In order to deliver what your customers want, you must divide your market into sub-sets. For example, you may separate consumers into two groups: price-conscious and quality-conscious. You can then sell a more affordable product to the price-conscious segment, and a more expensive but longer-lasting product to the quality-conscious consumers. If you do not separate these markets, and instead average out price and quality, no one gets exactly what they want. Another example of segmentation is what different groups of people value in running shoes: price, comfort, style, or technology/innovation. You need to target your messages purposefully in order to get the right product to the right segment of consumers.
Consumers can be segmented based on…
- Characteristics of the customer (ex. price-conscious or quality-conscious)
- Benefits sought (ex. comfort, style, durability)
- Systematic, Product-Related Behaviors
- Purchasing behavior (ex. credit cards or cash, bulk or in small amounts)
- By channel (online or in-store)
You can segment based on age, location, etc. Once you segment, you must select which is your target audience. Ask: how big is the segment, how much money do they have to spend? How well-equipped are you to meet the needs of that segment? How many competitors do you have vying for that segment? Balance attractiveness of that segment with your business’ capability.
Via Coursera.org and Wharton University