In this lesson we will look at defining market segments, and help you understand the difference between them and customer classifications. We will also discuss  characteristics, motivations and behaviours, and how they will help you understand your potential target customers.

Let’s start with a brief overview of a some of the most fundamental concepts of marketing.

What is Marketing ?

Essentially, Marketing is the process of communicating the value of a product or service to potential customers for the purpose of selling that product or service to them. Marketing involves everything an organisation does to acquire customers and maintain a relationship with them.

What are the essential elements of any Marketing strategy?

We need to bear in the W.H.C.P elements when evaluating any Marketing strategy:

• Who is your customer
• How to get that customer
• Cost involved in getting and maintaining that customer
• Profit we are likely to make from that customer

What is the Marketing Mix?

The Marketing Mix is a combination of tools that can help us put the right product in the right place, at the right time, and at the right price. It consists of:

• Product: what the product is
• Price: perceived value
• Place: where will we sell it, distribution channels, etc.
• Promotion: branding, colour, etc.

OK, with those fundamentals understood let’s carry on with the lesson.

What is Market Segmentation and why should I use them?

Market segmentation is the process of dividing a market into groups (or segments) of customers with similar needs or characteristics who are likely to exhibit similar purchase behaviour.

The list of possible segments is long but typical segments might include age, gender, religion, culture, income and lifestyle.

Segmentation acknowledges that different ‘types’ of buyers may require different products or marketing approaches or marketing mixes.

It’s very hard to determine what the needs of EVERYONE are

Segmentation can enable your business to target different groups of buyers by adapting your product and marketing mix to best suit each targeted segment. It ensures your marketing efforts are directed and (hopefully) heard by the right people. A good example of this approach can be seen in the mobile phone industry…

All mobile phone providers provide a wide range of mobile phones with different features which target customers in terms of their communication needs and wants.

This is then complemented by a range of mobile phone tariffs, or price plans, created to suit the different phone usage behaviour of customers in the market. This is segmentation is action!!

To summarise: Importance of defining market segments:

• identify potential target customers
• avoid waste of effort and resources in targeting customers unlikely to buy your products

What is the difference between market segments and customer classification?

We have been talking about market segments, but there are other ways to categorise customers and one of those is using customer classifications.

We know that segments are broad, and can include geographic locations, industries to target, etc. They typically include customers, prospects, partners, and used for high level strategy.

Customer classification is usually a more detailed view, and focused on just customers. They typically look at customer types like business customers and leisure customers.

What  are characteristics, motivations and behaviours of potential target customers? And How can we identify them?

Having a clear understanding of what the characteristics, motivations and behaviours of your potential target customers are can help you in all you marketing activities? In this section we will discuss what each are and how you can identify them.

Characteristics

Let’s start with characteristics. These are features or qualities belonging to customers. They could be very specific, for example:

• male
• aged between 20-30
• working full time
• lives in the city
• owns a bicycle
• watches a scary film every Saturday
• considers himself to be very patient

Or, they could be quite broad like “connected”, and we might know our customer is connected because:

• they have a smartphone and use it for 90% of their online interaction
• they are very active social media accounts
• they buy a significant amount online
• frequently use video/audio/instant messaging
• etc…

Motivations

Motivations are reasons for acting or behaving in a particular way. Good examples of motivators are loyalty, fear, or rage:

• Loyalty is a motivation that is encouraged by quality products, careful branding, an association with prestige or knowledge, etc. Apple or BMW are good examples of fostering a loyal customer case.
• Fear is a motivation that might lead a customer to buy in order to avoid risk or danger by seeking out brands that they believe will help them OR where they feel they might miss out!!
• Rage is a motivation that might lead a customer to buy because on injustice or rebellion, think about flags or clothing that carry’s slogans.

Behaviours

Behaviours are the way customers act or conduct themselves. Essentially  it looks at how people make decisions about what they buy, want, need, or act in regard to your product/service. Generally there are three factors:

• Psychological: perception of a need or situation, the person’s ability to learn or understand information, and an individual’s attitude
• Personal:  how a person makes decisions, their unique habits and interests, and opinions, often influenced by age, gender, background, culture, and other personal issues.
• Social: family, social interaction, work or school communities, or social class (possibly affecting income, living conditions, and education level)

Identifying characteristics, motivations and behaviours

The most effective way of identifying your potential customers characteristics, motivations and behaviours is through research. Market researchers often use surveys (quantitative research) and focus groups (qualitative research) to really get in touch with potential customers to facilitate a better, more considered understanding of exactly who, what and why those customers are looking for. Getting accurate who, what and why data can give you exactly what your marketing strategy needs to be accurate and effective. This will really help to get your product noticed by the right people that should lead to successfully selling your product or service.

Never underestimate the importance of good marketing data

Digging for “insights” is important to understanding consumer characteristics, motivations, and behaviours. Customer insights help you understand why your customer might care for your brand as well as their underlying motivations, mindset, moods and aspirations that are responsible their actions. Typically you will focus on:

• What they purchase
• An analysis of their behaviour
• What their decision-making power is

For more on ways to estimate your market size and how imporatant research can be check out his blog post from marketresearch.com:  http://blog.marketresearch.com/5-steps-to-estimate-market-size

Exercise

At this point write down as many segments that you can think of. Think about a wide range of groupings that you could use like age, education, income, etc. Anything that might be useful to isolate a potential market.

Quiz

[WATU 4]

What’s next

Later will see that it is used to assess segment viability and enable segments to be selected for targeting, e.g. size, sustainability, profitability, accessibility.