Strategic Market Segmentation

You don’t have to divide a market into specific government-approved categories. You can redefine and guess when it works. Strategic market segmentation can be very valueable. For example, I was consulting with Apple Computers in its early years when the marketing department decided to segment the market according to usage types, as in the illustration here.

Segmentation by Type of Customer

strategic segmentation

The simple idea of dividing marketing into these segments helped the company develop better strategies for software bundling, hardware configurations, advertising, and channels of distribution. Computers for government, for example, are sold through channels different from home computers.

And some creative segmentation schemes are based on psychographics, which are collections of personalities, values, opinions, attitudes, interests, and lifestyles. I find the idea behind psychographics intriguing. Knowing that somebody drives a certain type of car can help you predict other seemingly unrelated preferences. So a man driving a pickup truck might be likely to wear cowboy boots rather than Birkenstock sandals; and a woman driving a Volvo station wagon is more likely to buy organic spinach than fried chicken. Or so it seems. I don’t like stereotypes so the idea makes me uncomfortable, but it seems to work for goods and marketing. I ran into the segmentation shown below in the marketing collateral of a shopping center.

Pyschographic Segmentation

The accompanying literature explained:

  • Kids and cul-de-sacs were affluent upscale suburban families, “a noisy medley of bikes, dogs, carpools, rock music and sports.”
  • Winner’s circle were wealthy suburban executives, “well-educated, mobile executives and professionals with teen-aged families. Big producers, prolific spenders, and global travelers.”
  • Gen X and babies were upper-middle income young white-collar suburbanites.
  • Country squires were wealthy elite ex-urbanites, “where the wealthy have escaped urban stress to live in rustic luxury. Affluence, big bucks in the boondocks.”

As in the computer example above, the underlying assumption is that these market segments help businesses decide about which products to offer where, and which message will address which population. Emphasizing luxury over practicality would presumably work better with country squires, in this segmentation, than with kids and cul-de-sacs.

Another Strategic Market Segmentation

In the first example I used in Set the Strategy, Have Presence focuses on business owners who know they want presence in social media but don’t have time to do it themselves. That strategy implies choosing specific slices of the pie related to small business, business owners, numbers of employees, and attitudes about and familiarity with social media. All of that is strategic market segmentation. The example in this illustration moves away from the narrow classifications into a more useful segmentation:

In this case the segmentation is not just about size, but understanding and approach. The most interesting target segment is the small business whose owner values social media, wants help, and has the budget to pay for it. So this is a more classically oriented version of the strategy story definition that starts with defining the target market as:

Terry is a successful business owner worried about social media. She knows her business should be on Twitter, Facebook, and the other major platforms, but she’s already busy running a business, and she doesn’t have time to do meaningful social media as well (from Lead with Stories).

In the second example in Set the Strategy, the bicycle store, the focus is on three distinct market segments:  university students, families, and serious sports bikers. The store presumably carries bikes, clothing, and accessories for each of those three segments; and the people running the store probably assign customers to these categories as they work with them.

Or, as another example, when a local computer store defines its customer segments as “high-end home office” and “high-technology small business,” its segmentation says a lot about its customers. Then the company can plan its focus on the different types of potential customers.

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