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Main Benefits of the Market Segmentation Process
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Nov 18, 2023
Why should you work through the market segmentation, targeting, and positioning process? Obviously, to fine-tune and focus your marketing efforts to improve overall performance. But the segmentation process should provide additional analytical insights and other benefits to the business, as explained in this video. Find out more at the Market Segmentation Study Guide… https://www.segmentationstudyguide.com/
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Hello again and welcome to another video from the Marketing Study Guide. In this
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video I'm just going to outline the main benefits of market segmentation. My name
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is Jeff and I'm a long-term marketing lecturer and practitioner. So depending
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on what textbook you use you'll see there's these segmentation bases that are
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listed in books, typically geographic, demographic, psychographic, behavioral, they're normally in every textbook. Sometimes you'll have benefits sought
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separately or under behavioral segmentation and some textbooks will talk about hybrid or multi segmentation base where you use a combination of
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these. But the intention is the same is to take an overall market and then put
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them into related groups of customers using one or more of these bases. So
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these are the top level bases, geographic, demographic. They all have many
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variables underneath. So there's a selection of demographic, selection of psychographics, etc. Now the overall intention of the process is to improve
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our business performance. We do that because when we've gone through and
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look at the overall market, all the consumers, we put them in groups and we've
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identified one or more of those groups, which we call segments, to become our
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target market and by getting to know the target market very well and to
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developing our positioning and our marketing mix around the needs of that
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target market we will outperform our competitors or we will improve our
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performance overall okay so other than the business outcomes that hopefully the
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market share sales profitability improvement what are the other benefits of working through market segmentation
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Okay, let's just run through this, there's about six reasons. The first one is we're going to have a much greater understanding of the market
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Okay, because we've looked at everybody and we've had multiple attempts, most likely at segmentation and we segmented different ways and we considered this and considered that Over time in that process we going to be very strong in understanding different customer needs and what they looking
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for and how they're interrelated. As I said, we're going to most likely trial and error
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different approaches to segmentation, and we're just going to have more understanding
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pretty simply. The second thing is we're going to probably, if we spend enough time on it
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probably going to have a more innovative approach. If we do segmentation very quickly
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we go, well, let's segment by age group or less geographic area
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There's nothing overly innovative about that and it's not necessarily very overly helpful
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And I've got lots of videos on the fours and against of different approaches to segmentation
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which you can find on YouTube and my websites. But basically, by spending the time with it and thinking about it and yzing it, we're more likely to come up with better defined segments
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And this should give us a competitive advantage. We're going to have a better segmentation approach, a better defined target market than our competition
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So that's our competition. They're working hard. We've got some breakthrough approach to how we're targeting the market and what we know about those consumers
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Obviously, related to overall business performance from the main slide I showed you before
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is that we're going to have a better fit to their needs. So by using segmentation and finding good segments
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and then building those segments out with profiling, etc., we should be able to construct a better fit to their needs because we understand them better
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These days we talk about customer journey and customer experience, and we should be able to do that a lot better as well
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And we'll build a greater connection, relationship, engagement with that end audience
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We should improve our performance relative to competitors because we going to know competitors as well So by doing this process we can see okay that competitor clearly seems to be targeting that segment and this one they more tuned to that segment
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So it's going to be quite insightful for understanding competitive strategy as well
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And depending on the size and the power of our company, that gives you the ability for us to
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either attack certain competitors and disrupt them, or perhaps stay away from them if they're
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quite large and dominant and possibly responsive. It also helps us to work out where competitors
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are not. So are there gaps in the marketplace? Are there segments that are underserved that
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just haven't been targeted directly? Because we're thinking differently about the segmentation
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and the segment construction. And ideally what we try to look for is opportunities to grow the
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market. Once we get into a market share battle and we have the same target market and we're
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fighting the same way, we're just taking market share off our competitors and they respond
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back and forth, back and forward. Not a great long-term strategy. But if we're thinking
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differently about the marketplace, we may be able to grow the overall market, which means that we
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We get bigger and our competitors are largely unaffected by our actions or possibly even benefit from them
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Of course, we're bringing non-consumers into the category and they're gaining as well
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So they're going to either leave us alone or perhaps support us indirectly in our endeavors
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And when we have target markets, here's the next benefit is we simplify our strategy
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We know what we're after. This is the target market. We've spent time in the segmentation
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process. We've weighed up the fours and against of different target markets. This is the one we're
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after. We've become less opportunistic. I mean, that sounds like a good thing at times, but
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chasing opportunities can become quite distractive and a waste of money So we become focused very focused on what we about This is our target market Our resources are better allocated Our money goes into the right areas et cetera And something
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down the bottom here, new product development path. One of the big spans in marketing is obviously
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you know, communication and promotion. But the other big span is new product development
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So if we have a clear understanding of our target market, our future products become clearer and we
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actually map that out for the next few years and so this product and then followed by that product
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and that product and we could say hey in the in the future we want our product mix to to look like
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this sorry skip forward one um the last uh benefit i've got is we're able because we're very focused
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we can have a lot more brand consistency we can build a stronger brand a clearer brand brand
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clarity, positioning, all improves. Building brands takes time, money, and we have to get
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our brand into the minds of the consumers and our target market, which is a considerable effort
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But if we're very focused and we're connecting to that target market and we understand their
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motivations and how they think and what they're after and how they make purchase decisions and
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who else are there considering, we get a lot of brand benefits
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We're able to connect our brand integrity and our values to the values of consumers and go from being, you know
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that's a nice brand to a brand that becomes part of people's lives
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and adds value to their lives. So that's the summary of the benefits
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As I said, the main benefit is we will improve financial performance
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which is always good and we'll have a stronger competitive position but
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actually just working through the ytical process of segmentation and targeting and thinking about the market provides all these advantages. So
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hopefully that was helpful for you. Please check out my other videos on
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YouTube and please subscribe to my channel
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