The PDMA Handbook of New Product Development

13.6. Segmenting Your Market

Armed with a sound understanding of the market as a whole, segmentation is often an important next step. For most companies, the days are gone when they could view their customers as a homogeneous group that could be attracted, served, and retained in the same way. In most markets, customers are not all the same. They respond to different offers, require different service levels, and return different profits. All customers are not created equal in needs, behaviors, and profitability. Improving a company's focus on the most profitable customers can provide enormous returns. Segmentation analysis takes market and customer analysis to the next level by differentiating between customer groups and understanding the drivers of customer behavior on a segment by segment basis. Because product concepts are designed to meet underserved customer priorities, segmentation often precedes the identification of innovative value propositions. A customer-focused company manages its customer portfolio as closely as any other asset.

Figure 13-5. EXAMPLE OF APPLICATION SEQUENCE FOR MARKET RESEARCH TOOLS.

13.6.1. Criteria for Segmentation

Segmentation is fundamentally about de-averaging the customer base. It is the process of dividing a market into distinct groups of buyers that are similar in the way that they perceive, value, use, and/or buy the product or service being ...