July 31, 2018
Sandra Blair | Vice President Product Strategy
Market segmentation is based on the premise that companies don’t have sufficient resources to be everything to everyone. It lays out a logical process for defining core customers – those for whom resources are used to attract and retain – so you can best focus on them.
However, it’s easy to become sidetracked when defining a comprehensive market strategy for new products. Cool, new technologies and overly vocal stakeholders can shift attention away from real opportunities.
That’s why the first step in delivering profitable products is ensuring that new products are aligned with the needs and wants of your most promising and potentially promising customers.
Product portfolios are specific to an institution. Just because a product has shown success at another institution is no guarantee that it will be a star performer in your product portfolio, especially when customer composition and trade area characteristics differ significantly. That’s why it’s critical to analyze your market before committing resources.
Markets can be segmented on a wide range of factors ranging from demographics to attitudes and behaviors. Before engaging in developing a complex segmentation, however, think about what data you can easily obtain about current and potential customers. And, think about what data is linked to product usage and profitability.
Useful consumer segmentation schemes can be as simple as dividing consumer data into income groups within age segments. Business customer segmentations employ firmographics such as business size and company age – factors that historically have had a large impact on product adoption and usage.
The following example represents a cost-effective approach to consumer market segmentation.
Employing this approach also can be valuable when assessing potential mergers and acquisitions. It helps answer questions, such as:
Before moving forward, companies should be confident that proposed additions to product portfolios fit with overall product strategies and represent the best vehicles for optimizing resources across the organization.
Vice President Product Strategy
Sandra Blair has over 25 years of operational and consulting experience in Financial Services. She specializes in leading teams that provide technology solutions to the largest companies in the Fortune 500. Her experience spans the financial technology industry -- primarily electronic payment processing and banking -- with extensive experience in developing systems, call centers, and back-office operations for a number of industries.