Market segmentation process example 1


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Market segmentation process example 1

  1. 1. Market segmentation process example 1The first example, a business-to-business project, is captured in the following diagram. Thisdiagram also summarizes the segmentation process and includes the market map.The route through this diagram (and any segmentation project) is as follows:
  2. 2. In this particular example the company had been operating a three-segment strategy withcustomers divided into Corporates, Groups and Private Companies. A progressive decline inmarket share over a number of years was causing this structure to be questioned. The process isrigorous enough to test the validity of such Preliminary Segments (see Market Mapping on thediagram) without prejudicing the outcome in any way.By implementing sales and marketing strategies targeted at specific segments, this companysucceeded in increasing both its margins and market share within a few months of completing itssegmentation project.Market segmentation process example 2This is a brief outline of how one particular company progressed its segmentation project. Theproject kicked off with an in-company workshop at the end of which an action plan was drawnup. This action plan had two primary objectives: 1. To verify the conclusions of the workshop. 2. To fill in the information holes uncovered during the workshop.Once the segments had been finalized and the corresponding sales and marketing plans put inplace, the company achieved major gains in its market share.The market in question is one in which the customers need is currently being met by employingvery expensive, specialized technical equipment. The map of this market is as follows (it is basedon the second map in the Market Mapping Examples section of this website and now includescompany share and details by route to market):
  3. 3. Notes: The total size of this market is 1300 units. Guidelines on how to develop these moreinformative market maps can be found in Chapter 11 of Market Segmentation: How to do it andhow to profit from it (2012 edition published by John Wiley & Sons, ISBN 978-1-1184-3267-9).Once this map had been drawn up the company took each of the decision-making groups in turnand determined for each of them the key features on which the decision-makers tended to basetheir decisions and their relative importance to each other. Rather than assuming that all theindividual decision-makers found in each group focused on these key features in the same waythe company drew up a cross-section of companies found in each group and checked out thishypothesis. Where meaningful differences occurred they recorded them and also noted theprofiling characteristics that could be associated with each of them. So, for example, ifTechnicians fell into two camps when it came to the features they focused on, then this groupwas split into two, each sized and each identified by the characteristics that described who theywere.The company then developed an understanding of the real customer needs the features (on theirown and in combination with other features) were satisfying for each of the groups. Price wasthen added to the list of needs and their relative importance to each other determined. Again,rather than assuming that all the individual decision-makers found in each group rated theseneeds in the same way the company referred back to its cross-section of companies to check outthis hypothesis. Where meaningful differences occurred they recorded them, sized the resultingsub-groups and also noted the profiling characteristics that could be associated with each ofthem.At this stage the company had both developed a picture of the different decision-makers found inits market and established a framework that would enable them to compare one decision-maker
  4. 4. with another. Segments were then formed by bringing together like-minded decision-makers and,because of the information fed in beforehand, the resulting segments were sized and theiridentifying characteristics noted. Inevitably, while running through the latter stages of thisexercise like-minded decision-makers were spotted well before the formal clustering procedurewas conducted.©C