31. The Law of Segmentation

The Laws of Business Success

Under the Laws of Business

Companies must target specific customer groups or market segments if they are to achieve significant sales.

We are rapidly reaching the end of the mass market. Today, the most successful companies are those that have been able to identify specific segments of the marketplace for which they design individualized products and services to satisfy special needs and tastes.

The first corollary of the Law of Segmentation is
Many companies fail because they are targeting the wrong market with the wrong product in the
wrong way.

Many companies start off targeting their advertising and sales at a particular market segment, only to find that the products are being purchased by a different market segment altogether. Light pickups were originally designed for people doing construction work and hauling around small quantities of materials. They became extremely popular with young people as sports vehicles for going to the beach and mountains.

For many years, the German beer Lowenbrau, a high-priced import, tried to compete with American beers such as Budweiser and Miller. The company tried every conceivable form of advertising and was still unable to break into the American market, which was tied up by the big breweries. Finally, Lowenbrau changed its marketing strategy and began targeting men and women with higher incomes. The first new advertisement changed the whole market for imported beer in the United States. It said, "When you run out of champagne, order Lowenbrau."

By positioning itself against champagne rather than lower-priced beer, Lowenbrau created a perception that imported beer was something to be enjoyed by people who could afford the very best.

The second corollary of the Law of Segmentation is
The ideal market segment contains those customers for whom the product’s competitive advantage is most important in satisfying their most pressing needs.

In other words, if you are selling food, sell to hungry people. If you are selling time management systems, sell to those whose time is the most valuable and who feel their time is most in need of management.

Your best market segment consists of those who already have a clearly defined and demonstrated need for your product. As they say, "Fish where the fish are."

The whole purpose of market research is for you to identify and segment your market so you can reach it with the greatest efficiency and at the lowest possible cost. The more accurate you are about the customer you are trying to create and keep, the more focused your marketing efforts will be and the more likely it is that they will be successful.

How you can apply this law immediately:

1. Develop a clear profile of your ideal customers. Who are they-exactly? What is their age, sex, education, income, and value base? Where are they? Where do they live geographically? In what sort of businesses and industries do they work? In what positions do they work? In what departments of what types of companies are they located?

2. Determine the very best way to sell to your ideal customer. How do they buy? When do they buy? What sort of selling methods are available to you to communicate with the prospective customers who can benefit the most rapidly from what you sell?

Source: Brian Tracy, The 100 Absolutely Unbreakable Laws of Business Success, Berrett-Koehler Publishers, Inc, (San Francisco, 2000).