Segmentation and the Concept of Gravity of Decision Spectrum

This is in continuation with earlier posts on segmentation, though a little theoretical may be more examples can be brought out through comments and discussion..

Segmentation is the first critical step in the marketing process once a need has been identified. The process of segmentation, targeting and positioning provides the bases on which one decides the 4 Ps of marketing mix, product, price place and promotion.

In segmentation we divide a market into distinct groups which have distinct needs, characteristics or behavior, so that the company can focus its resources on satisfying the customers in this distinct segment rather than spreading itself thin trying to serve the whole market.

A 2006 HBR article, Rediscovering Market Segmentation provides us with the latest on the concept. They propose a 'gravity decision spectrum' to avoid the error marketers commit by applying segmentation designed to shed light on one kind of issue to some other purpose for which they are not designed. They suggest that one should begin with the expectation consumers bring to a particular kind of transaction.

The authors have divided the gravity of decision making into three, first is shallow, which involve the decisions which are simple and inconsequential like trying out a new brand of toilet paper and at the deepest end are decisions which have very high significance like buying a house and others which fall in middle.

An example of the shallow end was the case where in a manufacturer of men’s shaving products wanted to introduce disposable razors but feared that it might cannibalize the sale of its reusable razors. Segmentation exercise carried out classified consumer into those who use either disposable or reusable and those who switch. The company found that the switchers formed a very small segment and introduced the disposable razors.

In the middle end of the spectrum the article gives the example of the segmentation exercise carried out by Toyota prior to the launch of its Hybrid Prius in the US market. The consumers wanted car with greater power and faster acceleration than what was being offered by Prius. But through segmentation they discovered a small segment of consumers who were environmentally conscious and wanted to project that image and were also happy with the design and performance of the car and thus it was launched to this small segment through a focused media campaign.

At the deep end is an example of the people opting for Retirement community centers at a very high cost. The segmentation exercise revealed an orientation towards changing family values driving the purchase of these expensive retirement options. The two key values characterizing this segment were identified as the desire for autonomy and willingness to embrace.

Thus we can see that in each of these three cases the bases for segmentation differed and they brought out insights which helps marketers improve their decision-making.

Previous post on the issue

Segmentation and Demographics

Paras Pharma Succeeding through Segmentation