Whether you busy yourself delivering pharmacy services directly to patients or you sell products or services to the people who do, you will be thinking about market segmentation. Market segmentation is the process of separating the total market for your product into groups that are homogeneous within and heterogeneous without. That is, the same within and different without. There. Glad we got that out of the way. Now, what does it really mean and is it useful to you?
Where did the idea come form?
Back at the beginning of marketing, companies seeking to sell something used an approach called mass marketing. This is based on selling a product to a single type of customer using just one approach. One size fits all you might say. Around 30 years ago it dawned on marketers as a species that there may, just possibly, be more than one type of customer for their product. This seemed to pass the common sense test that people are all different and hence it must be true. Following on from the common sense test, academics like Wendell R Smith and others sought evidence and concluded that this was indeed the case. They called the different groups of people who might want to buy a specific product, market segments. Segmentation, the activity, came soon afterwards.
Segmentation has become a corner stone of marketing strategy in recent decades and while academic theories continue to develop, many companies are getting on with using segmentation to help them sell their products.
The reported advantages of segmentation also seem like common sense. People are different so they might buy products for different reasons. Surely not everyone who buys paracetamol, purchases it for the same reasons. Some might keep it in case they have the odd headache. Some might use it to manage pain associated with a long term medical condition. Some might use it for pain following sports training. We could go on but let’s stop there.
Market segmentation, and the value therein, relies on these differences being significant in one important respect. They affect purchasing behaviour and are something that companies can use to their advantage when selling. If you produce a paracetamol advert with a 30 year old rugby player as the star, that sort of person may well pay more attention to your product that if they were not represented. That’s the theory.
Segmentation helps you understand and characterise the market for your product in more detail.
This allows you to be more granular and specific when marketing and tailor your content and activity.
This in turn produces more effective marketing and higher sales.
You can only averagely appeal to an average customer. Segmentation removes the idea of an average customer and replaces that with different, specific groups who can be described and whose behaviour can be measured.
Same within, different without
For a segment to be useful in characterising a group of people, that group has to be different from the other groups you have identified. If it is the same as any other group then it’s not a separate segment. Combine them. All of the individuals in a segment have to be the same. That’s what makes them a segment. If they are not then it’s not a single segment. Split them.
Correctly identifying a segment enables you to write a segment profile or description. How does this help you may wonder? Well, if you have a reasonably accurate description of your customer (demographics, beliefs, attitudes and behaviours) you have a useful tool to support marketing decisions therafter.
You can, of course, segment in a huge range of ways but here is a starter towards making a good segmentation.
Category | Start with the broadest group who demonstrate a need for your product.
Function | Move onto look at whether there are any functional segments. E.g. Solid formulations for adults and liquid for children. Same need, different delivery based on the groups characteristics.
Personality | Finally, take a look at whether there are any groups who have the same functional needs who differ in personality. E.g. Their personal attitudes, beliefs and behaviours. Headaches, LTCs and rugby players etc.
Don’t get distracted
It is very easy to get tied up in segmentation and lose sight of the overall purpose. You are trying to identify market characteristics that affect one, key outcome. Buying! The only point in segmentation is to assist you in approaching your marketing in a manner that will maximise sales. Let’s remember too, that when we say marketing we aren’t just talking about communications here, we are talking about the strategic process and the subsequent tactical delivery.
While segmenting, ask yourself one key question. Does this apparent characteristic that I am investigating have any real affect on buying and is it something that I can influence?
So what if your segment description says your perfect customer likes spending the weekend throwing an egg shaped ball backwards? If it doesn’t influence purchasing decisions it doesn’t matter. Get rid of it. In the case of paracetamol, and in my experience, egg shaped balls might be something you could use but that is a specific case…