What are the three (3) most important things to consider when targeting and segmenting customers and why?
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BOOK: Alexander Chernev, Strategic Marketing Management: The Framework, 10th edition. Cerebellum Press. Copyright 2019. ISBN-13: 1936572595
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The first thing, I’d consider is the clarity of the goal for customer segmentation. What is the purpose of the customer segmentation. At my workplace, customers are segmented into different groups reaching different goals i.e. sales, influencers, experts etc. Some customer segments are based on internal sales team and system efficiency i.e. geographical division of customers. Therefore, knowing the why behind the customer segmentation will guide how to segment them. It creates a focus.
Second, defined customers segments should enable companies to understand and meet customer needs through personlization. Having the customers in micro-groups can help in catering their needs through the art of personalizing the product features and marketing mix.
Third key point is the effective use of company’s resources. A defined customer segmentation should be able to use company’s resources (marketing & sales) efficiently to create a desired impact on customer group based on their needs and characteristics. From resources perspective, a company’s goal is to maximize the impact of their strategies and activities; and the customer segemention is a tool to accomplish this goal.
I think the three most important things to consider when targeting and segmenting customers are defining the products and goals, studying the general market and customer behaviors, and keeping the flexibility to make timely changes.
Defining the goals and objectives before setting up new projects/products and starting a marketing plan is very critical for the business to understand themselves, their capacity, and the purpose of marketing a certain product (e.g.m, building up brand name versus making the highest possible profits. In addition, goal definition also helps the stakeholders to discuss and gather project assessment measures, showcasing the scope and deliverables, and highlight potential key roadblocks.
Studying the general market and customer before getting into specific segments is to avoid a rush job to obtain only a piecemeal of the whole potential customer groups. It also helps discover the underserved customer needs which were yet not on any competitor’s radar. Understanding the whole picture and general market trending also direct targeting and segmenting customers in a more broad and dynamic economic context.
Today’s market has a lot of uncertainties. Any business plan is facing sudden change of economic condition and black swan events. Therefore, making targeting and segmenting customers should maintain a regular monitoring plan to detect any changes in the market and keep the flexibility to make timely changes to adopt the new or upcoming conditions.
According to the textbook, “when identifying target customers, a company must strive to select the largest market segment for which it can establish a meaningful point of difference.” Strategic targeting requires companies to identify and cater to the needs of clients with whom they can create superior value and with whom they can generate superior value through monetary and non-monetary benefits. This may involve narrowing the focus on marketing tactics to clients whose needs best align with the value drivers offered by the company. Therefore, strategic targeting is a key initial step in the segmentation process.
Once optimal segments have been identified, companies must assess whether they have the resources necessary to fulfill the needs of customer better than competitors. If resources are deficient, management must determine if the cost to serve clients will generate superior value for the company and collaborators. If the business has the right infrastructure, skilled employees, physical resources, and expertise, it can create a distinct competitive advantage.
Third, firms should consider how they will communicate value and distribute the product or service to target customers based on the customers’ preferred communication and delivery channels. Understand the customer profile (demographics, behaviors, values, etc.) will enable a firm to develop a 5-C marketing strategy that is both cost efficient and effective in connecting with customers in target segments. By using the 5 C’s, company can also determine how their messaging and product delivery methods compare to competitors (using a SWOT analysis) while considering contextual opportunities or threats that can impact marketing tactics.