Too many organisations, especially small to medium sized organisations, do not spend enough time understanding their market, to their own detriment. They become reliant on the market not changing and are surprised when it does. In ignoring the market and concentrating on the production of their goods or services, many organisations seal their own fate.
To meet their financial goals, many organisations concentrate so hard on the cost side or supply side of the equation that they miss the point of understanding and meeting the customer’s ever changing needs. Undertaking some simple market analysis every two to three years is a good insurance policy.
Market analysis can be as complex as we want it to be and many consultants wish it was. Even the simplest market analysis however, begins with a segmentation exercise. A market segment can be defined as a group of customers who buy a product or service through a particular channel, e.g. a supermarket or a wholesaler or direct from the supplier.
Using the product or service as the main determinate of a segment will help us understand some of the purchasing behaviours of customers. For example, segmenting the watch markets into price ranges of less than $50, between $50 and $500 and over $500 will help us know which customers are willing to pay for perceived quality and which channels they trust to buy from for the price range.
A customer buying a $1000 watch is unlikely to buy it from a street vendor without thinking it was a fake. They would buy from an expensive jewellery shop without thinking it was fake and pay more for it than if they had bought it from the street vendor. Their needs are not just about the watch itself.
Product segmentation, however, does not really tell us what the customer values about our goods or services. Segmenting by use will give us some more information about what a customer values. For example, watches can be segmented by sports use, daily use, evening wear, children’s use and technical use, eg. nurses and doctors measuring heart rates.
Sports use will tell us that the wearer probably prefers shock resistance, water resistance, stop watch features and durable exterior construction. Evening wear use will tell us that the wearer probably prefers fine design features, use of metallic exterior, a simple face and few, if any, special time keeping features.
Segmenting a market by what value a customer attaches to a product’s use is by far the most powerful way of segmenting. Using our watch analogy again, understanding that a diver values their life above all and fears getting the bends, lead to the development of new watch features. For example, the ability to measure the depth to which a diver has descended, the time spent at depth and a calculation of what rate the diver should therefore ascend, giving warning alarms to stop for calculated times at each depth. Did I say watch features? Understanding what a customer values helps determine design features which are useful and which are redundant.
Using segmentation of customers in Fiji can bring similar benefits to marketers of goods and services.
For example, it is not good enough to concentrate on the supply side of agriculture. To build vegetable or root crop farms or processing plants with no view of what market segments want in terms of quality, quantity and delivery and for what price, is a high risk marketing strategy. The risk is that we will either miss opportunities for improved pricing or in many cases, miss the needs altogether and have no market that wants to buy our product.
Fiji suppliers must talk to their customers, their distributors, their wholesalers and ask them what they need for us to do better. To ask what would be the one thing we could do that would encourage them to buy more from us. To ask them what they use our products for. To ask them what is the one thing that if we did it, would hurt their business the most.
The answers to these and other questions will help us to understand their needs. Group our customers together in like needs and we have a segment. If the segment is big enough and we can afford to make the effort to meet their needs and we may have a new product or a superior form of service that our new segment may be willing to pay more money for.
Segmentation is not hard to do. It can start with a simple phone call to a customer or two or to a distributor. The key is wanting to know what the customers really want. Companies that do not segment miss opportunities to grow by going to market in the hope that someone will buy.