Market Segmentation – Tool and Techniques

Tools and Techniques Used in Market Segmentation

Business Marketing Segmentation

Segmentation of your markets or customers as a company is very important because, without it, you
will be marketing to a larger segment of the market than you need plus there is never a ‘one size fits
all’ marketing strategy. Segmentation is mainly a way of arranging customers into smaller,
manageable groups characterised by particular attributes. Once you are able to segment your
customers/markets, it makes it easier to market relevant messages to each group. Additionally, the
marketing messages can be altered in accordance with different segments

once their needs, interests
and demands are identified.
There are various techniques and tools used to segment a market. However, below are the top 4 that
are used by most companies and brands to ensure that there is no room for error.

Cluster Analysis

This is a statistical technique that can be defined as an analysis designed to categorize objects to a pre-defined number of different groups, with each group being relatively similar on a range of selected
attributes. The resultant groups are referred to as clusters. Therefore, it allows marketers to look at the
information they have gathered and use it to identify segments they can market to. However, in order
for one to be able to use cluster analysis, they first have to know the customers’ demographics and
characteristics. Once one has this information, you are then able to enter various variables such as
customer service as well as a demographic such as age into a customer analysis program. The results
show segments that will act as potential customers for your product or service. One of the most
commonly used cluster analysis software programs is SPSS by IBM.

 Segmentation Trees

The second technique involves a marketer creating a database from scratch. A segmentation tree can,
therefore, be defined as a variation of a decision tree, which visually shows the division of a market
into smaller possible market segments. This second technique is very helpful especially when there is
lack of valid statistical or research data. Similar to a family tree, a segmentation tree starts with the
name of the product or service at the top. It (the tree) is then broken down into branches made up of
potential markets. Below is an example of a segmentation tree with the product being cereal.

Once a segmentation tree has been created, the end result is a list of segments one can evaluate for potential marketing opportunities. However, it is advisable for one to create multiple drafts of
segmentation trees before settling on the one best fit for your task.

Geographic/ZIP  Code Research

This kind of technique is valuable to those trying to obtain demographic information, especially those
looking to get a general feel for households and businesses in certain areas. There are various data
collection companies that offer these data for free as well as others that provide ZIP code look-up programs such as MyBestSegments ZIP code look-up this is US bases. Information provided includes factors such as the population living in that ZIP code, median age as well as income. The data can further provide
information such as who makes up the households e.g. married couples, with or without children. All
these information enables a marketer to market and sells its products and services with specific
attention to the demand portrayed in each area. Solutions available in Kenya are the like of Nielsen Kenya

 Lifestyle segmentation

Customer lifestyle segmentation is a part of a marketing management technique in which small sub-
groups are created from the data collected according to their choices, needs, likes and dislikes. Tools
such as ‘Clarita’s lifestyle’ provide marketers with information on the potential customers’ shopping,
technology and financial preferences as well as types of media they pay attention to i.e. both online
and offline. The segmentation data collected can help marketers in pitching across different similar
products to potential customers in an effort to increase market share. Some customers are reluctant to
change their product preferences, however, if introduced to similar products with better offers such as
a lower price range, they may very well be persuaded.

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