Project Scope: Market Segmentation

(part of Chapter 2: Defining Your Project's Scope)

 

While defining a project scope may seem like a daunting task, it really comes down to two things; knowing you want to get out of your project, and deciding how you’re going to get it.

It also helps to know some of the common language used to define market research studies. Read on to learn about a common project type: market segmentation.

 

The premise of market segmentation is that to maximize sales to a large population of customers, it is best to divide it into logical subgroups. The assumption is that by dividing one large, amorphous mass into subgroups, you can fine-tune your product, messaging, support, or distribution channels to meet the specific needs of unique customer groups. Thus, the goal is to use a market segmentation model to improve marketing success and optimize marketing ROI.

Segmentation models vary from basic to complex, and the approaches to developing and applying them is a topic for an entire book itself. But here are some examples:

• Example 1: A telecommunications company selling mobile phone services might segment its market based on complexity of needs. One customer group might only need voice service, and very little volume at that. Another group might primarily use mobile texting services. Yet another might be a heavy user of mobile phones for voice, text, email, and web browsing. By identifying distinct patterns in customer needs, the company can optimize product bundles and target them at the correct audiences.


• Example 2: A hotel chain that caters to families might simply segment its market based on income level and travel frequency. The chain might find that a group of moderate income-frequent travelers exists that is swayed by certain loyalty program rewards. It might find another important group exists—that is more swayed by on-site amenities. With this information, the hotel can optimize its offerings and loyalty programs to appeal to each group’s unique needs.

 

Market segmentation studies are fairly involved. They are often multi-phased projects that can get very complex, especially for global organizations.

In fact, in my experience, market segmentation studies are among the most complex types of projects and have a higher risk of failure as compared to other studies. Even when completed as planned, many clients find it challenging to truly apply the results.

Market segmentation can be done with both consumer and business populations. That said, the studies for B2B populations are very different than those for B2C populations.

Take this into consideration when selecting potential agencies for this type of project. A firm that has strong experience in consumer segmentation does not necessarily have B2B segmentation expertise.

 

This is an excerpt from the book, "How to Hire & Manage Market Research Agencies," which is available on Amazon. Published by Research Rockstar LLC. Copyright © by Kathryn Korostoff. All rights reserved.