by Kenneth Rudich
If it is to be genuinely useful, a market segmentation analysis should provide actionable information for delivering value fulfillment.
The aim is twofold in purpose: (1) mixing and matching the product or service benefits in a manner that will best meet the needs and motives of each customer group; and (2) realizing the stated goals and objectives of the business.
Insofar as this undertaking involves the ability to strike a balance between the two, the market segmentation analysis must be guided by some criteria that will factor both outcomes into the process. Those criteria form the backbone for the discipline behind market segmentation.
I’ve divided that backbone into two main parts.
In Part 1, we’ll answer the question of what qualifies as a market segment. What characteristics should it possess before it can rightfully be regarded as a segment?
In Part 2, we’ll look at a framework for unearthing insights about a market segment. That framework is intended to help a business to better understand, and relate to, the characteristics of each individual market segment it has identified in Part 1.
the 5 characteristics of a market segment
To qualify as a market segment, it should possess the following characteristics:
- be identifiable: there must be clearly defined differences between the segments or targeted groups — each must provide different opportunities and/or challenges, or be interested in different benefits and/or motives;
- be quantifiable: it must provide a measurable structure;
- be addressable: it must be durable or not changing too quickly; relevant to the organization’s products/services or core competencies; and competitive forces should be perceived as surmountable;
- be reachable: it must be accessible by communication, transaction and distribution channels;
- of sufficient size: it must be worth addressing either by itself or in conjunction with other market segments.
If you can identify a group of customers that exhibits all five characteristics, then it qualifies as a market segment. This is the first step to making the market segmentation analysis genuinely useful. It sets the stage for what will be published in Part 2 of this series.