SEGMENTATION – THE KEY TO ACHIEVING LUCRATIVE BUSINESS RESULTS IN UNCERTAIN TIMES
We’ve all been there. Money has suddenly gotten tight. You’re sending your child off to college; you’ve just purchased your dream home; or you’re staring at retirement and you’re not sure you’ve saved enough. With each of these scenarios, the financial power has dimmed, even if the circumstances are merited. With each scenario, the customer will also continue to spend. Respective purchases may shift to a student laptop, furniture for the new home or increased outings with the grandkids.
The key for suppliers is to understand customer demographic pools and the associated needs, timing and trends that impact their buying decisions. This allows suppliers to modify their market strategy accordingly. It is essential for those seeking to build lasting customer relationships through the best and worst of times. Customer segmentation is the tool that makes this possible. And it is just as applicable to the industrial arena.
Segmentation is the process of subdividing a large homogenous market into identifiable sectors with similar needs and demand characteristics. Its objective is to design a marketing mix that precisely matches the requirements and expectations of customers in the optimal sub-segments. Optimal segments are those providing opportunities to increase company revenue and profits, gain market share, capitalize on products or services that only you offer and build repeatable/loyal customers. Sector profiles may be devised by using customer product interest, applications, geography or a myriad of factors. These segments despite, or due, to economic cycles or industry changes are strong. The more granular the customer segmentation, the more uniform and predictable the buying-behavior, allowing more strategic influence by the supplier.
There are many industries that have recently been effected by changing regulation, new technology or altering customer preferences. Examples of these include the Power Industry, Mining and Cement (US Construction bill). As with most upended markets, there are winners and losers. And with any changing market, there are opportunities and risks. Typically, with heightened uncertainty customers delay projects to adjust to their new reality, determining the financial and operational impact. Or they may switch from buying new machinery to services such as asset management. Proper segmentation and understanding helps find customers still motivated to act. For example, as commodity pricing equalized the cost of natural gas and coal sourced power plants with each new coal regulation, the cleaner energy prevailed and the natural gas market boomed.
The smart supplier evaluates the industry landscape to find the right customer set(s) needed to thrive. They ask: How is the market trending and who are current and future winners? Do we have a stand-out solution to address them? Does the sector meet business expectations (i.e. high-end supplier and customer understanding of value)? Is the size of the segment large and growing to support the necessary re-tooling or channel adjustments? With market uncertainty and changing business environments, the questions are numerous. Some of them can be tough. Much of them must be sufficiently answered to capitalize on good and bad times. Select carefully. Happy hunting!