iSixSigma

Segmentation

Definition of Segmentation:

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Unfortunately, your customers may have different needs and expectations for your organization. To meet this challenge, you might want to segment them into groups where the needs and expectations are similar. This will allow you to develop unique strategies to meet the different expectations.

Overview: What is Segmentation?

There are four main ways to segment your customer base. They are demographic, behavioral, geographic and psychographic. Let’s look at each in more detail.

Demographic

  • age
  • gender
  • marital status
  • family size
  • occupation
  • educational level
  • income
  • race
  • nationality
  • religion

Behavioral

  • online shopping habits
  • response actions on websites
  • benefits desired
  • brand loyalty

Geographic

  • country
  • state
  • county
  • zip code
  • climate
  • urban
  • suburban
  • rural

Psychographic

  • personality traits
  • interests
  • beliefs
  • values
  • attitudes
  • lifestyles

The graphic below shows some of the benefits of segmentation.

An industry example of Segmentation

A large pharmaceutical company realized their customer base for a new drug was diverse. To better understand and strategize their marketing campaign, the company’s Six Sigma Master Black Belt (MBB) worked with the marketing department to segment the major characteristics of the prescribing physicians. Using the four common ways to segment customers this is what they came up with in their first draft:

Demographics physicians

  • age
  • gender
  • educational level
  • income
  • race
  • nationality
  • size of medical practice
  • amount spent on other company products
  • individual, group or hospital based practice
  • type of medical practice

Geographic

  • country
  • state or province
  • county
  • zip code
  • climate
  • urban
  • suburban
  • rural
  • proximity to major medical center

Psychographic of prescribing physicians

  • thought leader
  • beliefs
  • values
  • attitudes towards new products

Frequently Asked Questions (FAQ) about Segmentation

1. Can my customers be segmented other than by demographic, behavioral, geographic and psychographic?

Yes. You can also segment by needs-based and transactional. Needs-based can include needs such as: problem-solving needs, functional needs, emotional needs and value alignment. Transactional can include how often customers buy, how recently they bought and how much they spent.

2. What is customer segmentation?

It is the act of breaking your total customer base into different groups or categories which have similar needs and wants. This will allow you to analyze your customers and, if appropriate, design unique marketing strategies for each segment.

3. What are the characteristics of a good segment?

A good segment should have the following characteristics:

  • Identifiable
  • Substantial
  • Accessible
  • Stable
  • Differentiable
  • Actionable

Characteristics of a good segment

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