The Zen of Segmentation

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In my previous post, I alluded to the fact that a market for a product (either a good or service) is generally segmented into distinct groups of consumers.

Each group of consumers may receive a different marketing mix tailored to specifically appeal to them. This will attempt to maximize profit by:

  1. Targetting the most-likely potential customers. Which inversely means, minimizing the amount of marketing efforts spent on people who are not perceived to be interested in the product.
  2. Using communication mechanisms that are more appealing to the target consumers and presenting it in places where the consumers are more likely to see it.
  3. Selling the product in a distribution outlet or channel that the target consumer will use.

One thing to note, when using a segmentation strategy, not all segments may be perceived as being profitable. Some may be rolled together and a more general marketing mix may be used.

Ultimately, the goal is to do 1:1 marketing which means that everyone can potentially have a personalized marketing mix.

In the past, this has not been feasible because it was prohibitively expensive using tradional means. However, the internet has changed this a little.

Companies are now able to move closer to the 1:1 marketing mix. This WiseMarketer.com article goes into a lot of detail on the technologies behind 1:1 marketing on the internet. It is a very interesting read.

The key point is that there are two different types of technologies being employed:

  1. Targetting – Attracting the consumers with the best predisposition towards purchasing your products (segmentation!)
  2. Recommender – Determine what is the best thing (i.e., product to recommend) to do at this moment.

I’ll let the article speak for itself. The author did a much better job than I ever could.

Is there a cost to society from better segmentation?

This article published in the LA Times titled, Telling You What You Like, seems to think so. The main argument is that by only presenting things that are perceived to be of interest to you, in effect, you are not being given the opportunity to broaden your tastes and likes.

In concluding this post, I would like to provide some links to very good sites on marketing:

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