Wednesday, November 25, 2009

Who the hell should be my customer segment??

First of all, I don't mean to be aggressive here (which you may think looking at the title). I think I am just expressing the frustration of a marketing manager, who is thinking whom should he sell his product to or who would buy his product or what should be his target customer segment?

Let me first define what does the term "customer segment" mean? But it's not so easy. It is not very easy to define this term. You pick up five top books on marketing and I am sure you will find different definitions of customer segment in them. (I think there would be books entirely focusing on customers and even customer segments. I still don't think they would be having the same definition). Though all different from one another but somewhere all would be using words like homogeneous customers and similar needs.

Let me have an initial try at the definition: "A segment is a set of homogeneous customers having similar needs which can be satisfied through similar distribution channels". Well, you might have noticed I have gone beyond just homogeneous customers and similar needs. (It doesn't mean I am a marketing guru. I must have read all this somewhere. But the point is that I agree most to this definition than any other).

Let’s see what this definition means. Firstly, who all are homogeneous customers? (Here, I would not like to go into seeing who is a customer. I am ignoring this for this post). Homogeneity can be defined in several ways. It could be on the basis of gender. So, I can say females are one segment and males other (you could have a third segment too). It could be on the basis of income. So, I could say, all people with income above 3 lacs is one segment and people below 3 lacs is another segment. As you can see, on the basis of income, we can have n customer segments. Homogeneity could be on the basis of height, weight, home ownership etc.

So, when we say "homogeneous customers", what do we mean? It means for my product category, they are homogeneous. For example: If I am selling some perfume or deodorant, then homogeneity could be on the basis of gender. If I am selling some club membership or credit cards, income could form the basis of homogeneity. If I am selling home loans or even other loans, homogeneity could be on the basis of home ownership (whether the person has his own home or stays on rented home).

Let me clarify one point here that I am using just one variable for defining homogeneity i.e either gender or income or height etc. But generally, a number of variables are generally used to define homogeneity e.g. I can define a set of homogeneous customers as "females with age between 25 and 30, earning more than 3 lacs per annnum, living in metropolitan areas in rented apartments along with their families" (Calculate the number of variables I have used. It's 6). So, I am defining my homogeneous sections on the basis of 6 variables. How many such sections can I define?

Having defined what "homogeneous customers" mean, let me ask do all homogeneous customer have same or similar needs. If you think yes, then think again! The answer is obviously no. Obviously because if my product is a matrimonial site and one of my section is "females with age between 25 and 30, earning more than 3 lacs per annnum, living in metropolitan areas in rented apartments along with their families", then definitely different people in this section will have different requirements. (You may ask here then what was the purpose of collecting them in a homogeneous section. The point is that though the requirements may be different but still many of them will have similar requirements). In my case, all of them would want a guy who can marry a girl with this profile! (I know not a great example!). So given that the needs of different people in a section may be different, the next job is to collect all the people in a segment who have similar needs.

So, have we arrived at a customer segment now? The answer is No. We have got a section of homogeneous customers who have similar needs but we have still not touched the second half of the definition i.e. “which can be satisfied through similar distribution channels". I am not touching this part now. I will take it up in the next post. (Otherwise you would sleep off till the end of the post).

PS: I know the scope of the title was to choose a segment and I did not even define a segment. This is cheating. You may call it. But I will be covering all this in subsequent posts.


  1. waiting for next post for greater insight..


  2. Gr8 work ..U will be a good writer in future explaining diff concepts to students..I really appreciate ur work..Keep it up !! This will surely help all those who will read ur blog..

    Lookng 4wrd 4 d 2nd one..

  3. @Siddhi will come before 5th...
    @Swati Thanks dear...waise I think I can be a teacher..:)

  4. wht abt teacher cum writer ? sounds good :)

  5. i haven't understood the reason behind this article....I would suggest you to complete this article next tym only(atleast u shud try)...