It is more than 80 years since Henry Ford wrote:
Any customer can have a car painted any colour that he wants so long as it is black.
Ford, My Life and Work, Chapter IV.
We are all used to an infinite choice in anything we consider buying. Therefore, new and growing businesses must think differently about their offer and how they promote it. Market Segmentation is the science of splitting your target customers into smaller groups with similar buying habits. Then you can tailor your offer to each group. By doing this you:
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Increase the proportion of people you convert into customers – your offer is better tailored to their needs.
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Reduce your promotional costs by targeting each group directly with specific messages using communications methods best suited to that group.
Why?
The marketing process is about understanding customers and then satisfying their needs better than the competition. Different customers have different needs. It is rarely possible to satisfy all customers by treating them in the same way.
If you ignore differing customer needs, your competitor can easily launch a product that serves a specific group. Then you lose customers and you lose money.
Useful Segments
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You can easily determine the attributes that differentiate segments;
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You can communicate with your chosen segments;
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Segments are large enough to justify the effort required to target them;
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Segments behave differently to differing marketing mixes;
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Last long enough to justify the cost and effort in addressing their needs.
Segmentation Process
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Define the market
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Target customers – some examples:
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Parents within 50 miles
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IT Managers in businesses with 50-500 employees
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Over 50’s in UK
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Map the markets
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Who decides
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Who influences
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How is the market structured
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Do you address your market directly or through intermediaries?
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Who pays the bills?
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Who specifies what and why?
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Exactly who are we talking to?
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What are they buying – think widely
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Why are they buying?
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Forming segments
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Group like-minded decision makers
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Name the groups
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Memorable words
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Polite words – the word might be used in public
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Avoid telling customers their segment – it is easy to offend
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Formulate segment based plan
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Tailor your offer for each group
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Promote your different offers correctly for each group
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Deliver plan
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Measure success
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Refine plan
This was a guest post by Paul Fileman of SPS who are a national team of proven senior management professionals, passionate about working to help businesses achieve their next level of development and performance. Whether they are facing market changes, financial problems, people/skills issues, or are preparing a major project, they offer dedicated support from a multi-disciplined team of experts.
This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
Just a quick fact.
Henry T Ford never actually said this famous comment and infact, all cars were produced in red white and blue and not black. Black was later discovered as the fastest drying paint and started to be mass produced but the famous comment is illusive and Henry T ford never actually said it!
Emily,
He most certainly did say it, it’s in his autobiography which is referenced in the post above (and you can find a copy at Project Gutenburg: http://www.gutenberg.org/dirs/etext05/hnfrd10.txt).
John,
Henry may have said it but it was AFTER it was said in jest about ford cars that it caught on. It was’nt until after the war that ford actually started mass producing black cars becasue they found out the paint was faster drying. The original production of ford cars before the war were produced in red, white and blue. It’s true!
Emily,
I’m not sure what point you’re trying to make? He *did* say it as you can easily verify by reading his book (reference and link provided above).
As for the colours, neither Paul (the author of the post) nor I asserted that black was the only colour. Paul simply quoted from Henry Ford’s autobiography to illustrate a point.
Likewise Ford was making a point when he said it. He clearly disagreed with Paul as in Ford’s view:
“Salesmen always want to cater to whims instead of acquiring sufficient knowledge of their product to be able to explain to the customer with the whim that what they have will satisfy his every requirement – that is, of course, provided what they have does satisfy these requirements”
Personally I tend more towards Ford’s view than Paul’s.
okay so the saying is not a myth which is how i constrewed it, it is just misquoted. In Ford’s autobiography, My Life and Work, he quotes himself in Chapter IV saying, “Any customer can have a car painted any colour that he wants so long as it is black.” However Red and grey were used prior to June 1909 – Brewster Green from early 1909 through 1910 – Midnight Blue from 1911 to early 1913 – Black became the ’standard’ colour from 1913 until 1926. In 1926 there was Channel Green and Windsor Maroon followed later in the year and into 1927 with 9 other colours. .
Emily,
Yes it’s often quoted out of context.
But I still don’t know what point you’re trying to make as neither Paul nor I claim that black was the only colour.
Surley your backing of the quote itself suggests that you beleive it to be the only colour?
Nope, I just corrected you assertion about Ford saying it.
Within the context of the post the quote clearly illustrates one point of view, whilst Paul argues the opposite.
Well I’ve learnt something today so thank you!
Sorry John, I have to disagree. Segmentation is not about pandering to sales-people’s whims and failing to explain an offer correctly. It is about gathering useful facts and data about different groups and using these to ensure that your offer is appropriate to the customer need. That way you maximise sales of standard products. Ford (And Volkswagen) in 2009 are experts at this – you only have to look at the current model line-up compared to that which existed 10 years ago.
Paul,
I’m not sure what you’re disagreeing with me on? I’ve no doubt that we both understand the benefits of segmentation.
I do however agree with Ford’s assertion that weak salesmen will use differing customer requirements as an excuse for missing a sale, which, left unchecked could lead to far too wide a range of product offering.