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Segmenting

Segmenting

Now that you understand what profiling is, it is time to segment your customers and consumers into groups.

Segmentation isn’t a new concept; it has been around since the 1960s. In the March 1964 issue of Harvard Business Review, Yankelovich proposed that “once you discover the most useful ways of segmenting a market, you have produced the beginnings of a sound marketing strategy”. Refer to related links below to read this seminal article.

Segmentation hasn’t changed; it still involves grouping customers into smaller, distinctly different groups to more effectively target and communicate with each of the groups that you believe are important to the success of your business. For example, the people you want to market to, and who are most likely to respond to your marketing efforts with sales.

There are a few ‘rules’ to segmentation to ensure it works:

  • Size: the size (number of potential customers or consumers) must be able to be measured. The purchasing power of the average customer must also be sufficient that they have the available resources to purchase your offering.
  • Substantial and profitable: the groups must be sufficiently large enough to produce profits for the business. It can be a small group of customers or consumers who are prepared to pay a high price for a product or service, or it can be a larger group who pay less, but the volume you sell allows for the average cost of producing each unit to come down and thereby produce sufficient profit.
  • Accessible: you must be able to reach the group through your online and offline communications. If you can’t reach them with your marketing messages, then you can’t sell your goods or services to them.
  • Unique: each group you identify must be unique and discrete from each of the other groups. They must constitute a meaningful and measurable group according to the identified demographics, psychographics, behavioural characteristics and needs. The uniqueness also relates to the way the group is likely to respond to your offering. For example, if two groups you’ve identified will respond to your product or service in the same way, then essentially they are the same group.
  • Actionable: you must be able to have sufficient resources to formulate effective marketing plans to attract and serve the segments.

Segmentation will only work if all of the above rules can be applied.


Discussion

Watch the two Coke advertisements and discuss how Coca-Cola has used segmentation to market their products.

Who do you think these advertisements were designed to target?

Post your opinions to the Comments section.

Diet Coke advertisement

Coke Zero advertisement


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This article is from the free online course:

Online Business: Customer Profiling for Success

RMIT University