KnowThis Blog Postings
- Published on January 20, 2010
- Posted by Paul Christ
With the exception of basic commodity items, such as home heating oil, a single marketing strategy often does not address the unique needs of all members of a market. Nearly all products and services face markets requiring a segmentation approach in which the overall market is carved up into smaller groups consisting of customers who share similar characteristics.
Unfortunately, many marketers often see the exercise of segmenting markets as being a time consuming and expensive task. In particular, they believe that an extensive marketing research study must be undertaken as part of the effort to identify segments. Because of this, many marketers, especially those in small-to-mid sized firms, view segmentation as a luxury they cannot afford and, consequently, do not bother including it in their marketing strategy.
Yet all marketers should know that a large expenditure on researching markets is not always needed for identifying market segments. In some cases small scale efforts at segmentation can offer valuable insights into a market. While the level of segmentation accuracy may not be as good as what a marketer would get by spending thousands of dollars hiring a leading research company, small efforts can still produce nice rewards including offering ideas for improving a company’s marketing strategy.
But how can a marketer tackle the problem of segmenting their market if they lack the funds to do an intensive segmentation analysis? Fortunately, there are a few low-cost approaches that can be taken:
1. Look to Current Customers
The best low-cost approach for segmentation is to access existing customer history and examine their previous purchase patterns. Combining customer purchase history with customer characteristics (e.g., geographic location, customer size, customers’ industries, etc.) may yield clearly identifiable customer groups. In many cases a marketer may be able to do basic analysis using a spreadsheet program such as Excel. For instance, some data analysis techniques found in Excel 2007, such as Pivot Tables, Conditional Formatting and Filtering, may be useful in identifying customer groups.
2. Check with Others Who Deal with Customers
If customer purchase data is not easily accessible, another approach is to check to see if customer categorizations have occurred in some way within other areas of the organization. For instance, query sales representatives to learn how they divide up their accounts, ask someone in accounts receivable if customers have been categorized, look for clues in results of past customer surveys or see if the distribution area (e.g., shipping) has a separate way of looking at customers. While information from these areas may not be optimal it will at least begin the process for thinking about customer categories.
3. Evaluate Web Metric
For companies operating online, another option for determining segments from customer data is to evaluate behavior using web metrics programs. Though highly sophisticated metrics programs are expensive, installing a free website data analysis tool, such as Google Analytics, provides very good insight into how customers use a website, thus suggesting unique segments. Not only is Google Analytics free, the process for installing it is extremely easy. Its web-interface provides interesting reports, though to get the full power of this tool marketers may need to spend time learning how it operates. A good place to start is with the Google Analytics Help section.
4. Brainstorm and Role Play
As a final option, marketers can hold an internal market research event that brings together key members of the organization. At this event try several qualitative research methods to encourage discussion that may lead to an “executive judgment” for identifying the key segments an organization serves. Some techniques to consider are: 1) brainstorming where everyone is encouraged to say whatever comes to mind; and 2) role playing where members are asked to take on the role of the organization’s customers. The key point with this exercise is to find issues that are shared by certain customers. Addressing these issues could serve as a point of segmenting the market.
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