So, how does one actually conduct a segmentation analysis? We’ll discuss three approaches, there might be more. There is a user based method, a benefit based approach and the occasion based way of conducting marketing segmentation.

A marketing toolbox

Each of these three segmentation approaches should lead to the same outcome: a mutually exclusive and collectively exhaustive set of customer segments grouped together based on similarities in their underlying values.

These segmentation approaches are the first elements of what I will refer to as the marketing toolbox which contains a set of tools that you can use to apply the theories we discuss to the specific problems you face.

These tools will come in many forms. Some will be frameworks others will be checklists or exercises but when you hear me mention the marketing toolbox you’ll know I’m about to talk about application.

A user based segmentation analysis

One way to segment the market is to conduct a user based segmentation analysis. This approach involves starting with a list of all the different types or classes of people who might use your product or service.

To do this right you really should go out and conduct market research to identify these groups. But when you don’t have the time or money to conduct good research a quick and easy brainstorming effort can often yield surprising insights.

So now that we have our list of potential user groups the next step is to figure out what would be important for each of those groups.  For each group think about what would be important and what would not matter so much.

The end result should be a list of customer segments with a rich description of their preference structures and the more detailed and specific you can get in describing what each group would want the better off you’ll be when it comes time to pick a target and to position your offering.

Once you’ve created your detailed list of segments the next step is to see if any of the groups overlap in terms of what they value. If two groups end up wanting almost exactly the same things in the offering there probably the same segment not to.

Each segment should have a distinct value profile. In other words each segment should want to clearly different things if they don’t combine them.  Another thing that could happen at this stage is you could find the initial user groups you define should actually be broken up into sub segments.

So that user-based segmentation. You start by determining the different types of users who might use your offering and then you derive your value based segments from that list of users.

A benefits based analysis

For this type of segmentation you start with the offering itself instead of starting with the consumer. Think of all the different types of benefits a consumer might derive from using this product or service and then determine your segments accordingly.

Ask yourself what benefits are most likely to drive purchase in this category.  Now we have our list of benefits and we can back our way into user segments by determining which groups of people are most likely to appreciate each particular benefit work out descriptions of the groups would value each benefit.

As you go through the list of benefits look for opportunities to refine your segments. Can you split any of the benefits based segments you’ve created? Should you combine any?

As with the user based segmentation the end result of the benefits of a segmentation should be a list of consumer segments with the rich description of their preference structures the more detailed and specific the better.

An occasion based segmentation

The third segmentation approach differs from the other two in that it doesn’t start with the premise that each person or household should be assigned to a different segment instead it recognizes that the same person may have different needs depending on the occasion in which he or she uses the offering.

Thus an occasion based segmentation starts by asking when would consumers buy or use this product or service, but unlike a user based segmentation any particular customer can fit into any or all of those occasion based segments.

Starting with this list of occasions we then consider the things people would want in each of those different situation.

Choosing the right method

The difference between all these three different different types of segmentation approaches user based benefits based on occasion based is in providing you with different places to start the process, to provide with different angles for looking at the same market.

But, all of these approaches should lead to the same end result a list of customer segments that differ in their preference structures. None of these segmentation approaches is right for a given market. In fact I would encourage you to try multiple approaches to see if each new perspective provides any additional insights.

Regardless of the method you’ve used to generate your psychographic or value-based segments once you’ve defined your segments you’re not done. Value-based segments are useful because they tell you the types of marketing actions that will appeal to that group of people.

Market segmentation presents a real opportunity for marketers to get creative in determining the different sources of value different customer groups might seek.

Just remember that whichever process you use to develop your segments make sure that the were getting a value-based segmentation so the you end up with segments you can actually use.