barriers and Value Gates
- How close are the famous 4 to that of other segments?
- Which segments are most removed from bigger and more powerful competitors offerings, in other words – what are they less likely
- Very importantly, are there some segments that no company seems to care about at all? It’s great news when there is, because you
- Is a vastly different Product Value Line – a new and independent set of Value Creators needed to serve the segment?
- What is the ability to serve this segment of other competitors given their Value Creators and the famous 4? Can they match us
- What are the synergy gains of serving a segment for us in terms of offering value and reducing costs? What about for our
- What is the current and future growth of the segment?
- What is the size of the segment?
- What is the current competition in the segment?
- What are the brand loyalties of existing customers in the segment?
- What is our attainable market share given promotional budget and competitors’ expenditures?
- What is the required market share to break even?
- What is the sales potential for the firm in the segment?
- What are the expected profit margins in the segment?
- What economical, social and political trends are and could affect the segment?
- What segments there is opportunity in
- Where we are going to research further in terms of competitors offerings
- Finally, where we are going to try and come up with ideas through Value Innovation
Post research – segment attractiveness
Segment attractiveness comprises many factors, and at this stage all that is needed is a broad overview. Don’t go into too much detail but brush over the questions below to see what ideas and segments you can obviously and definitely rule out. We are not trying to say with certainly which segments we will certainly choose that comes much later, we are trying to make a short list and rule out any segments if we can.
To serve a new segment you often must share Value Creators that create costs – costs of coordination, costs of compromise and costs of flexibility. What is the cost of compromise, coordination and flexibility to serve the segment for us and other competitors and how does this match up to the net advantage of sharing?
Think in terms of –
Coordination – Time, personnel and money – complexity
Compromise – Sharing any Value Creator means it may become less optimised for another segment and effect other Value Creators negatively as well.
Flexibility – Difficulty in responding to competitors moves and higher exit barriers.
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