Hello all, Rob DeRobertis for the Technology Marketing Center... and here are Five things about Market Segmentation
In high tech where many product marketing people come out of the engineering ranks (I’m one of them), there are tendencies to state that a given product is great for every customer. These are the people that say, “This product is great for so many customers it is impossible to segment”. For these product marketers the problem is that they are so entrenched in their technology that they become blinded by the necessary elements of market segmentation.
We have to remember that customers don’t buy products. They buy expectation of benefits.
Way too many times we get caught inside out. That is we say this product is great for X and everyone needs X. Well I’m sorry to say but not everyone needs X. Only someone needs X. Great product marketers realize segmentation is essential to help the sales and marketing organization to target programs to gain access to the select set of customers.
There is a consequence to the above statement. If a product marketing person refuses to segment their market then the sales and marketing organization will make up their own segmentation in a very haphazard way. This will cause inefficient results that will not effectively deliver the economic value to the organization.
So here are 5 dimensions of market segmentation to consider.
1) Applications, Markets, Industries. This is the most common segmentation where a product may be defined for certain use in certain applications. Be that a data base system which has been built to support the needs of a physician’s office or a semiconductor device for use cell phones. The target use is well understood and the benefits are explained from the "use" perspective.
2) Vs. competition. Another method of segmentation is to look at how your products’ features and benefits compare to the competition and define a program there. In this very competitive scenario, the tactics would be to drive sales to find every customer who uses products sold by X company and pitch the new better benefits of the new products. This tactic, when done properly can take market share from the competitor.
3) Critical desired benefits. In this segmentation, you are looking for the group of customers who all need x benefits. They may exist across many applications, markets and industries but all have a mutual need. For example people who need to reduce the total cost of ownership of a product because the maintenance expenses are unacceptable to the end customer.
4) Demographics. Even in Business to Business some products may be more appropriate based on age group. In many cases this is being realized today in the world of Social Media where a younger target audience may be more in tune to Facebook or LinkedIn rather than Sales people and catalogs. People do see benefits differently depending on their age group. In general, younger customers are looking to change the world and prove themselves to the "Boss". More "seasoned" customers are looking for stability and low risk benefits of a product.
5) Regional. A very old form of segmentation and maybe not realistic in today’s internet enabled global environment, but there still are opportunities to group a set of customers in a specific region who all seek the same benefit. This becomes quickly obvious comparing the buying processes of an engineer in Shanghai vs the methods used by an engineer in Chicago. There certainly are differing expectations of benefits in each region and the savvy marketer takes the time to understand these differences.
For further reading, check out Geoff Anderson's case study at the Technology Marketing Center.