Successful Needs/Benefits Segmentation: A User′s Guide

Abstract

Discusses needs/benefits segmentation in the context of alternative ways to segment markets. Describes the elements most important in the successful design, implementation and strategic use of needs/benefits segmentation. Counters a set of five commonly held myths, with implications for effective management of expectations and use of results.

Evaluation of structure and reproducibility of cluster solutions using the bootstrap

“…Sixty-five percent admit to having difficulties interpreting segmentation solutions. Similar conclusions emerged from earlier conceptual and qualitative studies (e.g., Greenberg and McDonald, 1989;Dibb and Simkin, 1997). These findings confirm that there is not only a need for more guidance regarding the choice of segmentation solutions among academic researchers, but that users of segmentation solutions in industry suffer from a knowledge deficit, which makes it even more important to provide them with guidance to avoid the use of random and sup-optimal market segmentation solutions as the basis of their strategic decisions.…”

Methodological reasons for the theory/practice divide in market segmentation

“…This finding indicates the situation has not improved much since Greenberg and McDonald (1989) stated that users of segmentation studies believed in false segmentation myths. One encouraging finding in this context is the awareness that the number of clusters chosen has an effect on the resulting solution.…”

“…Managers frequently lack conceptual understanding of market segmentation (Dibb and Simkin 1994) and commitment (White 1992), and consequently do not provide adequate budgets for segmentation or its implementation (Dibb and Simkin 2001). Greenberg and McDonald (1989) Our study investigates mechanical flaws, and contributes to the understanding of why the theory/practice divide occurs in the area of market segmentation. We examine which methodological aspects of segmentation studies contribute to the communication problem between researchers/data analysts on the one hand, and managers on the other.…”

“…The main reasons are the focus of academic studies on statistical techniques, and managers' lack of understanding of fundamental segmentation basics (Dibb 2005;Greenberg and McDonald 1989). To date, only one study has explored methodological reasons for the theory/practice divide: Dibb and Simkin 1994.…”

Judging the quality of customer segments: segmentation effectiveness

“…His notion of segment size (substantiality) is echoed by Chaston (1990), by Young et al (1978), who link it with profitability, and by Adcock et al, (2001), who also emphasise the reachability and relevance of segments. The concept of accessibility is reflected by Saunders' (1980) focus on segments which are managerially useful, and by Greenberg and McDonald (1989) who discuss the suitability of segment output for programme development. The notion of simplicity in assigning customers to segments (Abratt, 1993), and the desire for homogeneous and distinctive customer segments (Bertrand, 1989;Hooley et al, 2004), also relate to accessibility concerns.…”