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Initially your market has been constrained to affluent professionals within
5 miles of your home to keep delivery costs low。 So if market research
shows that there are 100；000 people that meet the profile of your ideal
customer and they have regular access to the internet； the market open for
exploitation at the outset may be as low as 2；500； which is the 2。5 per cent
of innovators。
This adoption process； from the 2。5 per cent of innovators who make
up a new business’s first customers through to the laggards who won’t
buy from anyone until they have been in business for 20 years； is most
noticeable with truly innovative and relatively costly goods and services；
but the general trend is true for all businesses。 Until you have sold to the
innovators； significant sales cannot be achieved。 So； an important first task
is to identify these customers。 The moral is： the more you know about your
potential customers at the outset； the be。。er your chances of success。
90 The Thirty…Day MBA
One further issue to keep in mind when shaping your marketing strategy
is that innovators； early adopters and all the other sub…segments don’t
necessarily use the same media； websites； magazines and newspapers or
respond to the same images and messages。 So they need to be marketed to
in very different ways。
SEGMENTING MARKETS
Having established that customers have different needs means that we
need to organize our marketing effort so as to address those individually。
However； trying to satisfy everyone may mean that we end up satisfying
no one fully。 The marketing process that helps us deal with this seemingly
impossible task is market segmentation。 This is the name given to
the process whereby customers and potential customers are organized
into clusters or groups of ‘similar’ types。 For example； a carpet/upholstery
cleaning business has private individuals and business clients running
restaurants and guesthouses； for example。
These two segments are fundamentally different； with one segment
being more focused on cost and the other more concerned that the work is
carried out with the least disruption to their business。 Also； each of these
customer groups is motivated to buy for different reasons and your selling
message has to be modified accordingly。
Worthwhile criteria
These are four useful rules to help decide if a market segment is worth
trying to sell into：
。 Measurability： Can you estimate how many customers are in the
segment？ Are there enough to make it worth offering something
‘different’？
。 Accessibility： Can you municate with these customers； preferably
in a way that reaches them on an individual basis？ For example； you
could reach the over…50s by advertising in a specialist ‘older people’s’
magazine； with reasonable confidence that young people will not read
it。 So if you were trying to promote Scrabble with tiles 50 per cent larger；
you might prefer that young people did not hear about it。 If they did； it
might give the product an old…fashioned image。
。 Open to profitable development： The customers must have money to
spend on the benefits that you propose to offer。
。 Size： A segment has to be large enough to be worth your exploiting it；
but perhaps not so large as to a。。ract larger petitors。
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One example of a market segment that has not been open to development
for hundreds of years is the sale of goods and services to retired people。
Several factors made this a particularly unappealing segment。 First； retired
people were perceived as ‘old’ and less adventurous； second； they had a
short life expectancy； and finally； the knockout blow was that they had no
money。 In the past decade or so that has all changed： people retire early； live
longer and many have relatively large pensions。 The result is that travel
firms； house builders； magazine publishers and insurance panies have
rushed out a stream of products and services aimed particularly at this
market segment。
Segmentation is an important marketing process； as it helps to bring
customers more sharply into focus； classifies them into manageable groups
and allows you to focus on one or more niches。 It has wide…ranging implications
for other marketing decisions。 For example； the same product can be
priced differently according to the intensity of customers’ needs。 The firstand
second…class post is one example； off…peak rail travel another。
It is also a continuous process that needs to be carried out periodically；
for example when strategies are being reviewed。
Methods of segmentation
These are some of the ways by which markets can be segmented：
。 Psychographic segmentation divides individual consumers into social
groups such as ‘yuppies’ （young； upwardly mobile professionals）；
‘bumps’ （borrowed…to…the…hilt； upwardly mobile； professional showoffs）
and ‘jollies’ （jet…se。。ing oldies with lots of loot）。 These categories
try to show how social behaviour influences buyer behaviour。 Forrester
Research； an internet research house； claims that when it es to
determining whether consumers will or will not go on the internet；
how much they’ll spend and what they’ll buy； demographic factors
such as age； race and gender don’t ma。。er anywhere near as much as
the consumers’ a。。itudes towards technology。 Forrester uses this concept；
together with its research； to produce Technographics。 market
segments as an aid to understanding people’s behaviour as digital
consumers。 Forrester has used two categories： technology optimists
and technology pessimists； and has used these alongside ine and
what it calls ‘primary motivation’ – career； family and entertainment
– to divide up the whole market。 Each segment is given a new name –
‘Techno…strivers’； ‘Digital Hopefuls’ and so forth – followed by a chapter
explaining how to identify them； how to tell whether they are likely to
be right for your product or service； and providing some pointers as to
what marketing strategies might get favourable responses from each
group。
92 The Thirty…Day MBA
。 Benefit segmentation recognizes that different people can get different
satisfaction from the same product or service。 Lastminute claims
two quite distinctive benefits for its users。 First； it aims to offer people
bargains that appeal because of price and value。 Second； the pany
has recently been laying more emphasis on the benefit of immediacy。
This idea is rather akin to the impulse…buy products placed at checkout
tills； which you never thought of buying until you bumped into them
on your way out。 Whether 10 days on a beach in Goa or a trip to Istanbul
are the type of things people ‘pop in their baskets’ before turning off
their puters； time will tell。
。 Geographic segmentation arises when different locations have different
needs。 For example； an inner…city location may be a heavy user of motorcycle
dispatch services； but a light user of gardening products。 Internet
panies have been slow to extend their reach beyond their own back
yard； which is surprising considering the supposed global reach of the
service。 Microso。。 exports only 20 per cent of its total sales beyond US
borders； and fewer than 16 per cent of AOL’s subscribers live outside
the United States。 However； the figure for AOL greatly overstates the
pany’s true export performance。 In reality； AOL does virtually no
business with overseas subscribers； but instead serves them through
affiliate relationships。 Few of the recent batch of internet IPOs have
registered much overseas activity in their filing details。 By way of
contrast； the Japanese liquid crystal display industry exports more than
70 per cent of its entire output。
。 Industrial segmentation groups together mercial customers according
to a bination of their geographic location； principal business
activity； relative size； frequency of product use； buying policies and a
range of other factors。 Logical Holdings is an e…business solutions and
service pany that floated for over ￡1 billion on the London Stock
Exchange and TechMark index； making it one of the UK’s biggest IT
panies。 It was formed from about 30 acquisitions of small （ish）
businesses。 The pany was founded by Rikke Helms； formerly
head of IBM’s E…merce Solutions portfolio。 Her pany split the
market into three segments： Small； Medium…Sized and Big； tailoring its
services specifically for each。
。 Multivariant segmentation is where more than one variable is used。 This
can give a more precise picture of a market than using just one factor。
Specifiers； users and customers
When analysing market segments it is important to keep in mind that there
are at least three major categories of people who have a role to play in the
buying decisions and whose needs have to be considered in any analysis of
a market：
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。 The user； or end customer； will be the recipient of any final benefits
associated with the product。
。 The specifier will want to be sure that the end user’s needs are met in
terms of performance； delivery and any other important parameters。
Their ‘customer’ is both the end user