One of the most important issues that high-tech firms wrestle with is the choice of an initial target market with their promising new technologies. The rationale behind segmenting markets and selecting a target is to identify groups of customers who share similar needs and buyer behaviour characteristics and who are responsive to the firm’s offering. Leading authors like Kotler present the organization as a value creation and delivery sequence. In its first phase, choosing the value, the strategist "proceeds to segment the market, select the appropriate market target, and develop the offer's value positioning. The formula - segmentation, targeting, positioning (STP) - is the essence of strategic marketing." (Kotler, 1994, p. 93).
Step 1: Segmentation
Segmentation involves finding out what kinds of consumers with different needs exist. In the auto market, for example, some consumers demand speed and performance, while others are much more concerned about roominess and safety. In general, it holds true that “You can’t be all things to all people,” and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable. For consumer marketing, the traditional bases of segmentation include: * Demographic variables, such as age, income, gender, occupation, etc * Geographic variables such as geographic location, rural versus urban, etc * Psychographic variables, or consumers values and beliefs that affect their lifestyles and hence, purchasing behaviour, such as an orienatation toward a healthy lifestyle or being technologically current * Behavioural variables with respect to the specific product category: * Frequency/volume of usage (e.g. light vs heavy users) * Benefits desired in a product (e.g. ease of use)
* Usage occasion (such as work vs home)
For B2B marketing, one common segmentation strategy is based on...