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Friday, 22 January 2010

Segmentation by Value

It's amazing how people just LOVE to label people, things, and box them up to neat little packages and expect everyone to fall nicely into place. So Gen NEXT are the younger ones, vs GEN X, the thirty somethings vs baby boomers.. but what do they MEAN? What do these labels say about what they value in the services and goods they purchase and consume?

If a firm has to design for value, it has to design for the segment of customers they want to target, and you would need to know what is the value upheld by the target segment. The cardinal rule of marketing 'you can't sell to everyone' still hold true today.

Segmentation in Marketing is as old as segments exists. In the old days - everyone stayed in their boxes (or so we are led to believe). If you stayed in a certain location, it said something about you, which class of society you are, which brand of cereal, juice or clothing you'd buy. Segments neatly fell into nice demographics, income and social classes. And by inference, marketers knew what each segment would value from a good or service and the firm could design and deliver accordingly.

Of course that is no longer true... today, it's really hard to box people up. This then leads to how hard it is to cut the market up into segments for firms to target. How should markets be segmented? Marketing has leaned towards behavioral segmentation, which is close to value segmentation but the focus is still on purchase segmentation vs consumption segmentation. In the mobile phone world, most firms have given up on traditional segmentation and now segment on value-in-use e.g. phone users are 'Life Jugglers', 'Technology Leaders' or 'Simplicity Seekers' (see Economist article)

If you want to think about how mixed up segments can be, just take me, for example. I declare my age, where I live and what I do for a living to Yahoo and for fun, I turn on Yahoo radio to see if they 'get' me. They run ads on kitchen towels and toilet paper. My facebook ads are about weight loss (maybe they should ask me my weight), skin care and credit ratings. Such is the extent of their sophisticated data mining software.

To be honest, I'm pretty hard to box up. I've got 3 kids and my eldest is in university. But I'm much more into social media than my girls. I use linkedin, twitter and facebook (facebook is all personal with very defined privacy settings), and I play MMORPG/PvP, with a level 42 defender. I'm glued to my iPhone and my laptop. Yes, I'm a geek. Worse, I'm a geek mom/gal of the bossy variety. But I also play golf to a handicap of 25, drive a BMW 318, own a house, am a consultant and an academic. On top of that, I cook for the family. Maybe the kitchen towels and toilet paper isn't far off the mark after all.

4 comments:

  1. Irene,
    Nice to discover your blog today. I totally agree with the above probably why I am a fan of a dynamic segmentation. Re the example you quote "tech co / mobile" I think traces too to an obsolete segmentation form. Just a couple of ideas... http://www.henshall.com/?s=segmentation+beer What's important in my mind is where and how new products are introduced and launched.

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  2. tks for the comment Stuart.. I like your focus on 'occasions' - it is exactly what I am writing in an article now - the convergence of technology resulting in the move from profile (customer) to use (context)

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  3. Interesting look in on the elusive concept of value Irene..but for a manager there is still an unanswered question..how to use use all this to come up with a 'formulae' for product/service pricing..my guess is maybe use of something close to contingent valuation/'non-market' valuation used for valuing environmental 'goods' such as fresh air etc..maybe the answer is in your book?

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  4. it covers some of it.. particularly around the concept of a present 'price' for future contextual value... more covered in the next edition though - out 2011!

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