Why does the concept of segmentation lead to concentration of resources in markets where competitive advantage is the greatest?
Conceptual Pattern for Segmentation
Segmentation is the structure of something that is made up of a series of similar segments separated by the creation of a boundary that divides or keeps apart subdivisions of a population with similar characteristics. It is a number of related elements or events with measurable properties and features. Segmentation is the logical or comprehensible arrangement of separate elements coming one after another in sequence or are arranged in a particular order on the basis of a common characteristic. Segmentation may exist for only a short period of time in which each member is adapted for a special use in a particular operation and are of the same kind, belonging together, and are so used in a way that they are the greatest possible degree of something and the final or limiting point resulting in a restriction in what can be done. Segmentation helps to distinguish an item, person, phenonomenon, etc., usually divided into three categories: (1) physical, (2) functional, and (3) operational. (Pattern Engine – Segmentation N=12 © 2014)
If segmentation is understood then the meaning of Quality will follow.
First Principle: The purpose of segmentation is to identify groups of potential customers with similar needs and/or characteristics who are likely to exhibit similar behavior. 1
Second Principle: Customer segmentation leads to the concentration of resources in markets where competitive advantage is greatest and returns are high. 2
Third Principle: The segmentation process starts with knowledge of who the customers are, how are they different and what are their needs. 3
Fourth Principle: Each segment must be of sufficient size to justify expenditures, must be clearly distinguishable from other segments, must be accessible to the company, and must be compatible with the company’s resources and expertise.3
Fifth Principle: To understand what lies behind the choices made by customers requires their behavior to be understood in terms of the needs they are seeking to satisfy. 2
Sixth Principle: Customers have a limited number of similar needs and wants that can be sated by providing sets of similar products that create superior value. 1
Key Conceptual Patterns
Behavior is the aggregate of responses to internal stimuli in which a person, organism, or group responds to a specific set of conditions. Behavior is the prevailing context of circumstances following a phenomenon that stimulates information. It is something said or written in reply to a statement or question as in words or in some action that influences the performance or outcome of the process for something to happen. Behavior is based on a set of facts that surround a situation or event and that and encourages an activity or a process to begin, increase, or develop. (Pattern Engine – Behavior N=12 © 2014)
Expertise is the skilled knowledge of an expert acquired from experience, training or study. Expertise engenders special knowledge and ability acquired by repeated practice. It is skillful performance in a particular field or activity or in any special branch of learning that results in doing something well. It is usually gained through training or experience for producing solutions or performing tasks in some problem domain. Expertise is the result of an activity or exposure to events or people over a period of time resulting in knowledge acquired by learning and instruction that leads to wisdom. (Pattern Engine – Expertise N=12 © 2014)
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1 Art Weinstein: Handbook of Market Segmentation – Strategic Targeting for Business and Technology Firms, 2004.
2 Malcolm McDonald & Ian Dunbar: Market Segmentation – How to Do It , How to Profit from It, 2004.
3 James H. Myers: Segmentation and Positioning for Strategic Marketing Decisions, 1996.