Segmentation in Marketing

Ask a group of 100 people to choose from Burger King, Subway or KFC. You will see that among those 100 people, each person will have their own reason to choose one of the three. Some might even want something entirely different, but the probability of all 100 choosing just one of these options is the least. 

This is because every person chooses something for their own reasons, so there is no way one product can satisfy everyone. Hence, before you move towards how to position your product, you need to segment the market into homogeneous groups.
 

Let’s learn more about it from our faculty member Mike.

In the video, you saw that businesses broadly use four methods to segment customers:

• Geographical segmentation: Based on the geography to which the customer belongs

    E.g.: McDonald’s menus are different in each country

• Demographic segmentation: Based on age, gender, income and education

    E.g.: Women’s shampoo vs men’s shampoo

• Psychographic segmentation: Based on the personality and lifestyle of customers

    E.g.: Fitbit for the fitness lifestyle

• Behavioural segmentation: Based on the actual behaviour of the customer, which includes product usage, attitude towards the product and loyalty status

     E.g.: WhatsApp features for casual chatting vs business

Now that you have segmented the market, let us now see how to ensure you have selected the right segment for your product or service.

Let us hear more about that in the next video.

In the video, you learnt about the MAADS framework. 

The acronym MAADS stands for measurable, accessible, actionable, differentiable and substantial.

• Measurable: It should be easy to estimate the segment size

  • E.g.: People who like the colour black (hard to measure) vs people who routinely purchase black clothing (easier to measure from sales figures)

• Accessible: The segment should be within the reach of the business

  • E.g.: Ideal consumers in other countries (unreachable)

• Actionable: The business should be able to take specific actions for the segment

  • E.g.: People who dislike the overall product category (hard to act upon)

• Differentiable: Consumers in the segment should be substantially different from others

  • E.g.: Two segments that are not differentiable from one another should be merged

• Substantial: There should be enough consumers in the segment to generate profits

  • E.g.: People who are taller than 6’5” (too niche, not profitable)

Next, let us look at how can you possibly collect data and then create segments.

In the next segment, you will look at how to implement targeting strategies.

In the above video, you saw how  certain value offered to the consumers can help the company as well. 

In the next video, let's continue hearing from our adjunct faculty Sabia about their journey of segmentation.