Mkt Segmentation Guide #2

Marketing Guide #2:  Markets are always people so market segments always consist of different groups of people.

Extension:  Your firm and your competitors do not make up the market; you serve the market. 

Extension: The different types of products that you market do not constitute different market segments.

It’s not often in marketing that one speaks in absolutes and uses the word “always”, but I can’t think of an exception to this marketing guide … markets are always people.   

What about business-to-business you ask?  I may be stretching the guide a little.  Yes, the prospective businesses for a given product or service constitute the marketing.  However, in those businesses people make the decision on which brands to buy.  A characteristic of business-to-business marketing is multiple buying influence which means that several people often are involved in the purchasing process.  Thus. I’ll argue that even in B2B categories people make up the market.

Marketing textbooks tells us that businesses tend to have one or a combination of three orientations.  (1) A business may be product oriented where it is believed that product features and product quality are the keys to long term business success.  (2) It may be sales oriented where the belief is that profit stems from the firm’s ability to sell product. (3) A marketing oriented firm believes that its mission is to create value for its customers.  If they are successful in creating value, customers will purchase their brand.  It’s the customers purchasing the brand that drives the business; sales and profits are the result of customer purchases.  Some firms demonstrate one of these three orientations.  Technology firms tend to be product oriented.  Some firms are dominated by their sales organization.  Some other firms may demonstrate all of these orientations.  The R&D and manufacturing groups are product oriented; the sales organization is sales oriented; and the marketing group is marketing oriented.

I mention these three business orientations because while marketing oriented firms understand that markets are made up of people, product oriented and sales oriented firms often fall into a trap. 

Product oriented firms often define the market by the varieties of products that make up their product category.  Probably the worst offender of this marketing guide is the automobile industry.  They constantly refer to the SUV segment, the sport compact segment, the near luxury segment, etc.  Thinking that the products you offer each appeal to a different and unique group of consumers will lead your marketing astray.  Marketers in almost all product categories like to group their products into logical groupings.  This, however, is the marketer’s view of the product category; not the customer’s view of the product category.

Sales oriented firms often define the market as themselves and their competitors.  You will find charts and graphs of competitor characteristics such as their product assortments, their customer base, their sales actions, etc.  This over-focus on one’s competitors by a sales dominated organization is understandable.  The salesperson makes a call on a customer; and as he/she walks into the customer’s place of business, the competitor’s salesperson is walking out.  Their view of the world is that business is a battle with the objective being to defeat the competitor.

The problem with defining markets as products or competitors is that these definitions cause marketers to lose their focus.  Marketers’ primary mission is to create value for their target customers, and marketers’ focus should be on their target customers.  Yes, marketers need to be knowledgeable about the varieties of products in their category.  And yes, they need to know what their competitors are doing.  But their focus needs to be on their target customers.

In almost all marketing-decision making, start with your target customer and work backwards to your market offering.  Follow this approach, and you’ll be a good marketer regardless of your background.