Market analysts often depends on market segmentation to help marketers focus on the subset of prospects that are ‘most likely’ to purchase their offerings. Segmentation, if done properly can help you insure the highest return for your marketing and sales expenditure. Once you observe that only a specific percentage of population are buying your products or using your services, it is better to focus accurately on them. The more you focus on them, the less your efforts will be wasted. But how do you focus?Considering this, analysts often suggests the use of needs-based segmentation to identify groups of customers who have unique sets of unmet needs.
Needs-based segmentation methodology enable you to identify how well a product or service helps consumers execute any job. These metrics are customer’s needs. These metrics segment the market, and help to group together customers who share similar unmet needs. Needs-based segmentation is valuable as it reveals the under as well as oversized market segments and show how vast they are. It also highlights what needs are unmet in each segment.
Segments are created based on three different types of variables
Consumerdemographics compriseof several variables as income, age, and gender. Demographics are easy to comprehend and easy to identify and target activities such as direct marketing, media buying and sales planning. Two households may have similar demographics but very different lifestyles, needs and behaviour. Therefore, demographics is a great weapon to target the audiences.
These variables features customer’s requirements, wants, attitudes and emotions towards the product category and towards the items related to the product category. Customer needs are often highly correlated with behaviours and needs-based segmentations tend to be a good way to distinguish one segment from another.
Behavioural variables describe what actually customers do including usage habits, shopping activities or switching behaviours. Customer’s behaviour is often used in segmentations of business-to-business markets, where sales efforts can identify the behaviour of individual customers.
The principles of needs-based customer segmentation
Identifying the pre-eminent customers
Two virtually-identical customers may buy from you for different reasons. One may be among your most reliable and profitable customers, while the other is hardly worth the effort. To identify customers based on needs-based segmentation, put customer needs as something that allow them to buy X-pounds of Y-products over Z-duration. A company cannot serve every customer profitably. They want to invest its limited resources in those customers and prospects who bring the most value. Company needs to invest in direct proportion to the expected return on marketing the pounds spent.
Identifying customer needs
Next process is to determine why a company has chosen a particular products and service based on their customer needs? Which of their needs have been particularly qualified and willing to meet? Researcher asks people especially the account managers or sales reps and dealers regarding how well they know their customers? This helps to determine how purchasing cycle works? Are purchasing decisions centralised or decentralised? Who influences the purchasing decision? To add depth of insights to the identification of customers, market analysts initiate an on-going two way dialogue directly with customers by offering help line or establishing user’s group, publishing segment or market specific customer newsletter or interviewing customers. They also provide direct mail with a response mechanism, schedule advertisement or conduct surveys or focus groups.
Comparing customer needs to seller’s strength
The majority of the customers buy for a handful of reasons. What are they? And how well do they match with the external service values that you consciously have worked at developing? You may find that for customers, the differential value that they create may consists of quick response time or quality of the product or how often the sales rep calls on them or get in touch with them via email. In a nutshell, one customer’s perception of the value may be another’s impedimentto buy from a seller. And it is important to know which is which and for whom. The more one works towards their customer database, the better it is for them to discover strengths and identify what is important. It is important to know what customers think and how you can refine your ability to deliver and capitalise upon it.
Develop segments based on customer needs
As you hunt for other potentials whose wants are similar to your best core customers and those who needs best coincides with your strengths, you’re most likely to develop more loyal and profitable customers. You may identify only one segment or recognise several clusters who share similar acts of unfulfilled needs and purchasing behaviours. However, this process can be enhanced with complex based variables and often involves two important questions-
- Who are the best loyal customers?
- What differentiate them from the mass of customers?
A well-constructed database that highlights customer characteristics in different ways can give you wealth of tools to turn data into information.Probeinto your database as to how many customers cluster into groups that care about each of different combinations. When you find larger numbers, you have identified ‘need clusters’ that are common to particular segment of your marketing strategy. This is the incentive for needs-based segmentation.
If your company wish to conduct needs-based segmentation research, you may contact Redshift Research for their expertise in market research and quality results.