Marketing and Finance: Creating Shareholder Value

7

The key role of market definition and segmentation

Fast track

Successful commerce has always been the result of a careful matching of offers to needs. Only a fool would conclude that all women between the ages of 18 and 22 are the same, or that all people who live in the same neighbourhood are the same, etc. Nonetheless, it is such shallow thinking that has come to represent market segmentation over the years.

A market trader many years ago, on having it pointed out to him that exactly the same apples at opposite ends of his stall were priced at 20 cents and 25 cents, replied that the 25-cent apples were especially for customers who wanted to pay 25 cents!

This somewhat silly and elementary example is only intended to illustrate that, in life, as in business, people have different need sets and the authors find it incredible that, in the 21st century, so many organizations still haven't fathomed that the secret to success is correct market definition and segmentation as precursors to product development, positioning and branding.

A market must be defined as ‘the aggregate of all the products or services that satisfy the same need’. Hence, in financial services, a pension is a product, not a market, as there are other financial products that can fulfil the same need set. It is crucial, therefore, to understand the specific demand for pensions. This is to ascertain whether other products are taking the place of pensions and whether pensions are growing, static or declining as ...