Skip to content
 

value chain marketing-an illustration of market segmentation

a market segmentation illustration

by Kenneth Rudich

You may recall that market segmentation is about moving away from a one-size-fits-all mentality when it comes to delivering value.
 
Instead of viewing customers as a single-minded group, all with the same motives and needs, it investigates how motives and needs might differ among them, and how those differences might influence their consumption patterns.
 
It then divides the larger potential market into smaller groups based on those differences.
      
The intent is to improve the level and quality of interaction with each group by targeting the value chain components to match up with the customer motives and needs.  This can increase both the effectiveness and efficiency of the marketing initiative.

a market segmentation illustration

Here’s a fairly obvious illustration to demonstrate how it works, and what makes it so potentially worthwhile for almost any business venture to consider.

Let’s start with the demand for a canister of mixed nuts that contains an assortment of peanuts, cashews, almonds, Brazil nuts, hazel nuts, beer nuts and pecans.  Let’s say sales are brisk and it’s profitable.  Let’s also say we’re in the habit of treating customers as one-size-fits-all, and that this is the only product we sell.
    
What happens if some people want only almonds, or only cashews, or only pecans?  Would they be willing to buy the entire mix of nuts to fulfill their desire for, say, almonds?  Or would they forgo the purchase due to a lack of value?
 
Or what if they do want a mix of nuts, but only with hazel nuts, cashews and pecans in it?  Perhaps now they’ll buy the canister and then throw away the nuts they don’t want.  In this case, the compromise they must make to fulfill their desire will have reduced the value of the product offering.

As you can see from this simple example, the demand for nuts can be divided into target groups or segments based on preferences and motives.  It might even be further divided into sub-segments, such as salted versus unsalted, a premium brand versus a generic brand, a large package versus a small package, and so on.

value chain implications

If we evaluate these different desires and motive against the components of the value chain, it becomes apparent there’s an opportunity to improve the match between the demand for nuts and what is being offered.  The one canister of mixed nuts tends to under serve the real market opportunity that exists.  Potential customers will be lost, and you’ll be inviting competiton from others who will gladly fill that gap while also trying to win customers away from you.

Perhaps the ideal solution is to put bins of nuts separated by category on the store floor so customers can make their own individual choices.  If allowed to fill their own container, they can get the nuts they specifically favor in the desired amounts they want.  This relates to the concept of modular thinking and how it supports mass customization.

But not many stores can afford to give up such an allotment of space for nuts.  So you may have to work around a distribution channel constraint (i.e., shelf space) by pre-packaging the nuts in a manner that still matches up better with the targeted needs and desires than does the current single canister of nuts. 

Perhaps you’ll face other value chain implications and need to address them as well.  Or maybe you’ll have detected something during the course of a market opportunity scan that unlocks a hidden opportunity, one that will leave you with a competitive advantage after it’s been executed.

market segmentation for your business 

This simple example barely scratches the surface for using market segmentation.  But it does illustrate the rationale for considering the possibility of a segmented demand, and for tailoring the product offering to match as closely as possible with motives, needs and desires.

Have you taken the time to consider how market segmentation might apply to the products and services you offer?
 
In the next post to MSM, I’ll explore another circumstance where a poor response to a market segment opportunity left the door open for an aggressive competitor to come in and seize it.       

19 Comments

  1. BongQDunster says:

    This design is wicked! You obviously know how to keep a
    reader entertained. Between your wit and your videos, I was almost moved
    to start my own blog (well, almost…HaHa!) Wonderful job.
    I really enjoyed what you had to say, and more than that, how you presented it.
    Too cool!

  2. You’re so іnteresting! I don’t think I have read through a single thіng like this
    before. So wonderful to discover somebody with some original thoughts on this subject matter.
    Seriously.. many thanks for starting this up.

    This website is something that is needed on tҺe internet,
    someone with some origіnality!

    my homepage :: black mold pictures of cleaning agents

  3. Cell phone reviews says:

    Reading by way of your nice content, will help me to do so sometimes.

  4. Ileana Juenemann says:

    I would like to say “wow” what a inspiring post. This is really great. Keep doing what you’re doing!!

  5. Matilde Ysaguirre says:

    I’ve just started off a blog, the knowledge you give on this site has aided me extremely. Thank you for all your time & work.

  6. Trudi Janacek says:

    Hello, this is my first time i visit here. I found so many interesting in your blog especially on how to determine the topic. keep up the good work.

  7. Tanisha Doescher says:

    Of course, what a great site and informative posts, I will add backlink – bookmark this site? Regards, Reader

  8. Pete Widrick says:

    I would like to say “wow” what a inspiring post. This is really great. Keep doing what you’re doing!!

  9. Jennifer Himmelwright says:

    This post makes a lot of sense !

  10. Joan Dafoe says:

    Awesome post. I so good to see someone taking the time to share this information

  11. Edgar Deroberts says:

    I was just having a conversation over this I am glad I came across this it cleared some of the questions I had.

  12. Elroy Burdge says:

    Nice post! You truly have a wonderful way of writing which I find captivating! I will definitely be bookmarking you and returning to your blog. In fact, your post reminded me about a strange thing that happened to me the other day. I’ll tell you about that later…

  13. Mildred Coffey says:

    Good! Thank you! I always wanted to write in my site something like that. Can I take part of your post to my blog?

  14. Arnulfo Mondelli says:

    Great read. Thanks for the info!

  15. Alejandro Booe says:

    Interesting read, perhaps the best article iv’e browse today. We learn everyday cheers to you!

  16. Haywood Rochin says:

    Great read. Thanks for the info!

  17. Quentin Ghoston says:

    Good! Thank you! I always wanted to write in my site something like that. Can I take part of your post to my blog?

  18. Ilias says:

    No estб seguro de que esto es verdad:), pero gracias a un cargo.
    Have a nice day

    Ilias

Leave a Reply