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We take great pleasure in learning from the most significant authors and researchers in the field of Marketing and Branding. Segmentation variables for businesses is a critical initial phase each business must follow. In this article, we turn our attention towards the successful publisher Philip Kotler and to the 14th edition of his best-selling book “Marketing Management”.

Target marketing includes three activities: market segmentation, market targeting, and market positioning. Per Dr. Kotler there are Five Segmentation variables for businesses to identify their place on the market:

1. Demographic

Question to answer: Which industry should our company serve? What size companies should we serve? What is the geographical area our business should serve?

2. Operating Variables

Questions to answer: What customer technologies should we focus on?
Should we serve customers needing many or few services? We should serve heavy users, medium users, light users, or nonusers?

3. Purchasing Approaches

Questions to answer:

First – Should we serve companies with a highly centralized or decentralized purchasing organization?
Second – Should we serve companies that are engineering-dominated, financially dominated, and so on?
Third – Should we serve companies with which we have strong relationships or simply go after the most desirable companies?
Forth – Should we serve companies that prefer leasing? Service contract? Systems purchases? Sealed bidding?
Fifth – Should we serve companies that are seeking quality? Service? Price?

4. Situational Factors

Questions to answer: Serve companies that need quick and sudden delivery or service?
Should we focus on a certain application of our product rather than all applications? Focus on large or small orders?

5. Personal Characteristics

Questions to answer: Serve companies whose people and values are similar to ours? Should we serve risk-taking or risk-avoiding customers?
We should serve companies that show high loyalty to their suppliers?

Why should you do a market segmentation for your business? 

Before developing a marketing plan any company must go through the three target marketing processes known as the STP framework. STP stands for segmentation, targeting and positioning and it is crucial to do it before you go ahead and do anything else. When you divide the marketplace into segments of interest for your business you get a powerful competitive advantage and your chances to reach the perfect customer who needs your products or services are increasing.

Customers are different and thanks to the internet era they are also powerful. They can read reviews and ask for personalized services like never in history. To turn this into an advantage the marketing team of your company or the agency you choose to work with performs a segmentation process to identify multiple sectors of the market.

Five important characteristics

For a market segment to be considered valid it needs to have the following five important characteristics. A segment must be Measurable, Substantial, Accessible, Differentiable, and Actionable.

  1. Measurable means that the size and all the descriptive elements of the segment can be measured.
  2. Substantial means that at the end of the day it is financially worth the process of going after that target segment. A substantial segment is large and homogeneous as much as possible.
  3. Accessible means that you can reach the segmented individuals easily and effectively.
  4. Differentiable means that there is a homogeneous group of potential customers in that segment and it is easy to separate or differentiate those customers from other groups. As an example, when you target vegan or vegetarian people – it is easy to differentiate them from meat consumers. It depends on the criteria you use to differentiate the segments to get the best possible results. As an example of negative segmentation, you may not see many differences in married versus unmarried women when they shop for perfumes. In this example married and unmarried women do not constitute different segments of the market.
  5. Actionable means that it is accessible, easy, and doable to create campaigns to attract and serve these selected segments of the market.

Segmentation variables for businesses – our team’s advice

Segmentation variables for businesses are something business strategies discuss frequently. Unfortunately, new small and medium companies sometimes ignore all the critical steps in creating a business. Making things correct from the start will pay off in the future.

Our team has experience with setting up a company from an idea to the final result. Contact us with no hesitation. We are happy to be of service.

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