Segmentation leading to targeting of customers is arguably the most powerful tool in our marketing bag. (The What is marketing section shows you how segmentation fits into marketing as a whole.)
This page provides guidance on the following:
- What is a segment?
- Why segment and target?
- How do people normally segment?
- Performing segmentation and target marketing
A segment is a group of people with similar needs who are part of your whole market . For example, you may be trying to get your organisation better known by the general public. But 'general public' is too large and generalised to help you achieve this. So by dividing the whole market into segments of people who you think are particularly important for your organisation you can reach them more effectively.
For example, for an organisation in Halifax their whole market is the people of Halifax. Segments of this market might be:
- adults in Halifax (not children or people in Yorkshire as a whole)
- people in parts of Halifax
- less well off people across the whole of Halifax and surroundings
- people from a certain religion in Halifax
- sporty people
- altruistic people etc.
Normally an organisation has too many segments it would like to reach and 'targeting' is about choosing which ones to prioritise.
The usefulness of segments are that for any one segment, you can:
- construct your service or message more precisely to the needs and interests of this segment of people
- and you can use more accurate methods of delivering your service or message (for example, a letter to the various local church magazines rather than to the local paper if you are aiming at religious people).
Some non profit organisations prefer not to make segmentation and targeting decisions but this is dangerous because by trying to meet everyone's needs you can end up with a generalised, low quality activity meeting no-one's needs very well. In particular there are three reasons why you should segment and target. Segmentation and targeting will help you to:
1. Meet needs better
- Homogeneity of the target group means your organisation can specialise, increase expertise and meet need better - higher quality.
- Allows you to choose the groups you feel are most in need (prioritisation).
2. Apply resources more effectively
- Cost effective because you can gain the benefits of scale while still meeting need.
- No/less duplication because you can choose segments that other organisations are not addressing.
3. Raise resources most effectively
- Supporters can quickly appreciate 2 and 3 above and be assured that you are being thoughtful about satisfying your customers as well as being as cost effective as possible.
Organisations usually segment their customers using the following categories:
- geography: for example, national, regional, urban/rural, density, climate, etc
- socio-demography: for example, age, sex, family, size, income, occupation, social class, etc
- psychography: for example, lifestyle, personality, attitudes, etc
- behaviour: for example, benefits being sought, purchasing rate, usage rate, etc.
Practical choices: 3 examples of segmentation
A development NGO working overseas might identify the following segments which prompt choices of which to target:
- which countries it will operate in
- what kind of settings within the countries, for example, urban or rural
- what kinds of people it will concentrate on, for example, pastoralists or small holders or small traders or destitute people
- which mode of working, for example, prevention or amelioration; start up support or rescue support.
A membership organisation has to choose:
- whether to run branches geographically, for example, regionally or locally or based on the interests of the members
- whether to concentrate (target) services primarily on qualified members or to be active in training up new members
- whether to have board representation of members based on interests or geography.
A regionally based cancer charity reviewing its remit has to decide:
- whether to remain segmented regionally or go national
- whether to retain its research focus (helping future generations but not current sufferers) or whether to provide services to today’s people with cancer or future generations
- whether to segment by a particular form of the disease or all types
- whether to segment by social/demogrpahic characteristics eg help all ages or concentrate on women, or children or older people.
Your strategy will have defined your organisation’s overall objectives. It should also have made clear the broad area in which the organisation is working, for example, deaf people, cancer, steel workers, Methodists, savers, etc.
But even if it has done this, the group you are trying to serve (your market) is nearly always too big for the resources (especially money) you have available. Second, you are likely to serve no-one particularly well without segmenting your market (dividing it up into groups of people with similar needs and wishes) and targeting (prioritising) one or two segments.
Philip Kotler, the academic who brought commercial marketing to the non profit sector, lists six stages of segmentation and targeting:
1) Identify bases for segmenting the market
This is a critical stage and should start far broader than you will be able to address.
- Example: for a cancer charity this might be children, adults, older people, men/women, today’s patients, the next generation, those with life threatening/non life threatening conditions, those with immobilising/non-immobilising conditions.
- Example: for fundraising it might be age, wealth, gender, religiosity, previous giving record.
2) Develop profiles of the previous segments
Concentrate on numbers in the segment, those that you sense are under-served/under-asked.
3) Develop measures of segment attractiveness
That is, how much in need are they? How reachable are they?
- Example: for fundraising, do they tend to give more than average, do they have a special affinity with your cause?
4) Select the target market(s)
Factor together your mission, objectives, segment attractiveness, the number of other organisations operating with that segment etc.
5) Develop Positioning for each target market
In other words, how do you want this segment to think about you and the benefits you can give them (see section on positioning).
6) Develop the marketing mix for each chosen target market
Define the product’s (goods, service or idea) attributes in a way which fulfils your organisational objectives and satisfies the customer's needs.
Kotler P, and Fox K, 1986, Strategic Marketing for Educational Institutions, Prentice Hall: Englewood Cliffs, NJ.