Archives for posts with tag: Segmentation

2 x 2 segmentation matrix

I ran a series of marketing workshops a few months ago, covering a pretty wide range of topics in a relatively short space of time. It was quick-fire, perhaps 30 minutes on a topic and then an exercise to put into practice what we’d discussed.

The one area that people struggled with the most was segmentation, and the task of segmenting your market. It’s easy to see why. It’s a really important part of the marketing process. How you segment your market determines who you will sell to, and also who you will compete against. Segmentation can be basic, such as by country, region, or company size, or it can be more sophisticated, covering groupings around values, or buying criteria.

Generally, you see people pick two axes against which to judge their segments or groups. For example, one axis might be how easy it is for us to sell to each group, and the other might be how attractive is this group to us. Then you plot each group against these two axes – low, medium or high – to decide which quadrant or group is worth targeting.

The trouble is, how you group your companies, and which axes you choose to judge them against – and there could be many possible axes – is critical. Bad decisions here can lead to you targeting bad companies, bad for you that is. Also, you could end up competing against the wrong competitors. As this post reminds us, if you know your market, define it, and segment it better than anyone else, you may find yourself to be the only competitor.

 

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When we look back on our lives or our careers and contemplate some of the decisions we made that didn’t go according to plan, we have a tendency to rationalise them and explain them away. It makes us feel better. “Yep, that didn’t work out, but at least I know that industry’s not for me.” “Shouldn’t have bought that car, I’ll put that down to a learning experience.”

I use this ‘backward justification’ approach myself, by reasoning that every decision we make in life is a good one. It was good for some reasons, not good for others, and at least it was better than not making a decision at all, wasting precious time stuck in a rut. It’s better to have been proactive and have thought through the permutations and ramifications before deciding, but sometimes you just have to go.

In the marketing context this back-to-front way of thinking is similar to what we call ‘reverse segmentation’, and in business it can be very costly indeed. Segmentation is of course a really important part of plotting your own brand of world domination. It’s part of the ‘S-T-P’ holy trinity of marketing, namely segmentation, targeting, positioning. You segment your defined market, choose the segment or segments you want to target, and present yourself in the best light to those chosen segments.

How you segment is the $64,000 question. According to what criteria do you segment? If you’re going to segment along two key axes and plot your market or audience on a matrix, you had better get the two key criteria right, otherwise you might as well segment according to favourite type of pop music and preferred colour of pyjamas – unless you’re in the musical pyjama business. Lots of businesses, however, are not market-focused. They’re generally product focused. They develop a product which they think is great, then they try and find a market for it. This is also called a solution looking for a problem.

When you already have your product, it’s really hard to come up with objective segmentation criteria that don’t play directly to your strengths. This, dear reader, is reverse segmentation, and you might as well put your cart in front of your horse. It gives you an erroneous picture of where your market is heading and of your likely success. You’d be amazed how many companies do it!