CULS Czech University of Life Science Segmentation in the marketing context

CULS Czech University of Life Science “Segmentation”: A way to group customers so that an organisation can better serve them. Groups customers who are more alike within a group than across groups on certain dimensions. Breaks the market down into manageable chunks that facilitate delivering to customers. Uses readily available characteristics as the basis for grouping customers.

CULS Czech University of Life Science Who buys our product? What do they buy? How do they buy? When do they buy? How often do they buy?

CULS Czech University of Life Science The criteria used for segmentation must have the following characteristics: The ability to distinguish between segments Each segment should have sufficient potential size to justify the time and effort involved in planning for this business opportunity Each segment should be capable of being described or measured Each identified segment should have relevance to its purchase situation Your company must be capable of making the necessary changes to its structure, information and decision-making systems so that they become focused on the new segments

CULS Czech University of Life Science “Needs based Segmentation” Groups customers by their individual needs. Segments customers into groups with similar needs. Enables development of products, marketing communication and business processes which focus on providing customers with the benefits which meet their needs. Can help to change the company mind-set - ‘biggest’ segments are not always necessarily the best - not all customers are created equally

CULS Czech University of Life Science Step 2 Who Buys? A preliminary listing and standardised profiling of the different buying groups at the point in the market map where segmentation is to occur. Step 3 A list of all relevant competitive product/ service types, distribution channels, frequencies and methods of purchase. What is Bought, Where and How is it Bought? Step 1 Market Map Defining the value added chain between supplier and final use Step 4 Combining Steps 2 and 3 to produce a series of micro-segments Who Buys What, Where, When and how? Step 5 Why is it Bought? Understanding what each micro- segment is trying to achieve with their particular purchase Step 6 Segmentation (Stage 1) Bringing together those micro- segments displaying similarities. Step 7 Testing the resulting segments against the check list of: Size; Differentiation; Reachability; and their Compatibility with your company. Segmentation (Stage 2) The Process of Segmentation (1)

CULS Czech University of Life Science The Process of Segmentation (2) Step 8 Defining the factors that make a segment attractive to your company Segment Attractiveness Criteria Establishing the relative importance of each criterion to one another Weight the Attractiveness Criteria Step 9 Setting high, medium and low scores for each attractiveness criterion. Criteria Parameters Step 10 Calculating the overall attractiveness of each segment. Score the Segments Step 11 Establishing the company’s ability to compete in each segment and deciding which segment(s) to operate in. Company Competitiveness Step 12

CULS Czech University of Life Science Segment targeting recommendations should drive positive action.... Defend Desirable segments we are capable of serving with our current capabilities - Sustain investment to maintain and enhance capability - Design programmes and products for these groups DevelopDesirable segments we lack capability to serve - Focus investment to improve capability or desirability - Design programmes and products for these groups - Retain actively while building capability TendLess desirable segments - Tactical marketing of products and programs designed for develop/defend segments - Reduce costs to serve to improve desirability IgnoreSegments where capability requirements are incompatible with medium term capabilities - “Spoiling” tactics to divert competition