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Market-segmentation research has the power to identify the target consumers an organisation should prioritise and target. Market Segmentation can be achieved with 5 steps focusing on the core elements of the segmentation.
====== Step 1: Define your target market, trends and scope of segmentation. ======▼
▲Define your target market, trends and scope of segmentation.
It is important to target the target market for the product being sold as consumers that are not within the target market are variables that do not provide any useful information for your organisation. It is important to try and comprehend why the customer is within this specific segment. What are their goals or purpose for being within this market? What are they likely to be chasing within this segment?
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By specifying geographical limitations, organisations can create a scope that is applicable in their specific domestic position. Organisations should work to segment areas that are within its areas of operating capability as segmenting areas that aren't realistically available represents opportunities that will be able to be utilised either way.
====== Step 2: Perceptual Mapping and Market Mapping ======▼
▲Perceptual Mapping and Market Mapping
"A market map defines the distribution and value added chain between final users and suppliers which takes into account the various buying mechanisms found in a market, including the part played by 'influencers'". (Mcdonald, M., Dunbar, I. 2012). Market Mapping is essential to correctly determine the specific market that should be analysed and the people who should be segmented. This model aids the identification of target consumers from Suppliers, Distributors, Retailers and Final Users. This includes the high potential market segments and what the size of it is.
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By divulging where competitors are positioned within the market map it is possible to see attractive segments of the market that may be worthwhile occupying. This is where you can begin to form an idea of where you will be able to hit the market as you can see which areas of the market are left untouched or not utilised to its maximum potential.
====== Step 3: Construct a Model of the market. ======▼
▲Construct a Model of the market.
A market is composed of customers who have spending trends that are different from those of other people. It is important to identify these trends and how they come into play within your market model. Transactions made can offer a lot of information about the consumer and it is important that this information is utilized in order to gain the greatest knowledgeable advantage available to your organisation. "It requires you to record the key features sought by the market when deciding between competing offers. These are selected from the actual product and services on offer (what is bought) and from the options presented by where it can be bought when it is bought and how". (Mcdonald, M., Dunbar, I. 2012).
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Developing a good range of micro segments is essential as it must be representative of the current market. Once completed this transactional information can assist decision making on selected a micro segment that is fitting for the organisational scope and purpose.
====== Step 4: Identifying Segments ======▼
▲Identifying Segments
Consumers at this stage can be examined and observed to reveal key information that drives their consumerism. After selecting attractive micro segments it is important to think about the Key discriminating features for these segments. What needs need to be fulfilled? This question is imperative to selecting the right segment as the need of the customer is reflected in their Decisive Buying Criteria. "Decisive buying criteria are the attributes of a purchase that customers evaluate when choosing between alternative offers". (Mcdonald, M., Dunbar, I. 2012)
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Once consumer needs and benefits have been thoroughly analysed and understood, the value the consumer perceives can be generated and from this prices can be established and value can be assigned to the features of the product. By having a value assigned with key features for particular segments, needs, prices and benefits can be more readily and easily calculated thus allowing for a more accurate market segment analysis. Once the appropriate markets have been analysed and compared, appropriate segments will be identifiable for the organisation to pursue.
====== Step 5: Segmenting ======
Similar micro segments can be grouped as bigger segments if they satisfy the same need, segments must comprise only features that are the almost the same or extremely similar.
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