Market Segmentation and Targeting

Market segmentation is a critical mechanism in the development of a transformational marketing strategy.

Almost every business segments markets in order to achieve marketing efficiency. Yet with all eyes on marketing’s ROI, identifying the “best” target—the one that will generate the highest return in terms of profits for your brand—becomes even more critical to success.

Our Target Optimization Process^TM will help you select and market to the most profitable target for your brand. Very importantly, the inputs to the model come from a comprehensive and rigorous approach to understanding:

• What the different market segments are worth in terms of current and potential profitability.
• How to describe each segment in terms of new product interests, demographics or corpographics, attitudes, needs/wants/problems, motivations, brand preferences, and more.
• How to most effectively and efficiently reach and engage them with media and marketing programs.

Of course, usability, actionability, and applicability of a market segmentation to different marketing, operational, and business decisions all depend on understanding exactly who in the company plans to use the results and how they plan to use them.

Toward that end, we involve senior management at your firm, as well as executives and managers from different functional areas—marketing, sales, research and development, public relations, and more–in the research process, from start to finish.

The end result of all of our market segmentation work is unambiguous guidance on targeting strategy. You will know unequivocally who represents the best target and have a full profile of members of the key segments in order to select the other components of marketing strategy that will improve ROI and grow your business.

The 4 Phases of the Target Optimization Process^TM

CREATE: Brainstorm possibilities

Unlike many firms, we recognize that no one—no one—can possibly know what descriptive, definitive characteristics will be predictive of profitability before you collect data from a representative sample of customers and prospects and undertake serious analysis. In our research, we consider hundreds of diverse characteristics including needs, attitudes, demographics, behaviors, and digital, mobile, and traditional media preferences, all of which might be candidates for a solution.

IDENTIFY: Connect to profitability

Next, we undertake a projectable survey and test all of the ways of segmenting against rigorous, profit-related criteria to identify the key characteristics driving in-market behavior and profitability to your brand.

DEVELOP: Generate different segmentation possibilities

We use different analytical tools including cluster analysis, latent class, and neural networks to develop many different solutions using the key characteristics.

SELECT: Evaluate solutions and identify the optimal solution

We evaluate possible solutions in terms of managerial, statistical, and financial criteria. We ask questions such as are we seeing different brand preferences? Different consumption levels? Different levels of profitability? We also consider their “manageability”—which solution is most easily understood? Is this approach more or less easy to implement? Will the sales force be able to use it?

Working with you, we select the optimal solution and provide a rank order of the different market segments in terms of their return on investment to clearly identify the most financially advantageous group to target.

Next Steps–

• Dowload a description of our market segmentation services
• Read related client case studies
• Learn about 10 different profit-related criteria you can use to evaluate potential targets in How to Identify the Most Profitable Targets
• Contact us to talk about how we can help you with market segmentation research

Innovation Kevin Clancy contributed a chapter on state-of-the-science market segmentation to the 2011 anthology Leading Edge Marketing Research. Download a chapter excerpt.