Segmentation is the process by which a marketer decides which specific customers will buy his products. In text books, Segmentation and Targeting are separately defined. Segmentation is the process by which a market is divided into smaller pieces on the basis of a few attributes, for example age, gender or income. Targeting is the process by which a customer in a particular segment is convinced to buy a product. In practice, the process works in reverse. Segmentation is a given; hugely influential pundits of marketing pronounce on the most relevant segmentation in the market. Products are designed with specific attributes in mind based on a segmentation that is already decided upon.
There is no better place than automobiles to see such classical marketing at work. There are well defined segments based on income and there are well defined products that address those segments. So Mercedes makes C Class, E Class and S Class cars, which go head to head with BMWs 3, 5 and 7 series and Audis A4, A6, A8. Each has some sort of a sports variant: AMG for Mercedes, M for BMW and R for Audi. And then there are a number of exotics that are cheap to make because they share the same platform – for example convertibles and super-performers. This kind of granularly defined, almost theocratic head to head competition is good in steady times, but it makes companies very vulnerable to innovative disruption.
Once in a while comes a product that is so innovative it overturns the existing order. There is no better place to understand product focused marketing than Technology. Apple’s I-Phone completely destroyed the Mobile phone hierarchy, so solidly established by Nokia. There was a time for Nokia 3XXX, a Nokia 4XXX, a Nokia 5XXX, a Nokia 7XXX, and so on. These were for casual users, camera users, regular users, office users and so on. Nokia had the entire marketing segmentation completely worked out. Now none of that matters.
This is an old and well learned lesson that all of us periodically forget. The map is not the world. Segmentation is a way to analyze the market, but the market does not exist because of the segmentation. Segmentation is the map; the market is the real world. Nokia’s casual user, office user and all those segments still exist in the sense that those people are still there. Their needs and desires and motivations and incomes remain the same. But today someone who Nokia believed would spend between Rs. 5,550 to Rs. 7,549 per phone is willing to pay Rs. 20,000 for an I-Phone.
About The Author
Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.