Market researchers call it “segmentation” – the process by which customers are divided into groups based on needs, interests and priorities and products and services are designed and targeted to meet the specific needs of each segment. Over the past several years, marketers have moved from a view that the marketplace is relatively homogeneous to a more targeted approach that recognizes customer diversity.
The main reason organizations divide markets into identifiable groups is to create a custom product and marketing mix for specific groups. Similarly, health care organizations are beginning to move beyond a “one size fits all” approach and customize services to better meet individual needs.
Before we delve into market segmentation further, let’s step back and look at the criteria necessary for a segment to actually be a viable target group.
Identifiable – The segment must be easily identifiable.
Unique – The segment must have distinct needs and preferences.
Size – The segment must be large enough to warrant the effort to serve the group.
Accessible – The segment must be reachable through various communication and distribution channels.
Durable – The segment should be relatively stable over time.
Financial – The benefits must outweigh the additional costs of targeting the segment.
The segmentation process can take many approaches, but most all methods include the following steps:
- Divide the market into meaningful and measurable segments according to customer needs, past buying behaviors or other variables such as age, gender, occupation, or geographic location.
- Determine the market potential of each segment by analyzing the benefit and cost impacts of serving each segment.
- Target segments according to their market potential and the organization’s ability to serve them.
- Invest resources to tailor products, services, distribution channels and marketing tactics to match the needs of each target segment.
- Measure performance of each segment and adjust the segmentation model over time as conditions change.
By dividing the market into smaller segments and offering unique products and services to each group, several benefits. It enables you to:
Develop new products or services – Market segmentation can help identify underserved markets, which provides an opportunity for organizations to enter the market first with new products and services.
Develop customized marketing programs – marketing can often be tailored to each market segment in a more effective manner than mass marketing designed to reach the largest number of people possible.
Cross-sell or up-sell products and services – As customers change their preferences and buying behaviors over time, organizations can serve various segments along the customer life cycle with different products and services.
Optimize distribution strategies – Customer preferences can help identify ineffective distribution channels and target those with the highest usage from your desired customer segments.
Attract new customer groups – Market segmentation offers the opportunity to attract new customers with starter products and services and then move individuals to premium products over time.
Determine appropriate product pricing – Market segmentation permits organizations to develop an array of products and services with different price points providing customers with multiple purchase options.
In the world of physician growth strategies, segmentation is a critical tool for determining who to target and for what. Building this process into each and every initiative will bring much greater focus to those efforts.