Transition from Segmentation to Targeting
Advanced segmentation and target marketing so you can sell more and spend less.
What's the new approach?
Knowing your customers precisely, and the most effective ways to reach them are the keys to unlocking profitability. By turning in-depth data into a unified, actionable understanding, these Segmentation and Targeting solutions connect you with your most valuable customers.
Segmentation and Targeting solutions:
-Prioritize your key customers and prospects, enabling you to limit waste and increase efficiency.
-Clarify your optimal marketing mix across all elements, providing a clear view of who and where your best customers and prospects are.
-Identify and reach your targets online, and in mobile audiences.
-Integrate your own customer data with world-class market and media data to move confidently from insights to marketing action.
Effective targeting:-
1)Identify & profile distinct groups of buyers who differ in their needs and preferences.
2)Select one or more market segments to enter.
3)Establish & communicate distinctive benefits of market offering.
Benefits of Segmentation and Targeting:-
Segmentation is essentially a process whereby a provider of goods or services
chooses to group prospective customers together on the basis of a set of common
characteristics that have significant implications for its marketing activity. Common
characteristics that might be used to segment a market include variables such as age,
income, personality and lifestyle. On the basis of those common characteristics, segments are expected to respond differently to marketing activities – they may want
different features, be more or less price-sensitive, respond to particular types of
marketing communications, or use different channels. Targeting is then concerned
with the identification of an appropriate set of segments which the organization
will seek to serve. Implicit in any decision to undertake segmentation and targeting
is the realization that no single organization is capable of being all things to all
men. It is inevitable that certain products will have particular appeal to certain
kinds of individuals. At one extreme, each individual customer could be presented
as a segment of one because each individual has different needs. In such a case, the marketing mix is bespoke to match the characteristics and needs of a single person or organization. This practice is perhaps more common than might at first be imagined. In retail markets, financial advisers provide a service encounter that is unique to the individual client – as do private bankers. In corporate markets, a customized approach is essential when dealing with large corporate clients. At the other extreme, the whole population could be treated as if it were a single homogenous segment. Traditionally, banks have treated the personal banking market as homogenous and provided a single standard current account to all customers. Increasingly, however, there is recognition that customers do have differing banking needs and that there is the potential to develop specific products for specific segments.
Thus, for example, Barclays now offers over ten different current
accounts in the UK market, targeted to a variety of segments – including children,
students, people with very high incomes and people with very low incomes.
Segmentation and targeting is a means by which a number of important benefits
are secured for both providers and consumers of products and services. In summary,
the benefits of segmentation and targeting are as follows:
1. It facilitates efficient resource utilization. Indiscriminate use of the marketing mix is
a wasteful use of precious resources. By identifying and targeting discrete segments
of consumers (retail or corporate), a company is able to limit the scope of
individual components of the mix and thus reduce costs. To take a simple example,
an advertising programme involving the use of the press media will be less
expensive if it involves the use of magazines that are read by a discrete target segment
of consumers rather than the entire population. Similarly, products
designed to meet the particular needs of a given segment will not need features they do not require. Thus, segmentation results in greater resource efficiency,
which benefits consumers through better value, shareholders through reduced
waste and lower costs, and the environment through resource efficiency.
2. It allows effective targeting of new customers. The logical next step from segmenting
a market is the selection of segments to target for marketing activities. Nowadays,
it is unusual for a company to have a completely indiscriminate approach to targeting
new customers. As the costs of customer acquisition have increased and companies become increasingly focused upon customer profitability, they have to
be selective in respect of which kinds of people or organization they want to be
their customers. It must be appreciated that different customers display different
characteristics and behaviours that impact upon customer value. For example, in
the UK, SAGA targets people aged over 50 for its range of leisure and financial
services. SAGA is able to price its motor insurance premiums very keenly, as the
over-50s represent a low-risk group in terms of propensity to incur motor claims.
Thus, SAGA can be very price-competitive and deliver superior value to this
group of consumers in a way that would not be possible if the company was
trying to serve a mass market.
3. It facilitates competitive advantage. The more specific an organization’s approach to
segmenting the market, the easier it is to establish and maintain competitive
advantage. This arises by virtue of the fact that competitive advantage is a relative
concept that involves differentiating an organization from its rivals in the
eyes of its customers. Self-evidently, the more indiscriminate the approach to targeting, the wider the array of competitors against whom an organization will
have to seek to differentiate itself. In the case of SAGA, it is required to maintain
a competitive advantage over those other organizations that also seek to target
the over-50s – such as RIAS. This presents SAGA with a smaller set of key rivals
than if it were to target the entire adult population. In turn, this makes it easier to
achieve and maintain differentiation.
4. It directs the marketing mix. Best practice dictates that each target segment chosen by an organization should be subject to a specific and relevant marketing campaign.
In this way, marketing is managed to achieve the best fit with each target segment.
Consider the case of the NFU Mutual Insurance Company. Originally aimed at
providing for the insurance needs of Britain’s farmers, it has repositioned itself
to address the insurance and investment needs of the following segments:
● farmers
● people who live in rural communities
● people who live in non-metropolitan towns and have an affinity for the
countryside.
The mix for the farming segment includes insurance products that are specific to
farmers, such as crop and livestock insurance. In terms of promotion, it advertises
extensively in the farming press. As far as rural dwellers are concerned, it uses radio
and television selectively to target those who live in predominantly rural parts of
the country. Its product range is geared towards rural dwellers with a special
interest in country pursuits such as horse-riding.
Some financial service providers are affinity-based, and this allows for particularly
close targeting of the marketing mix.
