Many people are involved in segmentation research design and implementation. High levels of participation in the research interests can enhance or derail a segmentation project. A number of dynamics contribute to the success of a segmentation research effort, and they have received a huge amount of attention in the management, leadership, and human resource fields. (Peters & Waterman, 1982). In other words, there are many resources available to help a market research team figure out how to work efficaciously with the stakeholders of research projects.
The quality of research design is dependent upon the quality of the information available for decision-making. While this is obvious upon consideration, the steps to ensuring that quality information is available are often shuttled aside in the rush to get moving on a research project. Internal stakeholders may put inordinate pressure on market researchers to initiate the project.
And both external and internal stakeholders are likely to believe that they know what the research should focus on, how the research should be conducted, and they very often will have strong preferences for either quantitative research or qualitative research approaches to the market research problem.
When the dust settles on the initial excitement of beginning a segmentation research project, successful implementation depends largely on how well people can work together, the degree of autonomy the research team has established, the level of credibility attributed to the research team, and the capacity of the team to amass quality information in a timely fashion. Before implementation of the research project, though, market researchers need to establish a thoughtfully developed segmentation strategy.
The first steps to developing a segmentation strategy are:
- Establish a clear description of the segmentation challenge or problem.
- Identify alternative approaches for researching the segmentation challenge.
- Choose the best research approach for the segmentation problem.
Defining the segmentation problem is one of the most critical steps in the development of a successful segmentation strategy, but it is also the step most likely to be neglected. As with any research strategy, this beginning point is where hypotheses are developed. The challenge for the market research team in this initial step is to identify the bases for segmentation and the descriptor variables. There is never just a single best basis for segmentation. Different bases can be used for different research objectives and product development decision problems (Wind & Thomas, 1994).
Here are some examples of approaches to segmentation and their associated variables:
- Buyer Utilities: New product development - Launching product alternatives
- Buyer Benefits: Positioning and repositioning
- Buyer Price Sensitivity: - Margin, terms of sale, past price changes
- Buyer Usage: - Heavy, moderate, light, non-users
Market-Specific Considerations Are Crucial to Segmentation Strategy
It is typical to have more than one segmentation basis in play within a given segmentation strategy. In addition to considering the way that the segmentation results will be used (e.g., pricing, positioning, new product development, etc.), the market research team must consider other market-specific issues. Several market-specific issues are discussed below.
A predominant factor is the dynamic nature of all markets. It variable is high on the list of market researchers since the project economics can drive decision-making based on aged data. It is always the dilemma faced by market researchers: Current decisions about segmentation are based on past data and future implementation.
It is a key reason why computer modeling is so highly valued in market research. The introduction of probability into segmentation decision-making can increase the quality and timeliness of the data sets used to develop the segmentation strategy.
Segmentation research involves a fairly high level of uncertainty and associated risk. The nature of segmentation research is deterministic rather than exploratory. The results of segmentation research are destined to be applied to decisions that are, at various stages, irreversible—or are reversible only at some cost.
The competitive environment, shifting consumer preferences, and market economics—among other factors—can substantively change the market (as described above), resulting in increased risk to marketers, advertisers, and others involved in provision stream of products and services.
Segmentation strategies are interdependent with the business strategy and marketing plans of an enterprise. Segmentation research cannot be conducted in a segregated fashion, but must instead be integrated with other business and marketing decisions that have already been made. Indeed, a segmentation strategy must be capable of meshing with changes in the overall marketing and business strategies.
As a result, market researchers may insist that the segmentation strategy is included in future business planning and model simulations, particularly when the allocation of resources is a factor. This idea is underscored in the opening paragraphs of this article that addresses the importance of the quality and timeliness of data, and how both of those attributes are associated with resource allocation.
Peters, T; J. and Waterman, R. H., Jr. (1982). In Search of Excellence: Lessons From America's Best Run Companies. New York, NY: Harper & Row.
Wind, Y. and Thomas, R. J. (1994). Segmenting industrial markets. Advances in Business Marketing and Purchasing, 6, 59-82. ISBN 1-5538-735-1