fbpx

Consumer Behaviour: Workshop – Market Segmentation Example 🙂

You're Reading:Decrypting Consumer Behaviour: A Practical Journey Through 7 IDEALS

Decrypting Consumer Behaviour: A Practical Journey Through 7 IDEALS

by Tasos

}

Jan 15, 2024

7 IDEALS METHODOLOGY DOCUMENTARY

I’m filming the last part. The finish line (Feb 02). 

TODAY'S SPONSORS

Law for AI by Peter Nieves: Top 3 Legal Concerns for AI Bot Users by an Award-Winning and Nationally Recognized IP Attorney. Plus, 5-Day “Protect Your Idea” Challenge – Jan 22-26.

The Traffic Syndicate: Mike Filsaime, Jesse Doubek, and Groove Digital are proud to introduce: the 12 Fundamental Laws of Successful Ad Campaigns. 

🚀 Unlimited Unstoppable TRAFFIC. Interviews with the experts, webinars, funnels masterclass.

Secret Money by The Wholesale Formula eCommerce Experts.

Attention Entrepreneurs: Dive into established brands with proven success – and uncover why they still need YOU. Real-world products, high-profit margins, and 1000s of lucrative opportunities awaiting at Amazon so you can profit like clockwork. Your success story starts here.

Join any event from the above and get booked for a 3-session 1-on-1 coaching experience with me (at no cost). Get ongoing email support, guidance, and feedback throughout the events. Let me know more about you, ask specific questions about your business or business ideas,  and let me walk you through the revolutionary “7 IDEALS” methodology with which I help small business owners innovate and change the world. Complete the short questionnaire and schedule a video-call meeting to discuss the details in-person. 🚀

This is an area for advertising & partnerships. NEW option: Pay-per-Click.

In the big world of economics, we’re still figuring out why people do what they do. Scientists study some parts of it, but there’s still a lot we don’t know. People act in different ways when it comes to finances—like buying things, saving money, investing, or being a responsible citizen. Family, society, politics, religion, the natural environment, and more all play a role in how people make these choices. The way people act is always changing, so it’s hard to make big generalizations about everyone.

People are complicated, and their behaviour can be seen in many different ways. For example, someone might be a loving family member, a smart citizen, and a shopper who makes choices based on their feelings. The world around them also affects how they act, making it even trickier to understand why people do what they do.

Throughout history, scholars have sought to unravel the complexity of human behaviour. Aristotle, identifying three fundamental motivations—reason, passion, and ethos—laid the groundwork for modern theories interpreting consumer behaviour. Contemporary approaches to understanding behaviour often draw from these Aristotelian foundations.

We can learn a lot by watching what people do every day, from simple things like driving a car to more complicated choices like who they vote for. But just seeing what someone does is just the start. We need to ask why they do what they do. In our case, why do they spend money on specific products and services? It’s only when we know both what people do and why they do it that we can truly comprehend their behaviour.

We discussed this subject multiple times, and there are more to come.

I gave you an introduction to this beautiful and multidimensional science, we examined the consumer decision-making process in-depth, analysed thoroughly consumer involvement/engagement, and uncovered every aspect of consumer perception.

In this article, we go way deeper to embark on an exploration of consumer behaviour by employing a diverse array of techniques, including research methodologies, data collection and analysis, market segmentation, targeted approaches, product positioning/placement, and trial testing. Through these lenses, we aim to unravel the intricate field of consumer behaviour and explore avenues for influencing it judiciously.

This is a more practical, technically oriented article, and I’ll be sharing various models and frameworks that I crafted for the “7 IDEALS” methodology. Plus, I’ll be showcasing examples of brands and case studies, and I’ll be organising a series of workshops to help you put theory into practice.

The outcome? You’ll get to understand how consumers act on a deeper level and thus, you’ll get closer to influencing their decisions with your marketing initiatives.

Are you ready?

Consumer Analysis and Marketing Strategy

Video Overview

7ideals methodology - the market parallax model v.2

Enter the “Market Parallax” Model

Navigating the Dynamic Landscape of Consumer Engagement

In the complicated collage of marketing strategy, the “Market Parallax” model emerges as a dynamic framework designed to navigate the diverse landscape of consumer engagement. Comprising five pivotal stages, this model harnesses the power of comprehensive research, precise segmentation, targeted strategies, strategic positioning, and rigorous testing. Let’s embark on a journey through each stage:

#1 Consumer Behaviour (Research and Analysis):

  • Unveiling Insights: The expedition commences with an in-depth exploration of consumer behaviour, an intricate mix of preferences, motivations, and interactions.
  • Data-Driven Understanding: Rigorous research and analysis unravel the nuances of consumer choices, providing a foundation for informed decision-making.

#2 Segmentation:

  • Crafting Distinctive Boundaries: Like skilled cartographers, businesses delineate the market landscape into distinct segments based on shared characteristics, needs, and behaviours.
  • Tailoring Strategies: Segmentation sets the stage for tailored strategies, ensuring that marketing efforts resonate authentically with each identified segment.

#3 Targeting:

  • Precision in Focus: Armed with segmented insights, businesses set their sights on specific target segments, honing in with precision on those most aligned with strategic objectives.
  • Strategic Alignment: Targeting unfolds as a strategic dance, where marketing efforts align harmoniously with the unique rhythms of each selected segment.

    #4 Positioning:

    • Strategic Alignment: The next destination in the “Market Parallax” odyssey is positioning, where businesses strategically place themselves in the consumer’s perception.
    • Creating Impact: Positioning is an art of influence, shaping how consumers perceive a brand, product, or service in the broader market panorama.

    #5 Testing:

    • Refining Strategies: In the crucible of testing, strategies undergo meticulous scrutiny, allowing businesses to gauge effectiveness, adapt swiftly, and optimize for maximum impact.
    • Iterative Enhancement: Meticulous testing becomes a compass, guiding businesses on an iterative journey toward marketing excellence and continuous improvement.

    In the realm of “Market Parallax,” businesses embrace a wide-ranging, all-encompassing view of the market, leveraging insights, strategies, and testing to position themselves with impact. This model, with its multi-dimensional approach, serves as a guide for businesses seeking not just to navigate the market but to carve a distinct and resonant presence within it.

    The “Market Parallax” model is not merely a roadmap; it is an expedition, a dynamic and exploratory journey toward marketing superiority.

    In the evolution of strategic marketing, the ‘Market Parallax’ model emerges as a groundbreaking enhancement to the classic Segmentation, Targeting, and Positioning (STP) framework.

    The STP model was not created by a single individual but evolved as a marketing framework over time. It is widely attributed to the marketing expert and academic Philip Kotler in 1969. The STP model became a fundamental concept in marketing strategy and is used by businesses to understand and engage with their target audience more effectively. It represents the transition from product-centered marketing to a consumer-focused approach.

    Where the traditional STP model may have provided a static lens, ‘Market Parallax’ introduces a dynamic, adaptive perspective that transcends the boundaries of conventional strategy.

    By incorporating rigorous consumer behaviour research, precise segmentation, targeted strategies, prudent positioning, and iterative testing, ‘Market Parallax’ transforms the static into the dynamic.

    This evolution equips businesses not merely to navigate the market currents but to produce art with its changing rhythms. In the ‘Market Parallax,’ adaptability becomes more than a feature; it becomes the essence, ensuring businesses respond dynamically to the ever-shifting landscape of consumer preferences.

    The result is not just strategic marketing; it’s a symphony of adaptability and resonance that defines a new era in consumer engagement.”

    Table Example
    The "Market Parallax" Model Overview
    Stage #1 Consumer Behaviour (research and analysis)
    Stage #2 Segmentation
    Stage #3 Targeting
    Stage #4 Positioning
    Stage #5 Testing

    In the “7 IDEALS” methodology, the ‘Market Parallax’ model is not just a stage; it’s a dynamic force that’s always in action. From the initial spark of an idea in business validation, we initiate a perpetual cycle of consumer research, market segmentation, targeted strategies, product positioning, and continuous testing. This model seamlessly collaborates with other frameworks, forming a holistic approach. The ceaseless loop ensures our business evolves, adeptly navigates market shifts, and consistently meets the ever-changing needs of consumers.

    7ideals methodology - the market parallax model ver.5

    In simple terms, the “Market Parallax” model is like a roadmap that helps small business owners navigate the complex world of marketing.

    It’s a step-by-step guide that shows you how to understand your customers, find the right audience for your products, and make your business stand out.

    It’s not just about selling; it’s about building relationships and making sure your business is always heading in the right direction. With the “Market Parallax” model, you have a tool to make informed decisions, adapt to changes, and create a brand that people love.

    Consumer Behaviour Research & Analysis

    Consumer behaviour research is part of marketing research and a clear distinction is made between qualitative and quantitative research (see also previous article regarding consumer behaviour: Consumer Perception and Marketing Strategy).

    Consumer Behaviour Research & Analysis Process

    An easy way to organize the research process around a consumer behaviour issue is to divide the process into 6 stages:

    Table Example
    Consumer Behaviour Research & Analysis Process
    Stage #1 Problem definition and objective setting
    Stage #2 Current situation analysis
    Stage #3 Informal research
    Stage #4 Formal research
    Stage #5 Data analysis
    Stage #6 Marketing plan

    Let’s delve into a detailed analysis of each stage in the consumer behaviour research process:

    #1 Problem Definition and Objective Setting:

    • Problem Identification: Recognize and define the problem or question the research aims to answer. This is crucial for guiding subsequent research efforts.
    • Objective: Clearly define the purpose of the research. It could be understanding consumer preferences, exploring market trends, or addressing a specific business challenge.

    #2 Current Situation Analysis:

    • Consumer Insights: Explore and identify determinant characteristics that matter most to the target audience. Utilize consumer feedback, surveys, and social listening to gain deeper insights into preferences and expectations. Plus, collect data from older studies, sales data and files, industry connections, professional and academic publications, literature reviews and research.

    #3 Informal Research:

    • Qualitative Methods: Employ methods like interviews, focus groups, or observational studies to gather in-depth insights into consumer behaviour. This stage helps generate hypotheses and refine research questions. Plus, business and marketing managers, CEOs, and other experienced professionals can be valuable aspects of informal research during the consumer behaviour analysis. These individuals often possess firsthand knowledge and practical experience that can contribute to identifying important product features influencing purchasing decisions.

    #4 Formal Research:

    • Quantitative Methods: Conduct surveys, experiments, or large-scale data analysis to obtain statistically significant results. This stage involves collecting numerical data to validate or invalidate hypotheses generated in the informal research phase.

    #5 Data Analysis:

    • Statistical Analysis: Analyze both qualitative and quantitative data to draw meaningful conclusions. Use statistical tools and techniques to interpret patterns, trends, and correlations in the data.
    • Pattern Recognition: Identify recurring themes, behaviours, or preferences among consumers. This step is crucial for extracting actionable insights from the data.

    #6 Marketing Plan: I analyse marketing plans in detail in the 7 IDEALS methodology – phase #2 BIG IDEAS, subphase #7 Marketing Strategy.

    • Segmentation and Targeting: Based on research findings, segment the market and identify target consumer groups. Tailor marketing strategies to address the specific needs and preferences of each segment.
    • Positioning: Develop a clear and compelling brand positioning strategy. Align the brand with consumer expectations and differentiate it from competitors.
    • Communication Strategy: Craft effective communication messages and channels based on consumer insights. Ensure that marketing efforts resonate with the identified target segments.
    • Implementation and Evaluation: Execute the marketing plan and continuously monitor consumer reactions. Evaluate the success of the plan and be prepared to adapt strategies based on real-time insights.

    Each stage builds upon the previous one, creating a comprehensive and iterative process. The goal is to gain a deep understanding of consumer behaviour, inform strategic decision-making, and ultimately enhance the effectiveness of marketing initiatives.

    Problem Definition and Objective Setting

    The problem definition and objective setting (stage #1), serve as the foundational stage for understanding consumer behavior comprehensively. It systematically guides brands in defining the problem, identifying its root causes, envisioning desired outcomes, setting objectives and key results (OKRs), and continuously refining their approach. Here are the steps that we follow:

    Step #1 Problem Definition:

    • This step involves clearly defining the problem or challenge that the research aims to address. It’s essential to articulate the issue in a concise and specific manner to ensure a focused approach to subsequent research activities.

    Step #2 Root Cause Identification:

    • Once the problem is defined, this step involves digging deeper to identify the underlying root causes contributing to the problem. Understanding these root causes is crucial for developing effective solutions that address the core issues faced by the target audience.

    We employ various methods to identify the root cause of problems, including:

    1. 5 Whys: A technique that involves asking “why” repeatedly to uncover the underlying cause of an issue.
    2. Fishbone Diagram (Ishikawa diagram): A visual tool used to identify potential causes of a problem by categorizing them into major categories.
    3. Pareto Analysis (80/20 rule): Identifying the most significant factors contributing to a problem based on the principle that roughly 80% of effects come from 20% of causes.
    4. Root Cause Analysis (RCA): A systematic approach to identify the underlying cause of a problem or failure and develop preventive measures.
    5. Fault Tree Analysis (FTA): A method used to identify potential causes of a specific event or problem by constructing a logic tree of all possible failures.
    6. Brainstorming: A creative problem-solving technique that involves generating ideas and solutions through group discussion.
    7. Process Mapping: Visual representation of a process to identify inefficiencies, bottlenecks, or areas of improvement.
    8. Data Analysis: Analyzing quantitative and qualitative data to identify patterns, trends, or anomalies that may indicate the root cause of a problem.

    Step #3 Outcome Definition:

    • In this step, it’s important to envision the desired outcomes or results that the research aims to achieve. This could include both short-term and long-term outcomes, such as improved customer satisfaction, increased sales, or enhanced brand reputation.

    Step #4 Objectives Setting and Key Results (OKRs):

    • Based on the defined problem, identified root causes, and desired outcomes, this step involves setting clear objectives and key results (OKRs) that will guide the research process. Objectives should be specific, measurable, achievable, relevant, and time-bound (SMART), while key results provide measurable milestones for tracking progress.

    Step #5 Review and Refinement:

    • Finally, it’s essential to periodically review and refine the problem definition, objectives, and research approach based on new insights, feedback, and changing market dynamics. This iterative process ensures that the research remains aligned with the evolving needs and goals of the target audience.

    By following this structured process, we can effectively define the problem, set clear objectives, and guide the subsequent research activities to gain valuable insights into consumer behaviour and preferences while effectively addressing underlying challenges, and strategically aligning our efforts to achieve meaningful outcomes in the market.

    Data Collection & Significance

    In the current situation analysis (stage #2), incorporating data from a variety of sources is crucial for obtaining a comprehensive understanding of the market. Here’s how different data sources contribute:

    Older Studies:

    • Benefits: Historical studies can provide insights into long-term trends, changes in consumer behaviour, and the evolution of market dynamics.
    • Considerations: Ensure the relevance and reliability of older studies, considering that market conditions may have changed.

    Sales Data and Files:

    • Benefits: Analyzing past sales data helps identify product performance, popular products, and customer buying patterns.
    • Considerations: Take into account any factors that might have influenced sales, such as promotions, seasonality, or external events.

    Industry Connections:

    • Benefits: Insights from industry insiders, suppliers, or distributors can offer a qualitative perspective on market dynamics and consumer preferences.
    • Considerations: Verify the credibility of sources and consider potential biases.

    Professional and Academic Publications:

    • Benefits: Academic and professional research publications can provide in-depth insights, theories, and empirical evidence related to consumer behaviour and market trends.
    • Considerations: Evaluate the quality of the publications and their relevance to the current market context.

    Literature Review and Research:

    • Benefits: A thorough literature review can help identify gaps in existing knowledge, validate research questions, and build a foundation for further investigation.
    • Considerations: Stay updated with the latest research and prioritize studies that align with the current market scenario.

    Integrating data from these diverse sources enhances the richness of the current situation analysis, allowing for a more nuanced and informed understanding. It’s essential to critically assess the reliability, recency, and relevance of each data source to ensure the accuracy of the insights gained.

    In stage #3 informal research, Input from interviews, focus groups, and observational research/studies can provide valuable qualitative insights that enrich the understanding of consumer behaviour. Plus, gathering insights from business and marketing managers, CEOs, and other experienced professionals can be valuable aspects of informal research during the consumer behaviour analysis. These individuals often possess firsthand knowledge and practical experience that can contribute to identifying important product features influencing purchasing decisions.

    Interviews:

    • In-Depth Understanding: Interviews allow for in-depth exploration of individual perspectives, motivations, and decision-making processes.
    • Uncovering Unseen Factors: Through open-ended questions, interviews reveal factors that might not be captured in quantitative surveys, providing a nuanced view.
    • Contextual Insights: Understanding the context of consumer behaviour is crucial, and interviews help uncover contextual factors that influence choices.

    Focus Groups:

    • Group Dynamics: Focus groups facilitate group discussions, uncovering collective opinions, shared perceptions, and group dynamics.
    • Idea Generation: Participants may spark ideas and insights among themselves, offering a rich source of qualitative data.
    • Observation of Reactions: Observing participants’ reactions to stimuli (products, concepts) provides immediate feedback on emotional responses and preferences.

    Observational Research and Studies:

    • Behavioural Insights: Observational studies capture actual consumer behaviour in real-world or controlled settings, providing behavioural insights.
    • Non-Verbal Cues: Observing non-verbal cues, such as body language, gestures, and expressions, can reveal subconscious reactions.
    • Environmental Influence: Understanding how consumers interact with the environment helps identify the impact of surroundings on decision-making.

    Overall Benefits:

    • Qualitative Depth: These methods offer qualitative depth, helping researchers understand the “why” behind consumer actions.
    • Exploratory Nature: They are exploratory in nature, uncovering new insights that can inform hypotheses for further quantitative research.
    • Iterative Process: Findings from interviews, focus groups, and observations can guide the development of more targeted surveys or experiments.

    Considerations:

    • Sample Diversity: Ensure diversity in the participants to capture a broad range of perspectives.
    • Ethical Guidelines: Adhere to ethical guidelines, especially in observational studies involving real-world environments.

    Combining qualitative methods with quantitative data creates a comprehensive understanding of consumer behaviour, enhancing the overall research strategy.

    Industry Expertise:

    • Benefits: Business and marketing managers, CEOs, and industry professionals have a deep understanding of market trends, customer preferences, and competitive landscapes.
    • Considerations: Ensure a diverse range of perspectives by consulting professionals from different sectors within the industry.

    Product Lifecycle Insights:

    • Benefits: Professionals with experience can provide insights into the varying importance of product features at different stages of the product lifecycle.
    • Considerations: Recognize that the relevance of features may evolve over time, and insights should be contextualized accordingly.

    Competitor Analysis:

    • Benefits: Professionals can offer insights into how competitors position their products, the features they highlight, and the strategies they employ.
    • Considerations: Verify the accuracy of competitive insights and cross-reference them with other sources.

    Market Dynamics:

    • Benefits: Professionals can share perspectives on broader market dynamics, economic factors, and consumer behaviour trends.
    • Considerations: Balance subjective insights with empirical data to ensure a comprehensive understanding.

    By engaging with experienced professionals, you can complement quantitative data with qualitative insights, gaining a more holistic view of the factors influencing consumer purchasing decisions. It’s important to structure informal research in a way that encourages open dialogue, allowing professionals to share nuanced insights based on their practical experiences.

    Examples of Brands

    Numerous smaller brands have successfully utilized informal research methods such as interviews, focus groups, and observational research to refine their positioning. For example:

    • Warby Parker (Eyewear): Warby Parker, a direct-to-consumer eyewear brand, engaged in conversations with potential customers through surveys and interviews. By understanding consumer pain points related to high eyewear prices, the company positioned itself as an affordable and stylish alternative to traditional eyewear retailers.
    • Dollar Shave Club (Personal Care): Before launching, Dollar Shave Club conducted informal interviews and observed consumer behaviours related to razor purchasing. This research revealed dissatisfaction with expensive razors, leading Dollar Shave Club to position itself as a subscription-based service providing affordable and convenient shaving solutions.
    • TOMS (Footwear): TOMS, known for its “One for One” model, initially positioned itself by understanding the social consciousness of consumers. Through informal research, TOMS identified a desire among consumers to make a positive impact through their purchases. This insight helped position TOMS as a socially responsible brand, donating a pair of shoes for every pair sold.

    These examples highlight how informal research methods can contribute to successful brand positioning by aligning products or services with consumer needs and values. By listening to their target audience, these brands were able to create authentic and resonant brand messages.

    In stage #4 formal research, we carry out surveys with questionnaires. In other words, it is a collection of primary data for the needs of our study. In this survey, we measure consumer attitudes, demographic, psychographic, socioeconomic, and other characteristics of consumers of our brand or product category.

    It is very important here to emphasize how necessary it is to test the original questionnaire before proceeding with its full application to the normal sample of consumers. The test of the original design of the questionnaire (pretest) will be applied to a few people (10 to 15 depending on the industry, product category, our goals, etc.) who will have similar characteristics to those of the sample.

    Questionnaire Pretesting:

    • Identifying Issues: Pretesting helps identify potential issues with the questionnaire, such as unclear wording, ambiguous terms, wrong order of questions, or biased phrasing.
    • Response Variability: Ensures that respondents interpret questions consistently, minimizing variability in responses.
    • Order and Flow: Tests the logical order and flow of questions to maintain respondent engagement and reduce survey fatigue.
    • Pilot Sample: Involves a small pilot sample representing the target audience to catch problems early.

    Adapting to the Target Audience:

    • Demographic Alignment: Ensure that the pilot sample mirrors the demographics of the intended survey population for accurate representation.
    • Industry Specifics: Consider industry-specific factors that may influence how questions are perceived or answered.

    Sensory Testing:

    • Multisensory Evaluation: In industries where sensory aspects matter (food, beverages, cosmetics), sensory tests assess responses related to taste, touch, smell, sight, or hearing.
    • Product Perception: Understand how consumers perceive and respond to different sensory stimuli associated with the product.

    Post-Pretest Adjustments:

    • Iterative Process: Based on pretest feedback, make necessary adjustments to improve clarity, eliminate bias, and enhance the overall quality of the questionnaire.
    • Iterative Testing: Consider conducting multiple rounds of pretesting if significant questionnaire modifications are made.

    Survey Administration:

    • Randomization: Implement randomization techniques in survey design to reduce order effects and response biases.
    • Controlled Conditions: When applicable, conduct sensory tests under controlled conditions to ensure accurate and reliable results.

    Data Analysis:

    • Preliminary Analysis: Perform preliminary analyses on pretest data to identify any patterns or unexpected findings.
    • Refinement: Use insights from pretest data to refine survey instruments and improve data collection strategies.

    By incorporating a robust pretesting phase, researchers can enhance the quality of data collected in the formal research stage, leading to more accurate and actionable insights.

    Experiments in the context of formal research involve manipulating one or more variables to observe their effect on another variable while controlling for other factors. Here’s an overview of how experiments are conducted within the formal research stage:

    Objective Definition:

    • Hypothesis Formation: Clearly articulate the research question and develop hypotheses that state the expected relationship between variables.

    Variable Identification:

    • Independent and Dependent Variables: Identify the independent variable (the one being manipulated) and the dependent variable (the one being measured).

    Experimental Design:

    • Control Groups: Design experiments with a control group that does not receive the experimental treatment, allowing for comparison.
    • Random Assignment: Randomly assign participants to experimental and control groups to ensure unbiased results.

    Manipulation of Variables:

    • Experimental Conditions: Define the conditions or levels of the independent variable that participants will experience.
    • Treatment Application: Apply the experimental treatment to the designated group.

    Data Collection:

    • Measurement Instruments: Use appropriate instruments to collect data on the dependent variable.
    • Pre- and Post-Testing: Conduct measurements before and after the experimental treatment to assess changes.

    Statistical Analysis:

    • Comparative Analysis: Use statistical tests (e.g., t-tests, ANOVA) to compare outcomes between the experimental and control groups.
    • Statistical Significance: Determine whether observed differences are statistically significant, indicating a real effect.

    Validity and Reliability:

    • Internal Validity: Ensure that the experiment accurately reflects the impact of the independent variable on the dependent variable.
    • External Validity: Consider the generalizability of findings to the broader population.

    Ethical Considerations:

    • Informed Consent: Obtain informed consent from participants, explaining the nature and purpose of the experiment.
    • Debriefing: Provide participants with information about the study’s objectives and outcomes after its conclusion.

    Replication:

    • Repetition: Consider replicating the experiment to validate results and enhance the robustness of findings.
    • Meta-Analysis: If possible, contribute to meta-analyses by combining results from multiple studies on the same topic.

    Experiments offer a powerful method for establishing causal relationships and understanding the impact of variables. However, careful design and ethical conduct are essential to ensure the validity and reliability of the results.

    Large-scale data analysis, often associated with quantitative research, involves the examination of extensive datasets to derive meaningful insights and draw conclusions. Here’s an overview of how large-scale data analysis is conducted within the formal research stage:

    Data Preparation:

    • Data Cleaning: Address any inconsistencies, errors, or missing values in the dataset to ensure data quality.
    • Data Transformation: Convert raw data into a usable format, and create variables or features necessary for analysis.

    Descriptive Statistics:

    • Central Tendency Measures: Calculate measures such as mean, median, and mode to understand the central values of variables.
    • Dispersion Measures: Examine measures like range, variance, and standard deviation to assess the spread of data.

    Exploratory Data Analysis (EDA):

    • Visualization: Use charts, graphs, and plots to explore patterns, trends, and relationships in the data.
    • Correlation Analysis: Assess the strength and direction of relationships between variables.

    Hypothesis Testing:

    • Statistical Tests: Apply appropriate statistical tests (e.g., t-tests, chi-square tests) to assess the significance of observed differences.
    • Testing Assumptions: Verify assumptions required for specific statistical tests.

    Predictive Modelling:

    • Model Selection: Choose suitable predictive modelling techniques (e.g., regression, machine learning algorithms) based on research objectives.
    • Training and Testing: Split the dataset into training and testing sets to develop and validate predictive models.

    Interpretation of Results:

    • Statistical Significance: Interpret whether observed patterns and relationships are statistically significant.
    • Practical Significance: Assess the practical importance of findings in the context of the research question.

    Cross-Validation:

    • Model Evaluation: Use cross-validation techniques to assess the generalizability and performance of predictive models.
    • Overfitting Control: Implement strategies to prevent overfitting, ensuring models generalize well to new data.

    Ethical Considerations:

    • Privacy and Confidentiality: Safeguard participant privacy and ensure confidential handling of sensitive information.
    • Data Security: Adhere to data security protocols to prevent unauthorized access or breaches.

    Replicability and Transparency:

    • Documentation: Thoroughly document the data analysis process, making it transparent and replicable.
    • Sharing Code and Results: Share code and results to facilitate collaboration and peer review.

    Large-scale data analysis leverages the computational power of modern technology to handle vast amounts of information, uncover patterns, and support evidence-based decision-making. Rigorous methodologies and ethical considerations are crucial to producing reliable and actionable insights from complex datasets.

    Examples of Brands

    Several non-giant brands have conducted experiments (formal research) to inform their positioning and achieve success. Here are a few examples:

    • Mailchimp (Email Marketing): Mailchimp, a marketing automation platform, has been known for its data-driven approach. The company regularly conducts A/B testing on its website, emails, and various features. Through experiments, Mailchimp refines its user interface, messaging, and user experience, positioning itself as a user-friendly and effective marketing tool for businesses of all sizes.
    • Casper (Mattresses): Casper, a mattress-in-a-box company, conducted extensive research, including sleep studies and surveys, to understand consumer preferences in the mattress industry. By combining formal research with product innovation, Casper positioned itself as a brand that offers high-quality mattresses tailored to the needs of modern consumers.
    • Everlane (Fashion): Everlane, a clothing retailer, is known for its commitment to transparency. The company has experimented with transparent pricing and supply chain information, allowing customers to see the true cost of each product. This experiment aligns with Everlane’s positioning as an ethical and transparent fashion brand.
    • HelloFresh (Meal Kit Delivery): HelloFresh, a meal kit delivery service, relies on data and experimentation to optimize its meal offerings, delivery options, and user experience. By conducting formal research and experiments, HelloFresh positions itself as a convenient and customizable solution for individuals and families seeking meal planning assistance.

    These examples illustrate how brands leverage formal research and experiments to refine their positioning, enhance customer experience, and align their offerings with consumer preferences.

    In stage #5 Data analysis, the data collected in the previous stages are analyzed here with a view to testing hypotheses that were formulated before data collection. This analysis should lead to specific conclusions as well as general suggestions that will be useful in the next and final stage of the process which is the marketing plan.

    The data analysis stage involves the application of statistical tools and techniques to draw meaningful conclusions from the collected data. Additionally, pattern recognition processes, often associated with data mining and machine learning, help identify hidden patterns, trends, or associations within the data. Here’s an overview:

    Statistical Tools and Techniques:

    Descriptive Statistics:

    • Measures of Central Tendency: Mean, Median, Mode.
    • Measures of Dispersion: Range, Variance, Standard Deviation.
    • Frequency Distributions: Displaying the distribution of data.

    Inferential Statistics:

    • Hypothesis Testing: Assessing the significance of observed differences or relationships.
    • Regression Analysis: Examining the relationship between dependent and independent variables.
    • Analysis of Variance (ANOVA): Comparing means across multiple groups.
    • Chi-Square Tests: Analyzing relationships in categorical data.

    Correlation and Regression:

    • Correlation Analysis: Examining the strength and direction of relationships between variables.
    • Regression Analysis: Modeling the relationship between a dependent variable and one or more independent variables.

    Predictive Modelling:

    • Machine Learning Algorithms: Utilizing algorithms for prediction, classification, or clustering.
    • Decision Trees, Random Forests, and Support Vector Machines: Common techniques for predictive modelling.

    Factor Analysis and Cluster Analysis:

    • Factor Analysis: Identifying underlying factors influencing observed variables.
    • Cluster Analysis: Grouping similar data points based on defined criteria.

    Time Series Analysis:

    • Trend Analysis: Identifying patterns and trends over time.
    • Seasonal Decomposition: Separating data into components like trend, seasonality, and noise.

    Pattern Recognition Process:

    Data Preprocessing:

    • Data Cleaning: Handling missing values, outliers, and errors.
    • Normalization and Scaling: Ensuring consistency in variable scales.

    Feature Selection:

    • Identifying Relevant Features: Selecting variables that contribute significantly to the analysis.
    • Dimensionality Reduction: Reducing the number of features for simplicity and efficiency.

    Model Training:

    • Supervised Learning: Training models using labelled data for prediction tasks.
    • Unsupervised Learning: Discovering patterns and relationships without labelled data.

    Evaluation and Validation:

    • Cross-Validation: Assessing model performance on different subsets of the data.
    • Metrics: Using appropriate evaluation metrics based on the nature of the analysis (accuracy, precision, recall, etc.).

    Interpretation and Visualization:

    • Visualizing Results: Creating charts, graphs, or plots to communicate findings.
    • Interpreting Patterns: Understanding the significance of identified patterns in the context of the research question.

    Iterative Refinement:

    • Model Adjustment: Refining models based on feedback, improving predictive accuracy.
    • Feedback Loop: Iterating the analysis to enhance insights and address limitations.

    The combination of statistical analysis and pattern recognition allows researchers to uncover actionable insights, make informed decisions, and develop strategies for the marketing plan. It’s crucial to choose appropriate techniques based on the nature of the data and research objectives.

    In stage #6 marketing plan, the development of a marketing plan is essentially what we are interested in extracting from the whole process that preceded it. That is, we are not simply interested in knowing how consumers think, how they act, how they decide, but above all we are interested in all this in relation to what it entails in terms of marketing operations.

    If we know all of the above, we are able to discover the most appropriate way to approach the consumer, which consumer, and so on.

    In the marketing plan, for example, we will identify based on the analysis the various market segments, select one or more of them as target markets, and approach each of them individually with a separate marketing plan, formulating strategies and programs that they will address each element of the marketing mix.

    In essence, the purpose of the marketing plan is to translate the insights gained from consumer behaviour research into actionable strategies and programs (tactics).

    The marketing plan is a dynamic document that should evolve alongside changes in consumer behaviour, market conditions, and competitive landscapes. It serves as a roadmap for the organization to effectively connect with its target consumers and achieve sustainable success.

    The Consumer-Customer Analysis Process

    Consumer analysis typically follows consumer behaviour research. Consumer behaviour research involves the systematic study of consumers’ actions, preferences, motivations, and decision-making processes. Once this research is conducted and data is gathered, the next step is to analyze the information to derive meaningful insights into consumer patterns, needs, and behaviours.

    Consumer analysis involves interpreting the collected data, identifying trends, segmenting the target audience, and gaining a deeper understanding of the factors influencing consumer choices. It’s a crucial phase in formulating effective marketing strategies and tailoring products or services to meet consumer demands.

    The consumer-customer analysis process includes the following stages:

    #1 Identification of Current and Potential Customers-Consumers:

    • Explore customer demographics, psychographics, and behavioural patterns.
    • Assess the needs and preferences of current and potential customers.
    • It’s crucial to understand who the existing customers are and to explore opportunities for expanding the customer base.

    #2 Description of Market Segments (Groups of Consumers):

    • Dig deeper into the characteristics that define each market segment.
    • Consider lifestyle factors, preferences, and cultural influences.
    • Segmenting the market allows for a more targeted and personalized approach to marketing. Describing different market segments helps in tailoring strategies to the specific needs, preferences, and behaviours of distinct consumer groups.

    #3 Identification of Product Value Bases for the Consumer (Customer Value) by Market Segment, and Possible Changes in These Bases in the Future:

    • Understanding the value that products or services offer to consumers within each market segment is essential. This stage involves identifying the unique value propositions for different segments and anticipating how these value bases might evolve over time.

    #4 Description of the Market Segments That the Company Currently Serves, the Ways in Which It Serves Them, as Well as a Description of Its Potential Customers:

    • This stage provides an overview of the company’s current market presence, including the market segments it serves and the effectiveness of the strategies employed to cater to them. Additionally, identifying opportunities for expansion and understanding potential customers helps in strategic planning and business growth.

    By progressing through these stages, our organization can gain valuable insights into the consumer landscape, enabling us to make informed decisions about product development, marketing strategies, and overall business direction. This process supports a customer-centric approach, ensuring that products and services align with the needs and expectations of the target audience.

    Table Example
    Consumer-Customer Analysis Process
    Stage #1 Identification of current and potential customers
    Stage #2 Description of market segments (groups of consumers)
    Stage #3 Customer value by market segment and possible changes
    Stage #4 Currently served market segments and potential segments

    Identifying Consumers-Customers

    Identifying our company’s customers requires answers to:

    A Series of Questions:

    1. Who are they? Their description according to the relevant segment of the market, to which they belong, using for segmentation criteria the known variables (e.g. for consumer products: demographic, psychographic, and socioeconomic characteristics, etc., and for industrial products: SIC code, customer size, location, behaviour, etc.).
    2. What do consumers buy? What do they do with the product? How do they use it?
    3. Where do they usually shop for it? Where do they buy it from?
    4. When do they buy it?
    5. How do they buy it? (ie, how do they choose it, what quantities do they buy, and on what terms? and so on)
    6. Why do they buy it? What is the value of the product for the consumer? Value can be defined based on the basic need or desire satisfied by the use of the product, or based on the benefit derived for the consumer from its use.

    Customer Journey Mapping:

    • How do customers typically become aware of our products or services?
    • What channels or touchpoints do they interact with during their decision-making process?

    Customer Pain Points:

    • What challenges or issues do customers face that our products or services can address?
    • Are there common pain points in the customer journey that we can alleviate?

    Competitor Comparison:

    • How do our customers perceive our products/services compared to those of our competitors?
    • What unique value propositions or features set us apart?

    Customer Feedback and Reviews:

    • What are customers saying about our products or services in reviews or feedback?
    • Are there recurring themes or suggestions that could guide improvements?

    Future Needs and Trends:

    • Are there emerging trends or shifts in consumer behaviour that might impact our offerings?
    • How can we anticipate and adapt to future needs?

    This process provides a holistic view of customer identification, incorporating insights from their journey, experiences, and evolving expectations.

    Table Example
    Identification of current and potential customers
    A series of questions Who (criteria), what, when, where, why, how, value
    Customer journey mapping Awareness, channels, touchpoints
    Customner pain points Challenges, issues, problems, commonalities
    Competitor comparison Perceptions, UVP, features
    Customer feedback and reviews Careful analysis, reccuring themes or suggestions
    Future needs and trends Emerging shifts, anticipation, adaption

    Concept of the Market and its Categories

    The word market, depending on the specific context in which it is used, has different meanings. We say, for example, the market of Athena Street, the market of Cyprus. In this case, the market refers to a specific geographic area. In other cases, we say that the oil market or the gold market is declining. In these cases, the market refers to a specific product. When the consumer says that they went to the market, they mean that they went to where the shops/stores are, i.e. the supply. When they again say that the market of X product was difficult for them, they mean that the conditions of the offer (for example, price, location, availability, product, payment terms, behaviour of sellers, and service in the store) were not what they expected to be.

    For marketing, a market is a set of buyers with unmet needs who have both the ability and the determination to satisfy them. Based on this description of the concept, for a market to exist the following three conditions must be met:

    1. There must be needs (always in a broad sense, to include desires as well)
    2. Buyers who have the ability to satisfy these needs (ie financial resources, income, money)
    3. Buyers who want, are determined and seek the satisfaction of their needs.

    As needs, capabilities and determination increase, so does market size, which for marketing means increased market potential and sales potential. Needs increase when the number of buyers increases (with the needs of each of them unchanged), when those needs themselves increase (with the number of buyers unchanged), or, and this is the most common case, when both increase. The ability to satisfy needs increases when the income of buyers increases. Finally, determination increases when the propensity to spend income increases. The size of the market affects not only the size of the production and, therefore marketing, but also the cost of production.

    The market is divided into several categories depending on who the buyer is:

    1. Consumer market
    2. Industrial market (manufacturing, professional services, government, institutional, aftermarket), and
    3. Global market

    In the consumer market, individuals buy various goods (consumer, durable, services) to satisfy their needs, or those of other individuals who are financially dependent on them. In the consumer market, in addition to individuals, households are also included. The concept of household is very important for marketing because the sales of many products (mainly durable goods) depend not so much on the number of people as on the number of households.

    The industrial market has a basic characteristic: Purchases are not made for the immediate satisfaction of the needs of buyers but for the immediate satisfaction of the needs of third parties. Markets, in other words, are inputs to a production process that result in final goods that can satisfy needs. Production should be understood in such a way as to include both the technical (transformation of material and immaterial inputs) and the economic (adding utilities) side of it.

    In the manufacturing market, buyers are industries, crafts, agricultural units, service units (electricity, telecommunications, water supply, banks, etc.) and others. The products they purchase include, but are not limited to, raw materials, semi-finished materials, capital goods, product parts, and miscellaneous supplies.

    The professional services market encompasses businesses and entities that primarily offer services rather than tangible goods. Services often have distinct characteristics and may require specific segmentation criteria. Here are some factors we consider: nature of services, delivery models, specialisation, geographic focus, technology integration, customer relationship dynamics, and regulatory compliance.

    In the government market, the buyer is the state, local government, and other legal entities under public law. Tendering (with sealed or open bids) is the dominant purchasing process. This process includes the following steps:

    1. Identification of needs
    2. Programming their satisfaction
    3. Detailed definition of the specifications (ie the technical characteristics) of the products to be purchased
    4. Wide publication of these specifications, competition
    5. Accepting offers from various suppliers
    6. Evaluation – selection of an offer
    7. Signing a supply contract
    8. Receipt and control of the products

    In the institutional market, buyers are various institutions with a charitable mission, such as hospitals, nursing homes, churches, museums, sports clubs, trade unions, foundations, committees, and others. All these institutions have clearly defined goals that they are trying to achieve, free from the profit motive.

    Finally, in the aftermarket – resale market, buyers are the intermediaries of the distribution channels, and mainly the wholesalers and retailers. These intermediaries buy the products to resell them as is, for a profit. The very few exceptions (for example packaging in smaller units of volume or weight) do not overturn the rule, namely that intermediaries do not bring about any change in the technical characteristics of the products they resell. Instead of the utility of production, intermediaries produce the utilities of place, time and possession.

    In contrast to the consumer market, the industrial market is characterized by the geographical concentration of buyers (the great majority of them are in certain areas), the adoption of rational selection criteria for the products they buy (the economic model basically interprets their buying behaviour), and from collective or multi-person decision making for purchase (for example committees).

    In the realm of global markets, businesses transcend geographical boundaries to engage in cross-border transactions and address the diverse needs of consumers worldwide. This category encapsulates the complexities and opportunities presented by the interconnected global economy. Here are key aspects to consider:

    • Cross-Cultural Dynamics: Global markets necessitate an understanding of diverse cultures, languages, and consumer behaviours. Effective marketing requires cultural sensitivity and the ability to tailor strategies to resonate with audiences from different backgrounds.
    • Trade Agreements and Regulations: Businesses operating in global markets must navigate international trade agreements, tariffs, and regulations. These factors significantly impact the feasibility and cost-effectiveness of conducting business across borders.
    • Market Entry Strategies: Companies entering global markets face critical decisions regarding market entry strategies. Choices range from exporting and licensing to establishing joint ventures or wholly-owned subsidiaries. Each approach comes with its own set of challenges and considerations.
    • Global Supply Chains: The dynamics of global markets extend to supply chain management. Businesses must optimize their supply chains for efficiency, resilience, and sustainability, considering factors like transportation, logistics, and geopolitical risks.
    • Digital Transformation: The advent of digital technologies has transformed global marketing. Digital advertising, eCommerce, and social media play pivotal roles in reaching a global audience. Businesses need to embrace digital strategies to stay competitive on the global stage.
    • Emerging Markets: Beyond established economies, emerging markets present new opportunities. These regions often undergo rapid economic development, offering potential for market expansion. Understanding the unique characteristics of these markets is crucial for success.
    • Risk Management: Global markets introduce additional risks, including currency fluctuations, political instability, and cultural misunderstandings. Robust risk management strategies are essential for mitigating potential challenges and ensuring long-term sustainability.
    • Sustainability and Corporate Social Responsibility: Global consumers increasingly prioritize sustainable and socially responsible practices. Businesses operating in global markets need to align with these values, incorporating sustainability into their strategies to enhance brand reputation.

    Incorporating the dynamics of global markets into our market framework acknowledges the evolving nature of business in an interconnected world and provides a comprehensive perspective for marketers aiming to navigate the complexities of the global stage.

    Market Segmentation Overview: Unlocking Business Success

    We analyzed that one of the most basic rules for business success is targeting the right people. Our target audience. Those people that we know are interested in our products, services, solutions, and offers.

    Why? Even the best products in the world can’t be sold if we reach out to people with little or no interest. We’ll be wasting time, resources, and money.

    Not all buyers are the same, everyone perceives the products differently and analyzes them according to their own standards and beliefs. Also, not all buyers have the same needs nor the same resources to meet their needs.

    All the above findings lead us to segment the market into individual segments (subsets).

    For marketing to bring about positive results, it should first define its goals and then strive to achieve them. The more precisely the goal is defined, the easier it is to achieve it. If all this does not happen, not only is success a matter of luck but also the waste of resources is inevitable. By segmenting and then targeting consumers effectively, who are the primary target of any business, we set the base for ongoing success and expansion.

    Market segmentation is a strategic approach that involves dividing a diverse market into distinct and manageable segments based on shared characteristics, needs, or behaviours, the calculation of their size, the understanding of how consumer needs are met, and the effort to satisfy them with the appropriate marketing mix.

    This practice holds immense significance for businesses striving to achieve targeted marketing goals and sustained success. Here’s why market segmentation is a cornerstone of effective business strategy:

    Precision in Targeting:

    • Defined Goals: Market segmentation allows businesses to clearly define their marketing goals, fostering a targeted and purposeful approach.
    • Strategic Alignment: Precise segmentation ensures marketing efforts align strategically with specific consumer needs and preferences.

    Resource Optimization:

    • Efficient Resource Allocation: By identifying and prioritizing high-potential segments, businesses can optimize resource allocation, preventing waste and maximizing returns.
    • Budget Efficiency: Targeting specific segments reduces the risk of spreading marketing efforts too thin, ensuring that resources are invested where they yield the most impact.

    Consumer-Centric Approach:

    • Understanding Diversity: Segmentation acknowledges the diversity within a market, recognizing that consumers have unique characteristics, behaviours, and preferences.
    • Tailored Strategies: Businesses can craft tailored marketing strategies that resonate with the specific needs and desires of each segment, enhancing consumer engagement.

    Enhanced Customer Relationships:

    • Personalization: Segmentation facilitates personalized interactions with consumers, strengthening the bond between the brand and its audience.
    • Repeat Business: By addressing the distinct requirements of each segment, businesses can foster customer loyalty and encourage repeat business.

    Market Expansion:

    • Identifying Opportunities: Segmentation unveils new opportunities within a market, allowing businesses to discover untapped segments with growth potential.
    • Adaptability: As markets evolve, segmented strategies enable businesses to adapt swiftly to changing consumer trends and behaviours.

    Measurable Outcomes:

    • Performance Metrics: Well-defined segments provide clear criteria for measuring the success of marketing initiatives, enabling data-driven decision-making.
    • Continuous Improvement: Metrics derived from segmented strategies guide businesses in refining their approach for continuous improvement.

    In essence, market segmentation is the compass that guides businesses toward their target audience, ensuring that marketing efforts are purposeful, resource-efficient, and deeply connected to consumer needs. By understanding and embracing the diversity within the market, businesses pave the way for sustained success, expansion, and meaningful consumer relationships.

    Market Segmentation Process

    Market segmentation is a systematic process of identifying internally homogeneous groups of buyers who require different marketing strategies to influence their consumption. Segmentation as an analytical method is linked to marketing strategy through the positioning of the product in the market in relation to the positioning of the competitors.

    Before our business proceeds with the segmentation of the market of interest, we should answer two basic questions:

    1. Is it possible for the conventional market to expand?
    2. Can the market be segmented?

    If the answers to the previous two questions are affirmative, our business can proceed by following the process steps shown in the figure below.

    1. Systematic Identification of Consumer Characteristics and Needs: Determining the characteristics and needs of consumers for the product category that interests our company. This initial step lays the foundation for effective market segmentation.
    2. Analysis of Similarities and Differences: Analyzing both similarities and differences among consumers ensures a comprehensive understanding of the market, helping to identify patterns and potential segmentation criteria.
    3. Development of Internally Homogeneous Groups (Segments): Development of internally homogeneous groups (segments) of consumers and their descriptions (segment profiles). Creating segments based on shared characteristics and needs enables the development of targeted marketing strategies tailored to the unique requirements of each group.
    4. Selection of Target Segments: The selection of target segments involves prioritizing and choosing segments that align with the company’s objectives and resources.
    5. Positioning Relative to Competition: Positioning the company’s product relative to competitors is essential for creating a distinctive and competitive market presence.
    6. Development of Marketing Plans for Each Segment: We develop an appropriate marketing plan and marketing mix for each target segment that ensures a focused and effective approach.
    7. Continuous Evaluation and Adaptation: We regularly assess the effectiveness of the segmentation strategy. We monitor shifts in consumer behaviour, preferences, and market dynamics. We gather feedback and data to evaluate the performance of each segment. We adapt marketing plans and strategies based on changing circumstances to maintain relevance. This last stage emphasizes the dynamic nature of markets and the need for businesses to stay agile in response to evolving consumer trends and competitive landscapes (if they want to avoid unwanted consequences.
    Table Example
    Market Segmentation Process & Conditions
    Step #1 Systematic identification of consumer characteristics and needs
    Step #2 Analysis of similarities and differences
    Step #3 Development of internally homogeneous groups (segments)
    Step #4 Selection of target segments
    Step #5 Positioning relative to competition
    Step #6 Development of marketing plans for each segment
    Step #7 Continuous evaluation and adaptation
    Conditions
    • Recognizable
    • Adequately sized
    • Stable
    • Accessible
    • Differential reactions in the same marketing mix
    • Measurable
    • Dynamic

    For segmentation to be successful, certain conditions must be met. That is, the segments that will result from the analysis must be

    1. Recognizable – segments can be identified based on their characteristic criteria and it’s fundamental for targeted marketing efforts.
    2. Adequately sized – large enough to be worth the investment, and to be of interest from a financial point of view. Ensuring that segments are large enough to justify investment is crucial for achieving a positive return on marketing efforts.
    3. Stable – not changing drastically, at least during the period of implementation of the marketing plan that is essential for consistent and predictable targeting.
    4. Accessible – Accessibility through various elements of the marketing mix, such as distribution channels, is necessary for effective engagement with the chosen segments.
    5. Differential Reactions in the Same Marketing Mix – To react differently (one from the rest), in the same marketing mix. This highlights the uniqueness of each segment and underscores the importance of customization.
    6. Measurable: Segments should be quantifiable and measurable using reliable data and metrics. Measurability allows for an accurate assessment of the size, characteristics, and behaviour of each segment. It facilitates the monitoring of marketing performance and aids in making data-driven decisions. This condition emphasizes the importance of having clear metrics and data points to evaluate the success and efficiency of marketing efforts within each segment.
    7. Dynamic: We acknowledge that market segments may evolve over time due to shifts in consumer behaviour, preferences, or external factors. Recognizing the dynamic nature of segments ensures that marketing strategies remain adaptable to changes, helping businesses stay ahead of evolving market dynamics.

    NOTE: Condition #3 is stable, and condition #7 is dynamic.

    Stability regarding condition #3, in this sense, refers to a level of consistency or predictability in the characteristics of the identified segments over the period relevant to the marketing plan’s implementation. It implies that the segmentation variables and criteria used to define segments remain relatively steady, allowing businesses to target and address the needs of those segments with a degree of reliability. It doesn’t necessarily mean that segments should remain entirely unchanged but rather maintain a level of steadiness for effective planning and implementation.

    If any of the good segmentation criteria are violated, we should resort to using other basic (characteristic) segmentation criteria, or other combinations of criteria.

    This comprehensive approach aligns well with the complexity of markets and the need for nuanced segmentation strategies.  This framework provides a solid foundation for businesses seeking to implement effective market segmentation.

    Bases for Market Segmentation

    Consumer and Industrial Market Segmentation: Recognizing the distinction between consumer and industrial market segmentation is crucial, as the criteria for segmentation can differ based on the nature of the target audience.

    Common segmentation bases are presented below, separately for consumer and industrial market segmentation.

    The “DMDES” Framework

    I crafted a unique framework for market segmentation which I use in the “7 IDEALS” methodology because no framework takes such a holistic approach to dividing markets.

    The name “DMDES” is a combination of the words “dynamic”, “market” and “division”, and combines elements of “ecology” and “systems thinking”, conveying the idea of a panoramic, all-inclusive, interconnected and evolving/dynamic approach to market segmentation.

    Table Example
    The "DMDES" Framework (overview)
    Consumer Markets Demographic characteristics
    Geographic characteristics
    Socioeconomic characteristics
    Psychographic characteristics
    Behavioural characteristics
    Industrial Markets Firmographics
    Consumer & Industrial Markets Additional Criteria
    Language
    Social, Interpersonal, and Situational Influences
    Global Markets Global Criteria
    #1 Consumer Markets

    Demographic characteristics:

    • Age
    • Gender
    • Household/family size
    • Family lifecycle
    • Income
    • Occupation (employment)
    • Education level
    • Religion
    • Ethnicity
    • Origin/race
    • Social status
    • Marital status
    • Place of main residence, etc.

    Additional Considerations: 

    • Longer average life
    • Effects of birth cycles and longer life expectancy on future age distribution
    • New roles for women
    • Increasing economic and educational improvement
    • Changes in the structure and composition of households

    Geographic characteristics:

    • Area (urban, semi-urban, rural)
    • Region
    • Size of city or village
    • Population density (sparse, medium, high)
    • Climate (warm, mild, cold, tropical, Mediterranean)
    • Terrain formation (plain, semi-mountainous, mountainous, island)
    • Standard metropolitan statistical area
    • County or district size
    • Geographical changes of populations

    Socioeconomic characteristics: Social class, lifestyle, cultural background, etc. These characteristics are essential elements of market segmentation, providing insights into the social and economic status of consumers. Here’s an overview of some key socioeconomic characteristics:

    • Social Class: Social class is a hierarchical arrangement of individuals or groups within a society based on factors such as income, education, occupation, and lifestyle. Consumers from different social classes often exhibit distinct purchasing behaviours and preferences.
    • Lifestyle: Lifestyle encompasses the way individuals live, including their activities, interests, opinions, and values. It influences consumer choices, preferences, and product usage. Lifestyle segmentation helps identify groups with similar patterns of living. 
    • Cultural Background: Cultural background refers to the shared values, beliefs, customs, and traditions of a particular group or community. Understanding cultural backgrounds is crucial for tailoring marketing messages to resonate with diverse consumer groups. 
    • Education Level: Education level reflects an individual’s level of formal education. It can influence consumer decision-making, preferences, and the types of products or services they are likely to engage with. 
    • Occupation: Occupation indicates the type of work individuals are engaged in. Occupational segmentation helps identify professionals, blue-collar workers, entrepreneurs, etc., each with distinct needs and preferences. 
    • Income: Income is a key socioeconomic factor that directly impacts purchasing power. Consumers with different income levels may have varying priorities, spending patterns, and preferences. 
    • Family Structure: Family structure includes factors such as household composition, family size, and the roles of family members. These aspects influence buying decisions, with family-oriented marketing strategies targeting specific family structures. 
    • Social Influence: Social influence refers to the impact of family, friends, and social networks on consumer behaviour. Understanding social influence helps in crafting marketing messages that resonate with interpersonal connections. 
    • Values and Beliefs: Socioeconomic characteristics also encompass the values and beliefs held by individuals or groups. Aligning products or services with the values of target segments enhances market appeal. 
    • Leisure Activities: Leisure activities, hobbies, and interests contribute to lifestyle patterns. Segmenting consumers based on their leisure activities helps tailor marketing strategies to specific recreational preferences. 
    • Digital Engagement: The level of digital engagement, including internet usage, social media participation, and online shopping behaviour, is increasingly becoming a relevant socioeconomic characteristic in the modern era.

    Understanding these socioeconomic characteristics allows us to create more nuanced and targeted strategies, ensuring that products and messages align with the diverse social and economic contexts of different consumer segments. It also helps in developing products and services that meet the specific needs and aspirations of various socioeconomic groups.

    Psychographic characteristics: Values, attitudes, interests, personality traits, and lifestyle. Psychographic criteria are obviously more difficult to identify and calculate accurately. The psychological profile of the consumer is defined based on five main axes: a) Motives, b) Needs and Desires, c) Personality, d) Attutudes, and e) Lifestyle.

    #1 Motives: Motives typically encompass both rational and emotional aspects:

    • Functional Motives: Practical and utilitarian reasons behind consumer choices, such as the need for convenience, efficiency, or specific product features.
    • Emotional Motives: Feelings and emotions that influence consumer behaviour, including the desire for pleasure, excitement, security, or social acceptance.
    • Social Motives: Motivations arising from social interactions and relationships, such as the need for affiliation, recognition, or belonging.
    • Personal Motives: Individual motivations related to personal values, self-expression, and self-improvement.
    • Cultural and Psychological Motives: Motivations influenced by cultural norms, values, and psychological factors, including the desire for status, identity, or cultural alignment.

    #2 Needs and Desires: A need is a basic requirement of the body, without which life cannot continue. Food, clothing, shelter, and health are examples of needs. On the contrary, desire refers to any non-necessary demand caused by the intended pleasure. Fun, education, and sociability are examples of desires.

    I combine 3 theories to investigate needs and desires.

    1. The Hierarchy of Needs is a psychological theory proposed by Abraham Maslow in the mid-20th century. Maslow’s hierarchy suggests that human needs can be organized into a pyramid, with the most fundamental needs at the base and higher-order needs at the top. Physiological, safety, belongingness and love, esteem, and self-actualisation.
    2. The “Self-Determination Theory” (SDT) developed by Deci and Ryan posits that individuals have three innate psychological needs: autonomy, competence, and relatedness. It suggests that satisfying these needs leads to enhanced motivation and well-being.
    3. The “Hierarchy of Effects” model is often used in marketing. It outlines the stages a consumer goes through in making a purchase decision, starting from awareness and ending with action. It has six stages: awareness, knowledge, liking, preference, conviction, and purchase. While it incorporates cognitive, affective, and behavioural components, it doesn’t focus explicitly on needs and desires but provides insights into the stages of consumer decision-making.

    The integration of these 3 theories into a comprehensive list of needs and desires has significant implications for marketing:

    Physiological Needs (Maslow):

    • Health and well-being
    • Basic nutrition and hydration
    • Shelter and comfort
    • Reproduction

    Safety and Security (Maslow):

    • Financial stability
    • Job security
    • Personal safety and protection
    • Emotional security

    Belongingness and Relatedness (Maslow, SDT):

    • Family
    • Social connections and relationships
    • Community involvement
    • Feeling part of a group or tribe
    • Intimacy
    • Trust
    • Acceptance
    • Love and affection

    Esteem and Recognition (Maslow, SDT):

    • Recognition and acknowledgement: status, fame, prestige, attention
    • Achieving personal goals
    • Developing competence and skills
    • Strength, self-confidence

    Autonomy and Control (SDT):

    • Independence and freedom
    • Control over life decisions
    • Personal empowerment

    Competence and Mastery (SDT):

    • Opportunities for skill development
    • Mastery in areas of interest
    • Personal growth and learning

    Aesthetic and Self-Actualization (Maslow, Hierarchy of Effects):

    • Pursuit of beauty and aesthetics
    • Creativity and self-expression
    • Pursuing goals
    • Fulfillment of personal potential
    • Partner acquisition
    • Parenting
    • Talents and abilities

    Cognitive and Information Needs (Hierarchy of Effects):

    • Desire for knowledge and information
    • Intellectual stimulation
    • Cognitive engagement and curiosity
    • Foresight

    Emotional and Experiential Needs (Hierarchy of Effects):

    • Emotional well-being
    • Positive experiences and enjoyment
    • Novelty and excitement

    Transcendence/Spiritual Needs:

    • Transcendence: The desire for personal growth, self-realization, and a connection to something beyond oneself. This could include spiritual or philosophical aspects.
    • Meaning and Purpose: Seeking a sense of meaning and purpose in life, which can influence choices related to products, services, or experiences.
    • Connection to Nature or Environment
    • Philanthropy and Social Impact: The desire to contribute to a greater good or make a positive impact on society, aligning with a sense of transcendence.

    This list encompasses a broad range of human needs and desires, integrating insights from various psychological theories. It can serve as a foundation for understanding and segmenting consumers based on their psychographic characteristics.

    #3 Personality: Each person has their own personality which may differ in some or even several points from the personality of another. Personality is a complex concept and its characteristics (dimensions), based on which it can be studied and evaluated, are many. Leaving aside extreme cases (exceptions), we can study personality and draw valuable conclusions for marketing using the following dimensions:

    • Masculinity, femininity
    • Independence: It affects, among other things, clothing, food, entertainment, and the way one shops. Fashion and its acceptance or rejection are directly related to this dimension
    • Achievement
    • Anxiety, concern, nervousness
    • Sociability
    • Dominance
    • Adaptability
    • Aggressiveness: testing new products, negotiating prices, and demanding better service
    • Seriousness
    • Emotion control
    • Openness to Experience: This trait reflects a person’s willingness to try new things, engage in novel experiences, and seek variety in life. It can influence preferences in areas such as travel, leisure activities, and product innovation.
    • Conscientiousness: This trait pertains to an individual’s level of organization, responsibility, and attention to detail. It can influence preferences in products or services related to organization, reliability, and functionality.
    • Optimism/Pessimism: Attitudes toward the future and outlook on life can affect consumer choices, especially in areas related to health, lifestyle, and long-term planning.
    • Hedonism: The pursuit of pleasure and enjoyment can influence choices in entertainment, leisure activities, and products associated with enjoyment.
    • Spirituality: Beyond transcendence, the specific spiritual beliefs or inclinations of individuals may play a role in their preferences and choices.

    #4 Attitudes: Consumer attitudes encompass a wide range of beliefs, opinions, and evaluations that shape their perceptions and behaviours:

    • Environmental consciousness: Attitude towards sustainability and eco-friendliness.
    • Innovativeness: Attitude towards trying and adopting new products and technologies.
    • Health consciousness: Attitude towards health and wellness, affecting choices in food, exercise, and lifestyle.
    • Social responsibility: Attitude towards supporting socially responsible brands and initiatives.
    • Risk aversion: Attitude towards avoiding uncertainty and preferring safe choices.
    • Value for money: Attitude towards seeking the best value in terms of quality and price.
    • Luxury Orientation: Attitude towards luxury goods and a willingness to pay premium prices.
    • Convenience Preference: Attitude towards prioritizing convenience in product or service choices.
    • Digital Adoption: Attitude towards embracing digital technologies and online interactions.
    • Status Consciousness: Attitude towards products or brands that convey a certain social status.
    • Cultural Affinity: Attitude towards products reflecting cultural preferences and traditions.
    • Social Media Engagement: Attitude towards active participation and engagement on social media platforms.
    • Influenceability: Attitude towards being influenced by advertisements, peers, or social trends.
    • Experience Seeking: Attitude towards seeking new and unique experiences in consumption.

    These attitudes can vary widely among different consumer segments, making them valuable indicators for creating nuanced and targeted marketing strategies. It’s important to note that attitudes are not static and can evolve over time, influenced by various factors, including cultural shifts, life events, and market trends.

      #5 Lifestyle: that is, what consumers do, how they live, and the trends they have for life. More specifically, lifestyle is studied based on the study of (AIO) activities, interests and opinions. By category, the above dimensions are based on specific measurable data:

      Activities:

      • Work
      • Hobbies
      • Social events
      • Vacations
      • Entertainment
      • Clubs
      • Community
      • Shopping
      • Sports

      Interests: 

      • Family
      • Home
      • Work
      • Community
      • Leisure
      • Fashion
      • Food
      • Media
      • Social networks
      • Achievements

      Opinions (for):

      • Themselves
      • Social issues
      • Politics
      • Business
      • Finance
      • Education
      • Products
      • Future
      • Culture
      • Technology
      • Civilisation

      This sequence follows a logical flow, starting with the underlying motivational factors (motives), progressing to the specific needs and desires, exploring personality traits, and finally, delving into the broader lifestyle aspects. It reflects a natural progression from internal motivations to external expressions, providing a comprehensive understanding of consumer psychographics.

      IMPORTANT NOTE:

      While there may be some overlap between psychographic and socioeconomic characteristics, they represent distinct dimensions of consumer segmentation. Socioeconomic characteristics typically focus on objective factors such as income, education, and occupation, while psychographics delve into subjective and psychological aspects like values, interests, and lifestyle.

      Here’s a brief overview of the overlap and distinctions:

      Overlapping Aspects:

      • Activities and Lifestyle: While activities can be considered behavioural (psychographics), they also contribute to understanding the lifestyle, which encompasses broader patterns of behaviour, choices, and preferences. 
      • Interests: Interests align closely with lifestyle and can be influenced by psychological factors, making them a bridge between psychographic and socioeconomic characteristics.

      Distinct Aspects:

      • Personality Dimensions: Personality traits are distinctly psychographic, providing insights into individual differences in behaviour and decision-making.
      • Opinions: Opinions, especially on social issues, politics, and culture, are more attitudinal and psychological, reflecting the subjective perspectives of individuals.

      While there is some interconnectedness, the psychographic category generally goes beyond the external and observable socioeconomic factors. Psychographics delve into the why and how of consumer behaviour, offering a more holistic understanding of their motivations and preferences.

      Combining psychographic and socioeconomic segmentation can create a comprehensive framework for developing targeted marketing strategies that resonate with the complex nature of consumer identities.

          Behavioural characteristics: Behavioural segmentation focuses on how consumers interact with a product or service, and their behaviour provides insights into their purchasing patterns, usage frequency, brand loyalty, and other aspects. In the context of behavioural segmentation, some key components include:

          • Volume Usage: This refers to how often or how much a consumer uses a product or service. It can involve assessing the frequency of purchases, consumption, or engagement. For example, consumers may be categorized as light users, moderate users, or heavy users based on the volume of their usage. By considering “Volume Usage” as part of behavioural characteristics, we can tailor our marketing strategies to different user segments. For instance, heavy users might respond well to loyalty programs or bulk purchase discounts, while light users may be targeted with initiatives to increase usage frequency. Analyzing volume usage within behavioural segmentation enables us to understand and respond to the diverse behaviours of our consumer base.
          • Usage Habits: How consumers use products, how frequently, and in what context are behavioural aspects that impact future purchasing decisions.
          • Purchasing Behavior & Preferences: This encompasses how consumers behave when making purchasing decisions and their preferences for certain products, brands, or features.
          • Purchasing History: Examining past purchasing behaviour provides insights into trends, brand loyalty, and the factors that influenced previous buying decisions.
          • Purchase Reasoning & Drivers: Understanding the reasons behind purchases and the drivers that influence decision-making sheds light on the motivations of consumers.
          • Purchase Frequency: This aspect of behaviour looks at how often consumers make a purchase. It helps identify patterns such as frequent buyers, occasional buyers, or seasonal buyers.
          • Types of Products: The choice of products, whether essential or luxury and the specific categories consumers engage with are behavioural indicators.
          • Brand Loyalty and Advocacy: Loyalty to a particular brand is a behavioural characteristic that indicates the likelihood of a consumer repeatedly choosing a specific brand over others.
          • Loyalty Status: Categorizing consumers based on their loyalty to a brand or product. This could include loyal customers, occasional buyers, and switchers.
          • Factors of Perception: Understanding how consumers perceive a product, brand, or industry based on their experiences and interactions provides insights into their behaviour and decision-making.
          • Preferences: Consumer preferences, especially in terms of features, flavours, designs, or variants, are behavioural indicators that influence their choices and usage.
          • Price Sensitivity: This refers to how responsive consumers are to changes in the price of a product or service. Price-sensitive consumers may be more influenced by discounts, promotions, or changes in pricing strategies. Conversely, consumers with low price sensitivity may be less influenced by price fluctuations. Their behaviour may be driven more by other factors such as brand loyalty, perceived quality, or specific product features. Understanding price sensitivity helps in setting competitive and attractive pricing strategies for different segments.
          • Usage Occasion: Refers to the specific situations, occasions, or events when consumers choose to use a product or service, highlighting the context-driven nature of their consumption patterns.
          • Benefit Expectations or Intended Benefits of Use: Understanding the specific benefits consumers seek from the product. It falls under the broader umbrella of understanding how consumers interact with a product or service and the anticipated outcomes or benefits they expect from their usage. This aspect provides insights into the motivations and goals that drive consumer behaviour. By assessing benefit expectations, we can tailor our marketing strategies to meet or exceed these anticipated benefits, thereby enhancing consumer satisfaction and loyalty.
          • Readiness Stage: Assessing consumers’ readiness to make a purchase, whether they are in the awareness, consideration, or decision stage.
          • User Status: Distinguishing between first-time buyers, repeat buyers, and potential buyers.
          • Media Consumption: The channels consumers use to consume information, whether through traditional media, social media, or other platforms, influence their behaviour.
          • Brand Interactions: Understanding how consumers engage with and perceive a brand, including their attitudes toward advertising and promotional activities.
          • Interactions with Apps/Websites/Businesses: Consumer interactions with digital platforms and businesses, online or offline, provide valuable data on preferences and engagement.

          By incorporating behavioural segmentation, we can enhance our understanding of how consumers interact with the market dynamically. This approach allows us to tailor marketing strategies based on the specific behaviours and preferences exhibited by different consumer segments.

          #2 Industrial Markets

          Firmographics: Firmographics are to B2B markets what demographics are to consumer markets. Firmographics refer to the characteristics and attributes that describe businesses or organizations rather than individual consumers.

          • End-use: How the product or service is ultimately used by the industrial customer.
          • Market size: The size of the target market, often categorized by revenue or other relevant metrics.
          • Product specifications: Detailed specifications and requirements for the product or service.
          • Industry: The industry in which the business operates or intends to target.
          • Standard Industrial Classification (SIC) Code: A system for classifying industries based on specific activities.
          • Company Size: Categorizing customers (businesses) based on their size, whether in terms of revenue, number of employees, market share, etc.
          • Purchasing Power: Purchasing power refers to the financial capability and resources of organizations to buy goods and services, influencing their buying decisions and consumption patterns.
          • Customer structure: Understanding the organizational structure of the customer, such as hierarchy and decision-making processes.
          • Psychographic characteristics: Similar to consumer markets, understanding the values, attitudes, and culture of the industrial customer.
          • Geographical factors: The location and geographic concentration of industrial customers.
          • Financial Stability: The financial health and stability of the business, are often assessed through financial statements and indicators.
          • Customer Base: The types of customers the business serves and the diversity of its customer base.
          • Service Specialisation: Niche or general services.
          • Client Focus: B2B (business to business), B2C (business to consumer),  B2G (business to government).
          • Nature of services: professional services (consulting, legal, accounting), business services (marketing, IT, outsourcing), consumer services (healthcare, education, hospitality).
          • Service Delivery Models: online, offline, hybrid.
          • Customer Relationship Dynamics: long-term, project-based, and subscription-based services.
          • Decision-Making Unit (DMU): The decision-making unit (DMU) or buying center comprises individuals within an organization, including the buyer, user, gatekeeper, influencer, and decider, who collectively participate in the purchasing decision process.
          • Years in Operation: The length of time the business has been in operation.
          • Strategic Goals: The business’s long-term objectives and strategic goals.
          #3 Additional Criteria (Consumer & Industrial Markets)

          Additional Criteria:

          • Behavioural Loyalty: Loyalty that is exhibited through repeat purchases, long-term contracts, or consistent business relationships
          • Technological Readiness: Assessing the technological readiness of customers, especially relevant in industries with rapidly evolving technologies.
          • Regulatory Compliance: Considering the compliance requirements and regulatory environment that may affect customer needs.
          • Risk Appetite: Assessing the level of risk tolerance among customers, especially important in B2B transactions.
          • Innovation Adoption: Understanding how quickly and readily customers adopt new products, services, or technologies.
          • Environmental Impact: Considering the environmental concerns and sustainability priorities of customers.
          • Digital Readiness: Evaluating the level of digitalization and technology adoption among customers.
          • Supply Chain Integration and Position: Assessing the degree of integration within the customer’s supply chain and the position of the business within the broader supply chain, including whether it is a supplier, manufacturer, or distributor.
          • Customer Journey Stage: Recognizing where the customer is in their journey, from awareness to post-purchase engagement (see below, the “Symbiotic Odyssey” framework).
          • Communication Preferences: Understanding how customers prefer to be communicated with, whether through traditional channels or digital platforms.
          • Service Level Expectations: Assessing the expected level of service and support required by customers.

            By considering these additional criteria, we can enhance the depth and specificity of our market segmentation strategies, tailoring our approaches to the unique characteristics and needs of our target audiences.

            #4 Language (Consumer & Industrial Markets)

            Language: The specific language, including keywords, idioms, and colloquial expressions that consumers use, can be a valuable criterion for market segmentation. This linguistic aspect is often referred to as “language preference” or “communication style,” and it can provide insights into the cultural and social context of different consumer segments. Here’s how it can be considered as a criterion:

            • Cultural and Regional Preferences: Different regions and cultures may have distinct linguistic nuances. Understanding and using the language specific to a region or culture can be crucial for effective communication and resonating with the target audience.
            • Generational Communication Styles: Different generations may use language differently. For example, millennials might use certain terms or expressions that are different from those used by baby boomers. Tailoring communication to the preferred language of specific generations can enhance engagement.
            • Online and Digital Preferences: In the digital age, online platforms and social media have given rise to new language trends and expressions. Understanding the keywords and phrases commonly used in digital spaces can help in targeting audiences on these platforms.
            • Industry-Specific Jargon: In B2B (business-to-business) markets, various industries often have their own set of jargon and technical terms. Adapting marketing language to align with the industry-specific language can enhance credibility and demonstrate industry expertise.
            • Brand Affinity and Lifestyle Language: Certain brands and lifestyle choices are associated with specific linguistic styles. Identifying and incorporating the language that resonates with the target audience’s lifestyle and brand preferences can strengthen the brand-consumer connection.
            • Emotional and Value-Driven Language: Consumers often respond to language that aligns with their emotions and values. Understanding the emotional triggers and values of different segments allows us to use language that deeply connects with our audience.
            • Community and Niche Preferences: Within specific communities or niche markets, consumers may use language unique to their group. Recognizing and incorporating this language into marketing efforts can help establish a sense of community and authenticity.
            • Consumer Reviews and Feedback Language: Analyzing the language consumers use in reviews and feedback provides valuable insights into their perceptions. This language can be leveraged to align marketing messages with consumer sentiments.

            The concept of “language” doesn’t fit neatly into the categories previously discussed for market segmentation (e.g., demographic, psychographic, behavioural, etc.). Instead, it is a cross-cutting element that can influence and enhance various segmentation criteria. It can be considered as a dimension that overlays and interacts with other criteria, providing a nuanced understanding of consumer preferences and behaviour.

            Understanding and utilizing the language preferences of different consumer segments is a nuanced way to tailor marketing communications. This criterion helps us not only speak the same language, literally and figuratively, as our audience but also fosters a sense of relatability and connection, which is essential for effective communication and engagement.

              #5 Social, Interpersonal, and Situational Influences (Extra Layer) – (Consumer & Industrial Markets)

              Social, Interpersonal, and Situational Influences:

              1. Social influences: These relate to the impact of social groups, family, friends, and society on an individual’s behaviour, values, and attitudes. This aligns closely with psychographic factors, as it involves understanding how an individual’s preferences and choices are influenced by their social environment.
              2. Interpersonal influences: This also falls within the realm of psychographics, specifically focusing on how personal relationships, social interactions, and communication patterns shape an individual’s behaviour and decision-making.
              3. Situational influences: While situational factors may not neatly fit into psychographics, they are often considered under behavioural segmentation. Situational influences include factors such as the physical environment, time constraints, and specific circumstances that can impact consumer behaviour.

              In my segmentation framework, social influences align with psychographic characteristics, while situational influences could be considered under behavioural characteristics. Interpersonal influences may span both psychographic and behavioural aspects, as they involve both individual attitudes and behaviours shaped by social interactions.

              Social Influences:

              • Culture: The set of shared values, beliefs, and practices that characterize a group or society.
              • Subculture: Distinctive groups within a culture that share common values, but also have unique characteristics.
              • Individual Culture: Personal preferences and behaviours that may deviate from broader cultural or subcultural norms.

              Interpersonal Influences:

              • Groups: Collective entities with shared interests or characteristics, influencing individual behaviour.
              • Social Classes: Divisions within a society based on socioeconomic status, impacting lifestyle and consumption patterns.
              • Reference Groups: Groups to which individuals compare themselves and seek guidance or approval.
              • Family: The primary social unit influencing an individual’s values, attitudes, and buying decisions.
              • Opinion Leaders: Individuals with significant influence over others’ opinions and decisions.

              Situational Influences: Situations: Specific circumstances or events that affect consumer behaviour. Belk suggests 5 groups of circumstance characteristics:

              • Physical surroundings: geographic location, place, decoration, sounds, music, perfumes, lighting, weather conditions, placement of goods and things inside stores, etc.
              • Social surroundings: persons present during the decision-making process by the consumer or during the purchase and use of the product, the characteristics of these people, their obvious roles, as well as their interpersonal interactions
              • Temporal perspective: The temporal dimension is a dimension of occasions, which can be specified in units ranging in time from a certain time of day during which we consume a product, to an entire season within the year. Time can also be measured in relation to a past event or a future event, such as the time elapsed since the last purchase of the product
              • Task definition: includes the intention or requirement to select, or purchase a product, or even to obtain information related to a general or specific product purchase. It may even reflect different expected buyer or user roles. For example, a consumer who buys a small household electrical appliance as a wedding gift for a friend is in a different situation than when he buys a similar appliance for personal use
              • Antecedent states: They are momentary moods, such as intense anxiety, pleasure, aggression, or excitement. They can also be momentary situations, eg cash available for shopping, tiredness, and feeling unwell. In other words, these are situations that apply temporarily or momentarily and not permanent situations, such as the characteristics of the person, and which immediately precede the current behaviour of the consumer. They might be mood, issues, problems, and specific concerns.

              Situations encompass a broader context that includes the immediate environment and specific events affecting behaviour.

              Overlap Explanation:

              Adding a dedicated category for social, interpersonal, and situational influences aligns with the complexity of consumer behaviour and contributes to a more holistic segmentation approach.

              This extra layer encapsulates aspects of consumer behaviour that are shaped by external factors beyond individual characteristics. Here’s a brief explanation of the potential overlaps with other segmentation categories:

              • Demographic: Social influences, such as family structures and cultural backgrounds, can impact demographic factors. For example, cultural values may influence preferences related to age or gender-specific products.
              • Geographic: Situational influences can vary based on geographic location. Local customs, traditions, and environmental factors may impact consumer behaviour in specific regions.
              • Socioeconomic: Social class is included in socioeconomic characteristics, but the extra category delves deeper into social and interpersonal aspects that contribute to socioeconomic status. For instance, social networks and group affiliations can influence purchasing decisions.
              • Psychographic: Lifestyle factors are part of psychographic segmentation, and they can be influenced by social and situational factors. Social and interpersonal influences contribute to shaping individuals’ values, attitudes, and opinions.
              • Behavioural: Groups and reference groups, which fall under social influences, contribute to behavioural patterns. Consumer behaviours are often influenced by social norms and interactions.
              • Firmographics: In B2B contexts, organizational culture and group dynamics within companies can be influenced by social and interpersonal factors. These factors may impact decision-making processes.
              • Language: Language can be influenced by cultural and social factors. Different social groups may have unique linguistic nuances and preferences.

              By creating this dedicated category, we acknowledge that consumer behaviour is a complex interplay of various factors, and the overlaps highlight the interconnected nature of these influences. It emphasizes that segmentation should not be seen in isolation but as an integrated understanding of the multifaceted aspects shaping consumer choices.

              Plus, elements like occupation, income, and education level often appear in both demographic and socioeconomic characteristics because they provide insights into both the individual’s personal attributes (demographic) and their economic status and social position (socioeconomic).

              Here’s how we address this overlap:

              • Cross-Reference and Consistency: We ensure that these overlapping elements are cross-referenced and consistent between demographic and socioeconomic data. This helps maintain accuracy and avoids discrepancies in the analysis.
              • Prioritize Dominant Categories: We identify which category (demographic or socioeconomic) has more relevance or dominance in our specific context. For instance, if income is a stronger indicator of our target audience, we might emphasize it more in the socioeconomic category.
              • Flexibility in Analysis: We allow for flexibility in our analysis. We recognize that some elements may play a dual role and can be valuable in understanding different aspects of our target audience.
              • Detailed Consumer Profiles (Customer Avatars – see below in the section “Targeting”): When creating consumer profiles, we consider including elements from both categories but emphasize the context in which each element is relevant.
              • Continuous Refinement: Market segmentation is an iterative process. We are open to refining the segmentation model based on a brand’s specific goals and needs, and on feedback, market changes, and ongoing analysis.

              Ultimately, the key is to maintain clarity, consistency, and relevance in our segmentation approach while recognizing that certain elements may naturally bridge multiple categories.

              #6 Global Markets

              To capture the nuances of global market segmentation, we consider the following criteria:

              Cultural Diversity:

              • Language preferences
              • Cultural values and norms
              • Consumer behaviours influenced by cultural factors

              Geopolitical Considerations:

              • Regional political stability
              • Trade agreements and alliances
              • Regulatory frameworks

              Economic Variables:

              • Currency considerations
              • Economic development levels
              • Purchasing power parity

              Market Entry Readiness:

              • Market entry barriers
              • Local competition landscape
              • Technological infrastructure

              Global Consumer Segmentation:

              • Global consumer demographics
              • Psychographic characteristics on a global scale
              • Behavioural patterns in a cross-cultural context

              Digital Presence and Accessibility:

              • Online behaviours and preferences
              • Digital adoption rates
              • Social media usage and trends 

              Supply Chain Dynamics:

              • Global supply chain logistics
              • Sourcing and distribution considerations
              • Supply chain resilience and adaptability

              Sustainability and Ethical Practices:

              • Global sustainability standards
              • Corporate social responsibility on a global scale
              • Consumer preferences for eco-friendly and ethical products

              Global Market Trends:

              • Emerging markets and growth regions
              • Shifting consumer trends on a global scale
              • Innovation and technology adoption worldwide

              Legal and Compliance Frameworks:

              • International trade laws and regulations
              • Compliance with global standards
              • Intellectual property protection globally

              Cross-Border Marketing Strategies:

              • Tailoring marketing messages for diverse audiences
              • Cross-cultural marketing campaigns
              • Global brand positioning and perception

              Risk Management in Global Context:

              • Currency risk management
              • Political and geopolitical risk assessment
              • Crisis preparedness and response strategies

              Adding these criteria provides a robust foundation for businesses looking to segment and target audiences in the dynamic landscape of global markets. It reflects the multifaceted nature of operating on a global scale and aligns with the DMDES model’s comprehensive approach to market segmentation.

              Table Example
              The "DMDES" Framework
              Consumer Markets Demographic characteristics
              • Age
              • Gender
              • Household/family size
              • Family lifecycle
              • Income
              • Occupation (employment)
              • Education level
              • Religion
              • Ethnicity
              • Origin/race
              • Social status
              • Marital status
              • Place of main residence
              • Additional considerations
                Methods:
              • Cohort Analysis
              • Survival Analysis
              • Population Estimates and Projections
              • Standardization
              Geographic characteristics
              • Area
              • Region
              • Size of city or village
              • Population density
              • Climate
              • Terrain formation
              • Standard metropolitan statistical area
              • County or district size
              • Geographical changes of populations
              Socioeconomic characteristics
              • Social class
              • Lifestyle
              • Cultural background
              • Education level
              • Occupation
              • Income
              • Family structure
              • Social influence
              • Values and beliefs
              • Leisure activities
              • Digital engagement
                Methods:
              • Hierarchy of Social Classes (Coleman-Rainwater)
              • New Composition (Gilbert-Kahl)
              • SIC Code (Standard Industrial Classification Code)
              Psychographic characteristics
              • Motives
              • Needs and desires
              • Personality
              • Attitudes
              • Lifestyle: (AIO) Activities - Interests - Opinions
                Methods:
              • Psychographic Process, Research, and Analysis
              • Values and Lifestyles (VALS)
              • VALS2 Typology
              • Rokeach Value System (RVS)
              • List of Values (LOV)
              • Multiattribute Attitude Models: Rosenberg, Basic Multiattribute, Fishbein, Hybrid, Fishbein Behavioural Intention
              Behavioural characteristics
              • Volume usage
              • Usage habits
              • Purchasing behaviour and preferences
              • Purchasing history
              • Purchase reasoning and drivers
              • Purchase frequency
              • Types of products
              • Brand loyalty and advocacy
              • Loyalty status
              • Factors of perception
              • Preferences
              • Price sensitivity
              • Usage occasion
              • Benefit expectations
              • Readiness stage
              • User status
              • Media consumption
              • Brand interactions
              • Interactions with apps/websites/businesses
                Decision-Making Process Models:
              • Classic: Economic, Passive, Cognitive, Emotional, Behavioral Economics
              • Monadic/One-Variable: Microeconomics, Psychoanalytical, Perceived Risk
              • Multivariate/Large Systems: Nicosia, Engel-Kollat-Blackwell, Webster-Wind, Howard-Ostlund, Bettman, Howard-Sheth
              • Perception-Assessment: Non-metric Multidimensional Scaling, Factor Analysis
              • Formation of Attitudes and Preferences: Compensatory (Fishbein, Extended), Non-Compensatory
              • Choices: Involvement (Low, High), Branded Product, Purchase Impact
              • Store Location: Reilly, Huff's Model, Outshopper Profile
              Industrial Markets Firmographics
              • End-use
              • Market size
              • Product specifications
              • Industry
              • SIC code
              • Company size
              • Purchasing power
              • Customer structure
              • Psychographic characteristics
              • Geographical factors
              • Financial stability
              • Customer base
              • Service specialisation
              • Client focus
              • Nature of services
              • Service delivery models
              • Customer relationship dynamics
              • Decision-making unit (DMU)
              • Years in operation
              • Strategic goals
                Methods:
              • Industrial Product Purchase Process
              • Industrial Buyer Decision-Making Model
              • SIC Code (Standard Industrial Classification Code)
              Consumer & Industrial Markets Additional Criteria
              • Behavioural loyalty
              • Technological readiness
              • Regulatory compliance
              • Risk appetite
              • Innovation adoption
              • Environmental impact
              • Digital readiness
              • Supply chain integration and position
              • Customer journey stage
              • Communication preferences
              • Service level expectations
              Language
              • Keywords
              • Idioms
              • Colloquial expressions
              • Cultural and regional preferences
              • Generational communication styles
              • Online and digital preferences
              • Industry-specific jargon
              • Brand affinity and lifestyle
              • Emotional and value-driven
              • Community and niche preferences
              • Consumer reviews and feedback
              Social, Interpersonal, and Situational Influences
              • Social: culture, subculture, individual culture
              • Interpersonal: groups, social classes, reference groups, family, opinion leaders
              • Situational: physical surroundings, social surroundings, temporal perspective, task definition, antecedent states
              Global Markets Global Criteria
              • Cultural diversity
              • Geopolitical considerations
              • Economic variables
              • Market entry readiness
              • Global consumer segmentation
              • Digital presence and accessibility
              • Supply chain dynamics
              • Sustainability and ethical practices
              • Global market trends
              • Legal and compliance frameworks
              • Cross-border marketing strategies
              • Risk management in global context

              Marketing Funnel & Consumer Journey

              Traditional Marketing Funnel:

              • Definition: The traditional marketing funnel is a model that represents the stages a customer goes through in the process of making a purchase decision. It typically includes stages such as awareness, interest, consideration, conversion, and loyalty.
              • Description: The funnel implies a linear progression where potential customers move through sequential stages, starting from becoming aware of a product or service to making a purchase and becoming loyal customers.

              Consumer Journey:

              • Definition: The consumer journey is the sum of all experiences and touchpoints a consumer has with a brand or product, from initial awareness through the entire lifecycle. It includes pre-purchase research, the buying process, post-purchase interactions, and ongoing engagement.
              • Description: Unlike the linear structure of a funnel, the consumer journey is often depicted as a cyclical or non-linear process. It recognizes that consumers may enter and exit the purchase decision process at various points, influenced by multiple interactions and channels.

              The “Symbiotic Odyssey” Framework

              Enhanced Funnel Incorporating Consumer Journey:

              • Definition: The enhanced funnel integrates the traditional marketing funnel with the consumer journey, providing a holistic view of the customer experience. It acknowledges the cyclical and non-linear nature of consumer interactions while maintaining the structured stages of the funnel.
              • Description: This model recognizes the importance of understanding consumer behaviour beyond the linear funnel stages. It considers the ongoing relationship with customers, post-purchase engagement, and the potential for customers to re-enter the funnel for new products or services.

              In summary, while the traditional marketing funnel focuses on a linear progression of stages, the consumer journey encompasses a broader spectrum of consumer experiences. The enhanced funnel seeks to combine the structure of the traditional funnel with the richness of the consumer journey, offering a comprehensive framework for businesses to navigate and optimize their interactions with customers.

              Overview

              Consumer-Focused Stages:

              1. Stranger/Consumer: At this stage, consumers are initially exposed to the brand or product (initial engagement).
              2. Prospect: Consumers show interest and consideration, moving beyond mere awareness, showing potential for deeper engagement.
              3. Customer: Conversion occurs, transitioning consumers into active customers and establishing the foundation of the relationship
              4. Repeat Customer: Solidifying the relationship through recurring engagements and fostering loyalty.
              5. Fan/Promoter: Satisfied customers become advocates, promoting the brand voluntarily by sharing positive experiences.
              6. Partner: A deeper level of engagement, where consumers become partners in some form. Achieving a symbiotic relationship where collaboration and shared values drive mutual growth.

              Company-Focused Stages:

              1. Awareness: Creating brand awareness among the target audience.
              2. Interest/Consideration: Fostering interest and consideration, aligning with the consumer’s journey.
              3. Conversion: Turning prospects into customers through effective marketing strategies.
              4. Retention: Ensuring customer satisfaction and encouraging repeat business.
              5. Advocacy: Encouraging customers to become advocates, supporting word-of-mouth marketing.
              6. Cooperation: Going beyond advocacy, fostering cooperative relationships for mutual benefit.

              By aligning these stages, we establish a dynamic and continuous loop where consumer behaviour influences company actions and vice versa. This integrated approach allows for a more fluid and responsive market segmentation process, acknowledging the evolving nature of consumer-company interactions.

              A Versatile Tool

              The marketing funnel serves as a versatile tool with various applications, including:

              1. Market Segmentation: Identifying distinct stages in the funnel allows for segmentation based on consumer behaviour, preferences, and engagement level.
              2. Targeting: Understanding where individuals are in the funnel enables precise targeting, tailoring strategies for different segments and stages.
              3. Positioning: By analyzing how consumers move through the funnel, businesses can strategically position products or services at each stage to influence perceptions.
              4. Crafting Marketing Strategies and Programs (Tactics): The funnel informs the development of strategies and tactics aligned with specific stages, optimizing resource allocation.
              5. Tailoring Messages: Tailoring messages according to the consumer’s position in the funnel ensures relevance and resonance, enhancing communication effectiveness.
              6. Guiding Advertising and Promotions: The funnel guides the creation of targeted and compelling advertising and promotional campaigns tailored to consumer needs and motivations.
              7. Sales Operations: Understanding the consumer journey helps refine sales operations, ensuring alignment with the stages of consideration, conversion, and retention.
              8. Connecting with Consumers on a Deeper Level: The funnel allows businesses to connect with consumers on a more personal and meaningful level, addressing their evolving needs and preferences.
              9. Optimizing Customer Experience: By mapping the funnel, businesses can optimize the overall customer experience, enhancing satisfaction and fostering long-term relationships.
              10. Data Analysis and Continuous Improvement: The funnel provides a framework for data analysis, enabling businesses to assess the effectiveness of strategies at different stages and iterate for continuous improvement.

              In essence, the marketing funnel serves as a comprehensive guide for businesses to navigate the consumer journey, enabling them to tailor their approaches and build lasting connections with their audience.

              Reasoning and Significance

              Embracing a novel approach to marketing funnels, the “7 IDEALS” methodology caters specifically to startups and small businesses, recognizing their unique dynamics.

              By extending traditional funnels and embedding them within the segmentation stage (instead of the targeting stage in the traditional STP model – Segmentation – Targeting – Positioning), we empower businesses, especially established small ones, to strategically guide consumers through a journey—from initial awareness to becoming loyal partners.

              This tailored approach enables businesses to drive existing customers back to the awareness stage for new offerings and adapt strategies based on consumer stages, ensuring agility in the global and highly competitive market.

              The ripple effect of this approach transcends marketing, influencing advertising, sales, customer service, production, innovation, and development—ultimately fostering a holistic and adaptive business ecosystem.

              Segmentation: Navigating the Symbiotic Odyssey

              • Market Exploration: Delving into comprehensive market research, we embark on a journey through consumer demographics, geographics, psychographics, social and interpersonal influences, situational impacts, preferences, firmographics, behavioural intricacies, linguistic nuances, global criteria, and beyond.
              • Holistic Understanding: We seek a profound comprehension of existing and potential customers, unravelling the layers of their identities, motivations, and aspirations, preparing to tailor our strategies to resonate deeply with their unique narratives.
              • Identify Symbiotic Segments: Guided by the spirit of collaboration, we categorize consumers into symbiotic segments that transcend mere demographics. Examples may include “Innovators Alliance,” “Sustainable Advocates,” or “Holistic Lifestyle Pioneers.”
              • Diverse Criteria Integration: Embracing a diverse set of criteria such as age, income, geography, lifestyle, and buying behaviour, we weave a rich tapestry of segmentation that reflects the dynamic essence of our market.
              • Guided by Relevance: Every segment we carve is not merely a label but a strategic partner in our Symbiotic Odyssey. Each segment should be actionable, purpose-driven, and harmoniously aligned with our broader business goals.
              • Measurable Connections: Ensuring our segments are not ephemeral, we make them measurable and identifiable, laying the foundation for a data-driven approach to guide our collaborative expedition through the consumer landscape.

              This enhanced segmentation approach transcends conventional boundaries, inviting consumers to join us on a Symbiotic Odyssey where mutual growth and shared values become the compass guiding our marketing strategies.

              Table Example
              The "Symbiotic Odyssey" Framework
              Journey (Consumer-Focused) Funnel (Company-Focused)
              Stage #1 Stranger/Consumer Awareness
              Stage #2 Prospect Interest/Consideration
              Stage #3 Customer Conversion
              Stage #4 Repeat Customer Retention
              Stage #5 Fan/Promoter Loyalty/Advocacy
              Stage #6 Partner Cooperation

              Market Segmentation Essence

              The description of the various consumer market segmentation criteria also reveals how closely related many of them are (for example, income with education, social class, geographic region, personality, lifestyle, and others).

              Marketing can use just one, single, criterion to segment and define the target market. This segmentation is easy and simple. However, it has a disadvantage because it does not provide the information needed so that the company can adopt and implement (with the marketing mix) the marketing ideology. Thus, the satisfaction of the needs of the target market (and therefore the sales and profits of the business) does not approach the desired or potential levels.

              For this reason, segmentation based on a single criterion should be avoided. Instead, segmentation based on two or more criteria should be preferred. Choosing both the number and the criteria can be done with the help of either marketing research or creative imagination.

              Using more than one criterion has the following two disadvantages:

              1. The more criteria used, the more market segments are created.
              2. The more market segments are created, the smaller the size of each of them (which means that the sales potential decreases and the difficulties of access increase).

              To help decide how many final criteria to use, the marketer should do a cost-benefit analysis. Each criterion added has a cost (resources) and a benefit (sales – profits). If the benefit is greater than the cost, then it is used. If not, it is rejected.

              Reflections:

              • Holistic Understanding: I emphasize the importance of a holistic understanding of consumers by considering multiple criteria. This approach allows marketers to capture the complexities and nuances of consumer behaviour.
              • Dynamic Nature: Market segmentation is not a one-time activity; it should be dynamic and responsive to changes in consumer preferences, market trends, and external factors. Continuous monitoring and adaptation are key.
              • Strategic Decision-Making: Acknowledge that the decision of how many criteria to use is strategic and should align with the overall marketing strategy. It’s a delicate balance between granularity and the practicality of implementation.
              • Strategic Flexibility: I highlight the strategic flexibility that a multi-criteria approach offers. It enables companies to fine-tune their strategies based on a more nuanced understanding of consumer needs.
              • Customer-Centric Approach: I emphasize that the ultimate goal is to adopt a customer-centric approach, where segmentation is not just about dividing the market but about tailoring offerings to meet diverse consumer needs effectively.
              • Integrated Marketing Mix: Connect the idea of segmentation with the development of an integrated marketing mix. Each criterion selected contributes to shaping product, place/distribution, promotion, and pricing strategies.
              • Market Potential vs. Accessibility: Expand on the trade-off between market potential and accessibility. While a highly segmented approach may limit the size of individual segments, it can enhance precision in addressing specific consumer needs.
              • Data-Driven Decision-Making: Stress the role of data-driven decision-making in identifying and evaluating segmentation criteria. Leveraging data and insights ensures a more accurate understanding of consumer behaviours and preferences.

                I want to underscore the strategic and dynamic nature of market segmentation, encouraging marketers to adopt a comprehensive and flexible approach.

                Segmentation Strategies

                After market segmentation, the firm is asked to choose between certain marketing strategies. These strategies differ in the number of segments that are decided to be targeted and the number of marketing mixes with which the firm’s product will be positioned in the target segments.

                Undifferentiated Marketing Strategy

                Here, the entire market is considered as a segment. That is, there is a target market and a marketing mix. This strategy is applied for very few products, mainly for those that are more or less homogeneous, e.g. sugar, salt, etc., and it makes sense to consider the entire market as a target market.

                This strategy is applied regardless of product, in those cases where the company does not have the necessary resources to develop different marketing mixes for different target markets.

                It is also used by companies that introduce a completely new product to the market and do not have relevant past experiences to identify the segments from which the demand for the product will arise.

                Concentrated or Focus/Centralised Marketing Strategy

                This strategy can focus on either the product or the market. Of the market segments, only one is targeted by the firm with a marketing mix.

                Although in this strategy we have a marketing mix, the difference with the previous strategy is that here the company has chosen a single market segment to target. In other words, the segmentation analysis has been preceded, and it has been established that only one segment is of interest to the company.

                The advantages of this strategy are the great possibilities presented for specialization. For example, Rolls-Royce concentrates all its marketing strategy on a certain segment of the market, that is, consumers who need status, elite, prestige cars, etc.

                Of course, this strategy is not expensive, but it is accompanied by the risk that the fate of the department completely determines the fate of the product.

                In addition, a form of centralized marketing is the so-called niche marketing. Here, businesses aim at a small segment of the market characterized by its very specific needs, e.g. bulletproof glasses, maternity tracksuits, etc.

                The main disadvantage of implementing a niche strategy is that the company is completely dependent on a single market segment. Of course, this is mainly a disadvantage for businesses that only apply niche marketing, especially small businesses.

                Differentiated or Multi-Segment Marketing Strategy

                As its name suggests, this strategy is based on the separate targeting of multiple market segments. In other words, more than one market segment is selected for target markets. For each of these, a separate marketing mix is developed.

                An expression of the differentiated strategy is usually the many variations of the product, so that each product is successful in each of the selected target segments.

                Although implementing this strategy entails higher costs associated with separate distribution, product promotion, and manufacturing, it also entails some significant advantages. It increases sales while reducing the degree of dependence of the business on a single market segment. Another huge advantage is diversity.

                Particularised/Specialised Marketing Strategy

                In this strategy, the firm recognizes that the same product can satisfy the needs of different market segments, and based on this recognition, by keeping its product unchanged, it tries to satisfy the needs of different market segments by simply differentiating the remaining elements of the marketing mix (place, promotion, price).

                This approach allows the company to maintain a standardized product while tailoring other aspects of the marketing strategy to effectively reach and serve various segments. It’s a strategy that emphasizes efficiency and cost-effectiveness by leveraging the economies of scale associated with producing a standardized product.

                When analyzing this strategy, we consider the following:

                1. Product Uniformity: We assess how the core product remains unchanged to serve multiple market segments.
                2. Differential Marketing Mix: We examine how the marketing mix elements (promotion, pricing, place, etc.) are adjusted to suit the preferences and needs of different segments.
                3. Cost Efficiency: We explore how this strategy enables cost savings through standardized production and marketing processes.
                4. Market Reach: We evaluate the effectiveness of reaching diverse consumer groups without the need for significant product modifications.

                One of the primary risks associated with the particularized/specialized marketing strategy is the potential for consumer segments to perceive that the product remains the same, with only differences in distribution, promotion, or pricing. If consumers in different segments become aware of this lack of substantive differentiation, several negative consequences may arise:

                • Consumer Disillusionment
                • Loss of Brand Loyalty
                • Substitute Product Adoption
                • Negative Word of Mouth
                • Brand Image Erosion

                To mitigate these risks, companies employing this strategy should consider:

                • Transparent Communication
                • Continuous Innovation
                • Monitoring Consumer Sentiment
                • Flexible Marketing Mix
                • Value Addition

                By addressing these considerations, companies can navigate the risks associated with particularized/specialized marketing and maintain a positive relationship with diverse consumer segments.

                Niche Marketing Strategy

                Niche marketing is a focused approach where a business targets a specific segment of the market that has unique and specialized needs. Rather than catering to a broad audience, niche marketing aims to serve a distinct and well-defined customer group. This strategy involves tailoring products, services, and marketing efforts to meet the specific requirements and preferences of the chosen niche.

                Comparison with Other Strategies:

                Undifferentiated Marketing:

                • Focus: Targets the entire market with a standardized product or message.
                • Pros: Economies of scale, broad reach.
                • Cons: Lack of customization, may overlook specific customer needs.

                Concentrated/Focus Marketing:

                • Focus: Targets a single, well-defined segment with specialized products or services.
                • Pros: Deep understanding of customer needs, and tailored offerings.
                • Cons: Limited market size, vulnerability to segment-specific risks.

                Differentiated – Multi-Segment Marketing:

                • Focus: Targets multiple segments with unique offerings for each.
                • Pros: Diversification, broader market coverage.
                • Cons: Complexity in managing multiple segments, resource-intensive.

                Niche Marketing’s Distinctive Advantages:

                • Precision: Tailoring products to specific needs enhances customer satisfaction.
                • Expertise: Deep understanding of niche market dynamics fosters expertise.
                • Loyalty: Builds strong brand loyalty within the niche community.
                • Reduced Competition: Often faces less competition within the specialized market.

                Considerations:

                • Market Research: Thorough understanding of the niche is crucial.
                • Customization: Products and marketing must align with niche preferences.
                • Scalability: Potential challenges in expanding beyond the niche.

                Choosing the Right Strategy: The choice between these marketing strategies depends on factors such as business goals, resources, market dynamics, and the level of customization required to meet customer needs. Each strategy has its merits, and businesses should align their approach with their unique objectives and the characteristics of their target market.

                Examples of Brands

                Here are a few examples of brands that have effectively applied market segmentation strategies:

                Undifferentiated Marketing:

                • Example: Lay’s
                • Brief: Lay’s, a popular snack brand, initially marketed its potato chips as a universally enjoyed snack without specific differentiation based on demographics. The brand aimed to appeal to a broad consumer base with a common love for potato chips.

                Concentrated Marketing:

                • Example: Yeti
                • Brief: Yeti, a company known for its high-end coolers and outdoor gear, has targeted outdoor enthusiasts who value premium quality and durability. Yeti’s niche approach has allowed it to establish a strong brand presence in the outdoor and adventure market.

                Differentiated Marketing:

                • Example: Dove
                • Brief: Dove, a personal care brand, practices differentiated marketing by offering product lines designed for different skin types and preferences. Dove addresses the diverse needs of consumers by providing specialized products for moisturizing, sensitive skin, and more.

                Particularised Marketing:

                • Example: GoPro
                • Brief: GoPro, a company specializing in action cameras, follows a particularised marketing strategy. While the core product remains the same, GoPro tailors its marketing to various consumer segments, including athletes, adventurers, and content creators.

                Niche Marketing:

                • Example: Warby Parker
                • Brief: Warby Parker, an eyewear brand, focuses on a niche market by providing affordable, stylish glasses with an online-first approach. The brand targets consumers looking for fashionable eyewear at a reasonable price, disrupting the traditional eyewear industry.

                These examples showcase the versatility of market segmentation strategies and how brands tailor their approaches to meet the unique needs and preferences of specific consumer segments.

                Market Segmentation Example #1

                Here’s an example of segmenting the market based on behavioural characteristics, and more specifically, volume usage.

                The totality of consumers in any market can be divided into at least two segments: users and non-users.

                Even each of these categories is subject to subdivisions. Thus, users can be divided into light users, moderate users, and heavy users. Accordingly, we would divide the non-users into potential users (those who are likely to use the product in the future) and those who, for whatever reason, are unable to purchase the product.

                At this point, it is interesting to mention a dilemma that stems from this kind of segmentation. It’s the heavy-half dilemma.

                Let’s imagine a market, for example, a soft drink market. The situation can be described as below:

                Table Example
                Soft drinks market segmented based on volume usage
                Non users 20%
                Light users (half the market) 40%
                Heavy users (half the market) 40%
                100%
                Light users consumption 15%
                Heavy users consumption 85%
                100%

                We assume that the number of light users and heavy users is the same, and this is true in many markets.

                The heavy from the light half differs in degree of consumption.

                In the example, we assume that the light half, due to being “light”, consumes a total of 15% of the soft drinks. The heavy half, on the other hand, consumes the lion’s share, 85%.

                The dilemma that finally arises is: if we were executives of a company and were tasked with introducing a new soft drink to the market, which of the two halves of consumers would we target?

                The quick and at the same time wrong answer would be: in the heavy half.

                That’s because, as has happened in big companies in the past, we’ve been lured away from perhaps 85% of total consumer consumption in the heavy half of the market.

                So the correct answer should have been: in the light half.

                Studies have proven that consumers of the heavy half are distinguished by the very high commitment (loyalty) they have to a specific brand.

                It is therefore much more difficult for them to change brands and preferences.

                The company should introduce the new soft drink to the market by first targeting the light half, who are easier to change preferences and who switch brands frequently by experimenting.

                After gaining some market share that initially satisfies the company, then, it can target part of the heavy half, or seek to convert consumers of the light half into heavy consumers, turning them into loyal consumers of its brand.

                Customer Value

                The reason consumers buy the product is because they see some value in it. The value of the product for the consumer consists of certain basic elements – components

                1. The importance of the use case
                2. The effectiveness of the product category in the case
                3. The relative effectiveness of the brand in the case of use
                4. The availability of the product
                5. Its price and
                6. The perception of the consumer

                The overall value of the product for the consumer is the synthesis of the values resulting from the evaluation of each characteristic of the product. Possible sources of value for the consumer are the following:

                1. Functional characteristics of the product
                2. Service, before, during and after the purchase of the product
                3. Emotional Value: In addition to functional characteristics, the emotional connection a consumer feels toward a product or brand can significantly contribute to its overall value. Emotional value may include feelings of trust, joy, or a sense of belonging associated with the product or brand.
                4. Image of the product and
                5. Equity of the particular brand (ie, the value of the name itself), or the value of the brand to the consumer, which is not explained by the functional or service characteristics of the brand
                6. Perceived Quality: The perceived quality of a product, which is often influenced by the brand image and reputation, plays a crucial role in shaping consumer perceptions of value. High perceived quality can enhance the overall value proposition.
                7. Social and Environmental Responsibility: Increasingly, consumers are valuing products and brands that demonstrate social and environmental responsibility. Sustainability practices and ethical considerations can add to the overall value of a product.
                8. Loyalty Programs: Loyalty programs and incentives can contribute to the perceived value of a product, fostering customer retention and repeat purchases.
                9. User Experience: The overall experience a consumer has with a product, from pre-purchase interactions to post-purchase support, significantly impacts its perceived value. A positive user experience enhances the overall value proposition.

                The value of a product is evident based on some signs, which do not require much effort to measure, such as:

                1. Complaints and compliments from consumers – users
                2. Interpersonal communications and dissemination (word-of-mouth)
                3. Price (the value of the product to the business)
                4. Price elasticity of demand
                5. Market share
                6. Profit margins
                7. Sales
                8. Repeat purchases (high brand attachment implies high brand value) or frequency of brand switching
                9. Competitive activity

                Marketers systematically try to measure the value of their product to the consumer. The methods are often used for this:

                1. Direct ratings on a scale
                2. Constant sum ratings across brands
                3. Conjoint analysis
                4. Trade-off analysis
                5. Brand equity measurement
                6. Customer surveys and questionnaires
                7. In-depth interviews
                8. Competitive benchmarking
                9. Market research panels
                10. Focus groups
                11. Customer feedback and reviews
                12. Observational research
                13. Ethnographic studies
                14. Sentiment analysis

                Measuring Product Value

                Measuring product value is a crucial aspect of marketing research, and different methods are employed to capture various dimensions of value. Choosing the right methods depends on the specific goals, characteristics of the product, and the nature of the market.

                We use both quantitative and qualitative approaches to gain a holistic understanding of customer value. These approaches provide different perspectives and insights, complementing each other to offer a comprehensive view.

                Here are some common methods for measuring product value:

                Direct Ratings on a Scale (quantitative):

                • This method involves directly asking consumers to rate the perceived value of a product on a numerical scale. It provides a straightforward and quantitative measure, and respondents can rate various aspects such as quality, price, and overall satisfaction.

                Constant Sum Ratings Across Brands (quantitative):

                • In this method, respondents allocate a fixed sum of points or percentages across different brands based on their perceived value, allowing for the quantitative assessment of the relative importance of different attributes and features. This method provides a numerical representation of perceived value.

                Conjoint Analysis (quantitative):

                • Conjoint analysis is a powerful technique that helps in understanding how different features and attributes of a product contribute to its overall value. By presenting respondents with multiple product profiles and asking them to choose preferences, marketers can derive the importance of each attribute.

                Trade-Off Analysis (quantitative):

                • Similar to conjoint analysis, trade-off analysis involves presenting respondents with different product scenarios and asking them to make trade-offs. This method helps in understanding the trade-offs consumers are willing to make, providing insights into their value perceptions.

                Brand Equity Measurement (quantitative):

                • Brand equity is often used as an indicator of the value of a brand to consumers. Various metrics, including brand awareness, perceived quality, brand loyalty, Net Promoter Score (NPS), and associations, contribute to brand equity measurement.

                Customer Surveys and Questionnaires (quantitative):

                • Surveys with closed-ended questions allow for the collection of numerical data, providing measurable insights into customer perceptions of value. Rating scales and multiple-choice questions facilitate quantitative analysis.

                In-Depth Interviews (qualitative):

                • In-depth interviews allow for open-ended discussions, providing qualitative insights into the nuances of customer perceptions. This approach is particularly valuable for exploring underlying motivations and emotions.

                Competitive Benchmarking:

                Comparing the perceived value of a product against its competitors helps in understanding the relative positioning in the market. This can involve assessing attributes, pricing, and overall satisfaction in comparison to competitors.

                • Quantitative Aspect: Comparative analysis of specific metrics or key performance indicators (KPIs) across competitors can be quantitative in nature. For example, comparing market share percentages, pricing structures, profit margins, or other numerical metrics provides quantitative insights into the competitive landscape.
                • Qualitative Aspect: Additionally, competitive benchmarking may involve qualitative assessments, such as evaluating the quality of customer service, brand perception, or user experience. These qualitative aspects contribute to a richer understanding of the competitive environment.

                Market Research Panels:

                • Leveraging market research panels allows for continuous monitoring of consumer attitudes and preferences. Panels provide a dynamic view of how product value evolves over time and in response to changes in the market or marketing strategies.
                • Quantitative Aspect: Market research panels often collect quantitative data through surveys, questionnaires, or behavioural tracking. Quantitative methods within panels can include measuring preferences, attitudes, purchase intent, and other numerical data points.
                • Qualitative Aspect: Market research panels may also incorporate qualitative methods, such as in-depth interviews or focus groups, to gather insights into customer perceptions, motivations, and experiences. Qualitative approaches within panels provide a more nuanced understanding of consumer behaviour.

                Focus Groups (qualitative):

                • Focus groups bring together a small group of participants for guided discussions. Qualitative insights emerge through group interactions, revealing diverse perspectives and uncovering unanticipated themes.

                Customer Feedback and Reviews (qualitative):

                • Analyzing customer feedback, reviews, and comments provides qualitative data on their experiences and perceptions. This rich source of information can uncover specific aspects of value and areas for improvement.

                Observational Research (qualitative):

                • Observing customer behaviour in natural settings without direct interference can reveal unarticulated needs and preferences. This approach is valuable for understanding how customers interact with a product in real-life situations.

                Ethnographic Studies (qualitative):

                • Ethnographic studies involve immersing researchers in the customers’ environment to gain a deep understanding of their behaviours, preferences, and the cultural context surrounding product usage.

                Sentiment Analysis (qualitative):

                • Analyzing sentiment in customer-generated content, such as social media posts and online reviews, provides qualitative insights into the emotional aspects of customer experiences and perceptions of value.

                When choosing methods for measuring product value, we consider the following factors:

                • Objectives: We clearly define the goals of the measurement. Whether it’s understanding overall satisfaction, identifying key drivers of value, or evaluating the impact of a new feature, we align the methods with the specific objectives.
                • Product Characteristics: The nature of the product, its complexity, and the range of attributes it possesses will influence the choice of measurement methods. High-involvement products with numerous features may benefit from conjoint analysis, while simpler products may be effectively assessed with direct ratings.
                • Market Dynamics: We consider the competitive landscape, market trends, and the preferences of the target audience. Methods that capture comparative insights, such as competitive benchmarking, can be valuable.
                • Resource Constraints: We assess the available resources in terms of time, budget, and expertise. Some methods may require more extensive resources, so it’s important to choose methods that align with practical considerations.
                • Data Requirements: Depending on the depth of insights needed, we choose methods that provide the necessary level of granularity. For detailed attribute-level insights, conjoint analysis may be more suitable, while direct ratings may be sufficient for broader assessments.

                By carefully considering these factors, we select measurement methods that best suit the unique context of the product and market, ensuring that the insights gathered are relevant and actionable.

                Integration for a Holistic Understanding:

                • Mixed-Methods Research: Combining both quantitative and qualitative methods, known as mixed-methods research, allows for triangulation of findings. Quantitative data can provide statistical validation, while qualitative data offers depth and context, resulting in a more robust understanding.
                • Sequential Exploratory Design: This approach involves initially gathering qualitative data to explore and generate hypotheses, followed by quantitative data collection to test and validate these findings. It allows for a comprehensive exploration before quantifying insights.
                • Convergent Design: In this design, both quantitative and qualitative data are collected simultaneously, providing complementary perspectives. The convergence of findings enhances the overall understanding of customer value.

                By strategically incorporating both quantitative and qualitative approaches, we can uncover nuanced insights into customer value. Quantitative methods offer statistical validation and generalizability, while qualitative methods provide depth, context, and a deeper understanding of the underlying motivations and emotions driving customer perceptions.

                I discussed some of these methods in the previous article regarding consumer behaviour, entitled “Consumer Perception and Marketing Strategy”.

                Unique Value Propositions (UVPs)

                Once you’ve identified market segments and measured the perceived product value using methods such as focus groups, feedback, reviews, and surveys, the next step is to determine the Unique Value Propositions (UVPs) for each segment.

                Here’s a structured approach:

                1. Identify UVPs: Based on the feedback and insights gathered from each market segment, determine the unique aspects of your product or service that resonate most with each segment. These could be features, benefits, or attributes that set your offering apart and align with the specific needs and preferences of each segment.
                2. Segment-Specific Messaging: Tailor your messaging and communication strategies to highlight the identified UVPs for each segment. Craft marketing messages that directly speak to the values and priorities of each group. This ensures that your marketing efforts are more targeted and resonate with the unique characteristics of each segment.
                3. Anticipate Changes: Anticipate how consumer preferences and values might evolve over time. Consider external factors, trends, and shifts in the market landscape that could influence the perceived value of your product. This forward-looking approach enables your marketing strategy to stay agile and adapt to changing consumer dynamics.
                4. Feedback Loop: Establish a feedback loop to continuously monitor and assess the effectiveness of your UVPs within each segment. Solicit ongoing feedback, analyze market trends, and stay attuned to changes in consumer behaviour. This iterative process allows you to refine and adjust your UVPs to remain aligned with evolving market demands.
                5. Innovation and Adaptation: Use insights gained from market segmentation and feedback to drive product innovation. Adapt your offerings to better meet the evolving needs and expectations of each segment. This proactive approach positions your brand as responsive and customer-centric.

                By identifying UVPs and anticipating changes in consumer values, you enhance your ability to deliver targeted and compelling value propositions to different market segments, fostering stronger connections and loyalty over time.

                I crafted a compelling framework for designing highly-effective unique value propositions, which I will share during the “7 IDEALS” presentation.

                Current and Potential Market Segments

                The fourth stage involves describing the market segments that your company currently serves, outlining how your company caters to them, and providing a detailed description of potential customers:

                Current Market Segments:

                • Segment Identification: Clearly define and list the specific market segments your company is currently targeting. This could include demographic, geographic, psychographic, behavioural, and firmographic characteristics.
                • Segment Size and Importance: Assess the size and significance of each segment in terms of revenue, market share, and strategic importance to your business.

                Company’s Service Offerings:

                • Product/Service Portfolio: Provide an overview of the products or services your company offers to each identified market segment.
                • Value Proposition: Highlight the unique value proposition (UVP) or key benefits that distinguish your offerings within each segment.

                Customer Interaction Channels:

                • Distribution Channels: Describe the channels through which your products or services are distributed to customers within each segment.
                • Communication Channels: Identify the communication channels used to reach and engage customers in each segment (e.g., advertising, social media, direct sales).

                Customer Relationship Management:

                • Customer Support: Detail the customer support mechanisms in place for each segment, including customer service channels and responsiveness.
                • Feedback Mechanisms: Highlight methods for collecting and analyzing feedback from customers within each segment.

                Marketing and Promotion Strategies:

                • Segment-Specific Marketing: Discuss how your company tailors its marketing strategies to address the unique characteristics and preferences of each market segment.
                • Promotional Activities: Outline any specific promotional activities or campaigns targeted at each segment.

                Competitive Landscape:

                • Competitors in Each Segment: Identify key competitors within each market segment and assess their strengths and weaknesses.
                • Market Positioning: Describe how your company positions itself in relation to competitors within each segment.

                Potential Customer Profiles:

                • Identifying Potential Customers: Provide criteria and characteristics for identifying potential customers who fit within the existing or new market segments.
                • Expansion Opportunities: Discuss opportunities for expanding into new segments or enhancing your presence within current segments.

                Adaptation and Growth Strategies:

                • Strategies for Each Segment: Propose strategies for adapting to changes within current segments and strategies for growth, whether through market expansion or product/service innovation.
                • Risk Mitigation: Address potential risks and challenges associated with serving each segment and propose mitigation strategies.

                This structured approach ensures a comprehensive overview of your company’s current market segments, how it serves them, and the potential for growth and adaptation in the future.

                Sales Forecast

                Before we enter the targeting stage of the “Market Parallax” model, we perform a sales forecast. Integrating a sales forecast process after segmentation and before entering the targeting stage can be highly effective. Here’s why:

                1. Informed Targeting: Sales forecasting provides insights into the potential demand for your products or services within each identified market segment. This information informs the targeting process, helping you prioritize segments with higher sales potential.
                2. Resource Allocation: Knowing the expected sales volume allows for better resource allocation. You can allocate marketing resources, budget, and efforts more efficiently by focusing on segments that are likely to yield higher returns.
                3. Risk Mitigation: Sales forecasting helps identify potential risks and challenges in meeting sales targets. This proactive approach enables you to develop mitigation strategies and adjust your targeting or marketing approach accordingly.
                4. Strategic Decision-Making: With sales forecasts, you can make strategic decisions about product development, inventory management, and distribution channels based on anticipated demand from specific segments. This aligns your business strategies with market realities.
                5. Performance Evaluation: Establishing sales forecasts provides a benchmark against which you can later evaluate the performance of your targeting and marketing efforts. This feedback loop enables continuous improvement and adjustment of strategies.
                6. Communication and Alignment: Sales forecasts facilitate better communication and alignment between different departments within the organization. Marketing, sales, and production teams can work collaboratively with a shared understanding of expected outcomes.

                To maximize effectiveness, ensure that your sales forecasting process incorporates reliable data, considers external market factors, and is adaptable to changes. This approach aligns market segmentation, sales forecasting, and targeting, creating a more seamless and strategic marketing process.

                Along with defining the target market, every business is interested in learning the sales potential of that market. This sales forecast is necessary to judge whether or not this target market is profitable. Also, in the event that it is beneficial, the company should know in advance (in time) what is the most likely level of demand for its products, in order to prepare properly.

                There are many sales forecasting techniques. Each of them has its pros and cons. The choice of technique will be decided by the marketing managers, after taking into account the resources of their company, the need for accurate or not and for quick or not forecasts, the environment, and the particularities that the product presents in the market. The use of two or more techniques is recommended (and practiced by large companies) to avoid unwanted surprises.

                The various forecasting techniques base their estimates on the following:

                1. Questionnaires
                2. Experiment
                3. Past experience
                4. Correlation of various economic quantities
                5. Market research
                6. Advanced analytics
                7. Expert opinions
                8. Scenario analysis
                9. Technology integration
                10. Sales funnel analysis
                11. Collaborative forecasting
                12. External factors

                Questionnaires:

                • Overview: Questionnaires involve the systematic collection of data through surveys designed to gather insights into customer preferences, behaviours, and purchasing intentions.
                • Methodology: Structured Surveys: Develop surveys with clear, structured questions to gather quantitative data. Open-Ended Questions: Include open-ended questions to capture qualitative insights and unexpected feedback.
                • Pros: Provides direct insights from the target audience. Can be conducted online, via phone, or in-person.
                • Cons: Responses may be influenced by survey design and wording. Relies on participants’ willingness and availability.

                Experiment:

                • Overview: Experimental forecasting involves creating controlled conditions to observe how changes in variables (e.g., pricing, marketing strategies) impact sales.
                • Methodology: A/B Testing: Implement variations (A and B) in specific elements and compare their impact on sales. Pilot Programs: Test new products or strategies in a limited market before full-scale implementation.
                • Pros: Provides real-world insights into the cause-and-effect relationship. Allows for testing hypotheses in a controlled environment.
                • Cons: Costs associated with running experiments. Limited to the factors tested in the experiment.

                Past Experience:

                • Overview: Past experience forecasting relies on historical data to predict future sales patterns based on similar conditions.
                • Methodology: Time Series Analysis: Analyze historical sales data to identify trends, seasonality, and patterns. Regression Analysis: Identify relationships between sales and various influencing factors.
                • Pros: Relies on concrete historical data. Useful for products with stable demand patterns.
                • Cons: Assumes that historical conditions will repeat. May not account for changes in market dynamics.

                Correlation of Various Economic Quantities:

                • Overview: This technique involves analyzing the correlation between sales and economic indicators to predict how changes in the economy may impact consumer behaviour.
                • Methodology: Economic Indicators: Identify relevant economic factors (e.g., GDP, inflation, consumer confidence) and assess their correlation with sales. Industry Reports: Leverage industry-specific economic data.
                • Pros: Considers external factors that may influence consumer spending. Provides a broader economic context for sales predictions.
                • Cons: Economic conditions may not directly translate to consumer behaviour. Correlation does not imply causation; other factors may be at play.

                Market Research:

                • Customer Surveys: Conducting detailed surveys can provide insights into customer preferences, buying behaviour, and anticipated demand.
                • Focus Groups: Gathering a small representative sample of the target market for in-depth discussions can offer qualitative insights.

                Advanced Analytics:

                • Data Analytics: Utilize advanced data analytics and machine learning algorithms to analyze large datasets for patterns, trends, and correlations.
                • Predictive Modeling: Develop predictive models that consider historical data, market trends, and external factors to forecast future sales.

                Expert Opinions:

                • Industry Experts: Consult industry experts or professionals who have in-depth knowledge of the market, trends, and potential influencing factors.
                • Internal Experts: Leverage the expertise of internal teams, including sales, marketing, and product development, to gather insights.

                Scenario Analysis:

                • What-If Scenarios: Consider conducting a scenario analysis to assess how changes in various factors (economic conditions, competitive landscape, etc.) may impact sales.

                Technology Integration:

                • Sales Forecasting Software: Explore the use of specialized software and tools that leverage artificial intelligence (AI) for more accurate and efficient forecasting.
                • CRM Integration: Integrate customer relationship management (CRM) data to understand customer behaviour and predict future sales trends.

                Sales Funnel Analysis:

                • Funnel Metrics: Analyze metrics within the sales funnel to identify potential bottlenecks, conversion rates, and areas for improvement.
                • Customer Journey Mapping: Map the customer journey to understand touchpoints, influencing factors, and potential points of conversion.

                Collaborative Forecasting:

                • Cross-Functional Collaboration: Encourage collaboration between sales, marketing, finance, and other relevant departments to gather diverse perspectives and insights.

                External Factors:

                • Economic Indicators: Consider external economic indicators (e.g., GDP, inflation, unemployment) that may impact consumer spending patterns.
                • Industry Reports: Refer to industry reports and market analyses for a broader understanding of market dynamics.

                Each of these techniques offers unique advantages and challenges, and a combination of methods can provide a more comprehensive and accurate sales forecast. The choice of technique depends on factors such as the nature of the product, available data, and the level of accuracy required.

                The incorporation of various techniques and a multidimensional approach to sales forecasting can enhance the accuracy and reliability of predictions, helping businesses make informed decisions.

                Market Testing

                The most common experiment in sales forecasting is the market test. An area (small town or district) representative of the whole is selected in order to test a product. The various variables of the marketing mix can be varied to control the reactions of the buyers. Depending on the product, once a necessary period of time has passed (usually a few months), the results (sales, etc.) are calculated.

                Market testing is a particularly useful sales forecasting technique for new products or products planned to enter new territories.

                Along with forecasting sales, marketing managers also learn how effective various changes to the elements of the marketing mix are. The main problems are the high cost, the long time required, finding a representative area, and the leakage of the secret (for new products) to competitors (so the advantage of surprise ceases).

                Market tests are a practical way for businesses to assess the potential success of a new product or changes to existing products in a controlled environment before a full-scale launch. Here’s a breakdown of key points related to market testing:

                Purpose of Market Testing:

                • Assess the viability and acceptance of a new product or modifications to existing products.
                • Understand consumer preferences and behaviours in a specific market segment.

                Execution of Market Test:

                • Selection of Representative Area: Choose a geographical area that is demographically and behaviourally representative of the broader target market.
                • Controlled Variable Changes: Modify elements of the marketing mix (product features, place/distribution, promotion, pricing) to gauge their impact on consumer response.
                • Time Frame: Allow sufficient time for the market test to generate meaningful results, typically a few months.

                Benefits of Market Testing:

                • Real-world Insights: Provides tangible data on consumer reactions, preferences, and purchasing behaviour.
                • Risk Mitigation: Helps mitigate risks associated with a full-scale product launch by identifying potential issues early on.
                • Adjustment of Marketing Mix: Allows marketing managers to fine-tune elements of the marketing mix based on observed consumer responses.

                Challenges and Considerations:

                • Cost: Market testing can be resource-intensive, especially in terms of advertising, logistics, and monitoring.
                • Time: The process may require a significant amount of time to observe and analyze results.
                • Representativeness: Ensuring that the selected area is a true reflection of the broader market is crucial for accurate predictions.
                • Secrecy: For new products, there’s a risk of competitors learning about the product before its official launch, impacting the element of surprise.

                Types of Market Tests:

                • Standard Test Markets: Introducing the product in a few representative cities to assess its performance.
                • Controlled Store Tests: Testing the product in specific stores or regions within a larger market.
                • Simulated Test Markets: Creating a simulated environment to mimic real market conditions.

                Despite the challenges,