Market Segmentation Leads to Business Transformation

Market segmentation leads to business transformation

When you to have new insights and begin to think differently about entry points to fulfilling your customers’ desires – then your business can improve radically.  Market segmentation can give you those new thoughts.

Marketers often think of segmentation in terms of splitting customers into different groups. Demographic segmentation uses factors such as age and location to define different customer groups. Psychographic segmentation groups customers according to factors such as life stage and personality. In addition to these two types of segmentation there are countless others: needs based segmentation, behavioral segmentation, vertical market segmentation and so on. As implied by the method names – focus is on the variables and how customers split.

Transformation comes when we focus on ways to think about combinations and not so much on the splitting or particular variables. The segmentation process gives us a new lens for viewing how marketplace elements can be broken apart and then recombined to create a new marketplace perspective. Achieving transformation requires thinking about a segmentation’s implications and imagining new business concepts which emerge from those implications.

Using segmentation for business transformation is harder than just singing the song!

Seeing the new possibilities takes insight, skill and hard work. For example, there are the various experts involved in creating a musical performance. The experts are segmented on role: a guitarist, pianist, drummer, cellist, flutist and so on. All the segmented roles come together to create entertaining and unique noises.

Combining all of the elements into a one man band takes real talent. Usually it fails. But after 20 years of hard work and real skill Boston’s One Man Noise Maker makes it look easy.

The size of his quickly filling contribution bucket indicates his success. I witnessed more than one sale a minute.

The tablet computer market serves as another recent business example in the so-called new products space. There are many companies entering and leaving the tablet computer market segment. Transformational thinking comes from Amazon.com’s Jeff Bezos when he says in Bloomberg BusinessWeek: “… We don’t think of the Kindle Fire as a tablet. We think of it as a service.”  Jeff Bezos is transforming his business by imagining how the tablet computer segment’s existence creates new entry points to fulfilling his customers’ desires.

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