The purpose of market segmentation is the maximization of marketing program effectiveness and thus profitability. Gathering the information for segmentation purposes supports the ability to define the most desirable customer profile. With this knowledge the most desirable customer can be marketed and sold to. The process of identifying customer profiles involves identifying those with the highest number of common possible responses then determining the profiles with the greatest number of participants. The sales potential and relationship costs of the profiles should be determined for viability. It should be considered that a smaller segment may yield greater profitability. And finally, the dominant profiles of the customer base should be compared to the potential target market to assess alignment. Following are keys to developing and evaluating target market profiles:
- Define Commonality in Segmentation Responses – Creating profile(s) from statistical data involves finding the highest occurrences of possible responses among survey participants. Those profiles with the highest degree of commonality will result in identification of the segments with the greatest number of participants.
- Determine Prevalence of Profiles – Identifying the most common profiles within a target market will indicate the profile of people with the greatest market potential. For example determining that the greatest number of participants in the survey is between 40 and 50 years of age and drive a vehicle that’s between 5 and 7 years old will provide a profile of the largest group in the target market.
- Assess Sales Potential of Profiles – Different profiles will bring different levels of sales volume. For example, a difference in age may indicate how diligent a person is in having preventive maintenance services performed on their vehicle. Or the age of the person’s vehicle may indicate that certain parts are approaching the point of failure. Indicators like this can be effective indicators of potential sales volume.
- Define Acquisition and Retention Costs – The cost of reaching new customers can vary based on the methods employed in reaching them. Thus the acquisition costs of some target profiles may be greater than others. The cost of retaining customers can also vary. Customers that are ‘high maintenance’ can be more expensive to retain.
- Align Customer Profiles with Prospect Profiles – An important factor to consider is the comparison of the most prevalent customer profiles to those of the overall target market. If there’s a wide disparity it may be due to conscious choices made on whom to provide vehicle service for. Or it may be due to poorly placed marketing focus.
