Today we are going to talk about the concept and the market segmentation examples.
I divided this topic into two sections.
In our previous posts we’ve talked about:
5 ATTRIBUTES OF A SUCCESSFUL ENTREPRENEUR,
3 BEST WAYS TO IDENTIFY YOUR TARGET MARKET and HOW TO MAKE YOUR BUSINESS IDEA A REALITY.
Now, segmentation is by far the most important thing that you will do in your company in terms of figuring out who your customers are.
There are a lot of different ways to segment.
We are going to use ISLIP Media company as a case study later in this post, meaning how they segmented their market.
And I believe that you will also learn from that.
#1: one of the market segmentation examples is geography.
I sell to the United States, I sell to Nigeria that’s pretty straight forward, or I sell to English-speaking countries in the world.
Or I sell to my local area, just my city.
There are many professional businesses who just sell locally, okay?
#2: of the market segmentation examples is by industry meaning, my customers are in a certain industry.
For example, my customers could be doctors who reside in the hospitals, that’s the medical industry, the hospital industry.
There are many other market segmentation examples, again I sell to this steel industry.
And it’s a pretty round segmentation, but it’s one target.
It might be the steel industry in Lagos Nigeria (Steel Mills) etc; so we are going to segment it down.
#3: another market segmentation example is an application – let’s use the doctors for instance. I might sell MRI; imaging equipment to doctors in the hospitals. So the application of my technology is MRI (Magnetic Resonance Imaging).
So I sell the software that fit into MRI, that’s the application for it. The other obvious one for the application is computer software. So on a database management or software company, okay? That’s an application.
Again, businesses use to act differently. Think of yourself, if you are a business person and you think of the thing you’re buying in your business you probably have different types of products you buy for your home.
For example, you might buy a laptop for your business because you travel, and you might want to spend $3000 or $4000 because you need to show some fancy video clips in terms of what you use it for.
But at home, you might buy the laptop worth of $500 that just has a few pieces of software. You’re most concern of using it for the internet, and doing IM (Instant Messaging), some other basics and you don’t need more ability.
Again, it is very, very different if you go to Dell website checking some computers. The first thing the Dell computers ask you on their homepage is, “are you a business? Or are you an individual?
Then you will fall in a segment of small business versus large business etc.
Again, businesses and consumers are very differently divided, most companies can not sell to both parties. Selling to business typically means a sort of what they call, “a high-touch”.
You have to have a direct sale, it might be of the telephone, it might be the internet, but you are touching your customers directly. But you can’t touch consumers individually, it’s too expensive.
So you have to not have a lot of salespeople, but instead, you want to have something that leverages to consumers. So like a website where you can sell to millions of consumers.
#5: A high-end vs low-end – it’s another key segmentation; you think of a bigger business vs a tiny restaurant. They are targeting different people.
We are targeting low end now. What is low end saying? You are the low end; cheaper, less quality product because people buy a less quality product.
Now, on the other hand, you want to be let’s say, “Mercedes” okay? Or a better example, “Kia” or you could be the BMW. Each has its own market, and there are dozens of other ways to segment.
How ISLIP Media Segmented By Application
Let me give you a brief description of ISLIP Media. What ISLIP Media did was it had a video search engine basically.
So it could go inside a video, and it could search the words in the video by using pitch recognition, face matching, image matching and things like that.
So they have to determine who will be the customers. Now it wasn’t in the days of YouTube, this was the days when media was all generated by big media companies.
So what about first segmentation? There is the business market by industry,
- the business/corporate
- the entertainment industry
- the government
which is an industry in itself and
Those are the four main industries. We further segmented entertainment into:
Again we are talking about video. So what they said was to target their search engine product for news which would be very different than targeting features like films, okay? So those were all the choices.
What they did was they actually crossed out the business and corporate market that mostly has to do with training videos. And they didn’t feel there was a large market enough there for them.
They also crossed out education for similar reasons; it’s just the willingness to pay and building for those people to pay.
Their software was probably $50,000 to $100,000 range which was not going to be something that you could not afford.
Then the government – they didn’t just feel they had the contacts, and again that the applications weren’t right. So they chose the entertainment industry, again with the further segmentation.
They thought about people searching inside of videos and then playing the videos.
So inside the entertainment they ruled out future films because they said, that’s not what people want to do. People just don’t want to play a clip when a certain word is on the screen.
Well, as the news set clearly, there is the ability to search videos with “in the news” such as CNN and then play the video from there.
So with all that industry segmentation they chose entertainment, and sub-segment which was news, broadcasting, and sports as I mentioned in the “a b c d “above.
In this case in each of these different industries there were different applications.
There is what they call, (a) Real-time application – what that meant was instantaneous searching of videos, okay?
And obviously, something like news if you want to search it right away. Something like broadcast, let’s say a show on a history channel which could be different; then news station.
(b) The second application was archiving – this was to take large quantities of archives that were on the video out of the archives.
Then index them so that they could be searched. And then there was (c) Training – and then there was the
They ruled out archiving because in talking to people it was pretty obvious.
People weren’t going to talk as they said in the industry literally, take this out of the libraries and spend all this time interviewing and indexing them.
So they ruled that out. Real-time made much sense because there was a lot of videos being generated literally by the second, by tv stations, news stations.
And people would want to search that and play video. The internet was also another one that I think made a lot of sense. As in application, because video back then was really just started on the internet.
But people would put in video clips on the web, and the ability to search them was very important.
Training was the one they actually ruled out, and that again is a good application in terms of the usage of their technology.
They didn’t just make enough money in training business at that particular time. So again, segmenting the entertainment, then news, broadcasting, and sports within that real-time/internet.
So that was ISLIP segmentation in terms of targeting their customers as one of the market segmentation examples.
Finally,ISLIP Media is a typical example of a market segmentation to target your customers. So if you want to sell your products, you may target locally or globally depending on the level of your business. Most companies don’t sell to both customers and businesses. They either sell to businesses or customers.
Our next section is another way to segment the market “the adoption curve”. Follow this blog to get it in your email inbox. Which other way do you segment the market? Let’s hear from you. If you’ve found this post helpful do share with your friends.Advertisements