This is the sixth part in our series of marketing articles, if you missed the first, second, third and fourth ones you can find them here: Marketing Series: An Introduction to Marketing, Marketing Series: Customer Orientated Marketing, Marketing Series: Determining what your customers want, Marketing Series: Market Research – How do we know which plan is the best? and Marketing Part 5: Understanding the sales process, the psychology behind Customer Behaviour.
Analysing Customer information:
Once we have an understanding of our potential client’s motivations, then it is important to organise this information into respective categories. Market segmentation is your customer base broken down into their associated groupings. You cannot do this by each individual, as there is insufficient volume of scale, and people usually belong to certain communities with similar buying habits (Pensioners won’t purchase the same things as teenagers).
Groupings allow you to determine the potential success of your product, define marketing strategies and help to decide a sustainable price point. The following is the criteria used to measure each potential segment:
- Behaviour and motivations: Are they fashion conscious or only buy what they need?
- Who is the decision maker: For Children’s toys the parent decides what to get but the child influences that process. ( Whaa Whaa. Mommy I want that one!!!!)
- Price sensitivity: Not just their affordability, but what they are prepared to spend. Most wealthy people I know spend up big on large ticket items, but are cautious with their normal shopping.
- Brand image loyalty: Will they continue to buy from you or swap over continually?
- Profitability by area: Are the margins worth the effort for the return? Supermarkets sell at low margins (a couple pence per items) but in such large volumes that it makes it worthwhile.
- Credit rating: Is their discretionary spend limited to their take home pay, or can they stretch this by paying the item off over a period of time.
- Demographic by, Age, Gender, Income, Class, Education, race. (ACORN). The ACORN system is produced by CACI (short for ‘A Classification of Residential Neighbourhoods’) and is a geodemographic systems of segmentation based on the census of the population.
- Psychographic: Are they mainstream or a reformer? When a new product is released, are they the first to buy it, or wait until all their mates have one?
- Size, and usage: Are they a majority of the population, or in the minority and are they likely to purchase from you often? If the customer base is scarce, and not frequent users, then margins must be increased to compensate.
Segmentation
Most businesses will not just have one segment, but a variety and each must be compared to determine the relative effort, to achieve the level of market penetration, or an acceptable return.
Each segment must be:
- Specific: (i.e. Young professionals, between 25 and 35 in the South East of England.
- Measurable: (i.e. This grouping has an average disposable income of £150.00 per week and spend £45.00 on the range of products you provide.
- Accessible: Can they be reached easily. (i.e. My demographic is business owners which is the most difficult group to reach and specific strategies need to be employed to reach that audience.)
- Substantial size: (i.e. 30,000 people match the above description.)
- Sustainable: Will they repeat purchase from you for continuity of supply? (i.e. Enter into a monthly mobile phone contract or purchase their own phone with intermittent top-ups?)
From this information we need to determine:
- Their needs and which ones are unfulfilled. Is there a gap in the market for our product or service?
- How much they can spend? What is acceptable to the customer?
- Purchasing behaviour. Often or once in a while?
From this we can arrive at the key success factors and develop an appropriate marketing strategy for each segment.
For information on data analysis services we provide go to: https://it-ebs.co.uk/banner/excel/
Next in the series we will look at, where our product is placed within the market as compared with the offerings from our competitors.
Malcolm Ford has had 25 years business experience and has been involved conducting marketing campaigns for companies both in the UK and in Australia. He currently resells and implements Enterprise software systems.
