According to Evans et al, (1995), technology has provided the means by which consumers could be individually targeted and continues to drive growth and development within industries.
Information is now provided by such things as EPOS, Smartcards i.e. loyalty cards, store cards, charge cards. These all provide direct information on personal details, previous purchases and even medical records. Data bases also developed from direct mail and telesales which produces analyses of this data into geo-demographic clusters, companies do this on their own customers and prospect customers. By analyzing this data the companies are able to define different segments more accurately.
Research indicates that a great deal of communication from companies is inappropriate or of no interest to them, Evans et al (1995).
Producing a successful segmentation strategy.
Many marketers see market segmentation as a necessity to a successful strategy. For many market segmentation is regarded as the panacea of modern marketing (Wind, 1978). A mass marketing approach can no longer be suitable for customers’ needs. By using segmentation, businesses can start to cope with this diversity, by grouping customers with similar requirements.
Much time and money is invested in segmentation strategies, however evidence suggests that businesses have problems operating segmentation.
There are three major debating questions, which arise regarding the failure of segmentation and how to overcome it.
- Is segmentation a good idea?
- If segmentation is such a good idea, why does it sometimes fail?
- What can be done to reduce the chance of failure?
(Dibb, 1998)
Is segmentation a good idea?
The main logic for using Segmentation is for businesses to focus their efforts in certain segments. Gaining a competitive advantage is what a successful marketing strategy is all about. Even with a standard product if it serves the segment well your competitive advantage will be multiplied (McBurnie and Clutterbuck, 1988).
Advocates of segmentation suggest it is all about a better understanding of the customer, market, and appreciation of the competitive situation.
The process of stages in market segmentation i.e. segmentation, targeting and positioning raises two fundamental concerns:
- Businesses which believe they are applying a market segmentation approach, may not necessarily be doing so; and
- Marketers who are following the prescribed steps may not be achieving results, which can be implemented.
Why segmentation sometimes fails?
What is the notion of success? Can it indeed be measured? There is lack of evidence to suggest that segmentation does have an impact on business performance. Segmentation failure refers to situations in which the segmentation process has failed to generate solutions to the problem in hand. The following 3 themes need to be understood to why segmentation can fail:
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Misunderstanding of segmentation principles – Marketers fail to realise that segments must be meaningful to customers, and not just to the business. A classic example of poor understanding is in the quotation from a managing director below:
“I don’t know if we segment the market, or who we really position ourselves against the competition. I expect our advertising agency know. I think we are probably up-market, because we advertise in some very posh magazines” (Doyle et al., 1986).
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Problems with the segmentation Literature – Marketing practitioners from many different industries have criticized the user friendliness of the academic literature. One of the most fundamental concerns is that the literature fails to consider some of the more practical constrains on marketers seeking to implement a segmentation approach. There is so much data and statistics, however not all managers are trained to deal with the complexities of statistical analysis.
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Practical Guidance for segmentation success – There is often surprise at the lack of practical guidance for first time marketers carrying out segmentation analysis. An example of the many typical questions which would arise from a manager carrying out this form of analysis for the first time are: Is there a process that I can follow? Where should I start, and what data do I need? What variables should I use to segment the market? How do I measure the success of segmentation?
What can be done to reduce the chances of segmentation failure?
The benefits of a clear plan and set of objectives will certainly help the firm to understand what it is exactly they aim to achieve. This will also help them to measure progress of any implementations, there are many process to help businesses plan their segmentation i.e. (McDonald and Dunbar 1995). This will help the business do a better analysis of the environment in which it works.
The planning approach needs to consist of 3 stages: before, during and after. This helps the awareness of segmentation success factors. It may also in some circumstances be helpful to get help form outside (agencies) in the case of statistical analysis.
Finally it is vital that a segmentation process is used which takes into consideration the company current situation and operational constrains which the business faces.
Analyzing segmentation for industrial markets.
As a general rule applying a segmentation approach allows an organization to handle the diversity of the market by focusing resources on particular customer groups (Choffray and Lilien, 1978). Market segmentation also provides the strategic basis for other marketing decisions (Weinstein, 1987, 1994). It therefore has the potential to help businesses to fine tune their customer offerings and develop competitive advantage, as well as aiding the process of resource allocation and strategic planning (Hansen, 1972). Thus in industrial markets, segmentation differentiates between customers, aids the choice of market opportunities and results in more effective marketing programmes (Webster, 1991).
Market segmentation can only be effective when two conditions are met: Firstly that customers are interested in the bundles of benefits which a particular good or individual service offers rather than just the product itself. Secondly that customers view the benefits offered by the goods or services differently within the market. (Day et al, 1979).
Ease of implementation requires that alternative segments have distinctive profiles.
While benefit segmentation is now widely used in consumer markets, in industrial situations demographic and product-related variables continue to be most commonly applied. The segments derived cannot always be targeted directly with new products, promotions and so on. Segments must first be profiled with descriptions of consumers to fulfil the accessibility requirement for effective market segmentation. Demographic and socioeconomic variables are often used for this.
It is worth noting though that industrial segmentation research is generally considered to lag behind comparable consumer research (Dowling et al. 1993). Reasons for this may be that: there is a complexity of buying decisions, and where the buying centre is based (Plank, 1985), difficulties in researching business markets (Webster, 1991), problems in identifying and agreeing segmentation variables (Shapiro and Bonoma, 1984), and the heterogeneity of businesses (Plank, 1985). These often result in the adoption of a simple sectorised view of the market, where the buyers within each group do not have truly homogenous needs or buying behaviour (Dibb and Simkin, 1994).
A study on the use of segmentation was carried out on the European car parts after-market. This market was chosen because:
- There had to be heterogeneity in specific requirements
- there were many different types of immediate customers and the structures to represent them
- Plus the first to points had to have enough potential to be of economic benefit.
The conclusions of this research were that segmentation analysis is not only poorly directed but actually of limited value.
Use of positioning for brands.
‘’Effective positioning can be critical to a brand’s success’’, (Marsden, 2002)
Through using positioning successfully, brands will be able to position their product in the consumers mind.
Memetic approach.
Four keys to successful positioning:
- Clarity
- Consistency
- Credibility
- Competitiveness
(Jobber, 2001)
Use of positioning strategies in Business Markets.
Post modern segmentation to fragmentation.
Postmodernism is a new perspective in which to view and act in the world. Which if used in marketing would need substantial redefinition of the character and the role of this field. There are five conditions of postmodernist culture:
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Hyper-reality: which is simulated reality such as themisation of shopping malls, hotels i.e. Las Vegas Luxor Hotel depicting Eygpt. Shopping Malls imitating Rome etc. The idea is ‘right here right now.’ Consumers are stimulated by this because they can experience the pleasure and excitement of events, happenings, history etc without the costs, dangers or inconvienence of doing these things for real.
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Fragmentation: In the postmodernist view the need to fragment and segment markets are much less urgent, therefore marketers undertaking this view would not place so much importance in segmentation. For example adverts that represent a unified theme or focus rather than a single idea. A current example is the Nike adverts in which the slogan is simply ‘just do it.’
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Separation: In the postmodernist view the product can be separated from its functions. I.e. what could a kitchen mixer be used as?
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Reversal of consumption and production: Consumers are defined by the experiences acquired through consumption. More products are designed for the feel good factor or good experiences. A person’s consumption habits often give them their identity. Customers can now design their own products with the help of technology, (e.g. bathrooms etc) they become the producer and each product is different.
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Emphasis on form and the acceptance of chaos: The consumer recognises the product by its images rather than the brand. Companies are not just selling a brand they are selling the image and experience. Finally, people have become accustomed to disorder and chaos in the world therefore companies who take this stance provide the greater order that the consumer is lacking in their life.
In conclusion, images are becoming increasingly important, both in terms of what the customers seek and also in terms of determining what value the product will eventually bring. Consumption takes place largely to produce a self-image that will result in success according to the customers environment therefore consumers represent multiple images fashioned for the many occasions that each one encounters.
