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In traditional market segmentation techniques, factors like demographic, socioeconomic, and psychographic variables become the basis for predicting buyer behavior. These variables can always change, making it harder to determine how buyers will behave. As a result, predicting a customer’s future purchase decision becomes inefficient. To correct this, marketers can use benefit segmentation to group consumers based on perceived benefits.
What is Benefit Segmentation?
Benefit segmentation is categorizing and targeting consumers according to the benefits, value, or advantage they are looking for. Markets that consume a specific product or service do so because of their perceived benefits. As customers are segmented by the value they’re looking for, benefit segmentation is a good way to determine real market segments.
Firms can use core needs as bases for creating segments. They can then create a profile for the consumers in each core group. In addition to core benefits identified for each segment, each group can have other factors like brand attitudes and levels of consumption. This allows for a better understanding of consumers in any given segment. Other categories in segmentation are quality, performance, customer service, or special features. These profiles allow firms to offer products that each core group actually needs.
Benefit Segmentation Example
For example, in the financial industry, banks identify eight types of core benefits. These are personal service, investment, limited banking, accessible cash card, advice, money management, and full banking. Aside from these core benefits, they can also include demographics and customer service as extra features. Then, for each segment, banks will create customer profiles to be more efficient and effective in their targeting. They can achieve this because the focus is on what consumers hope to enjoy when doing business with them.
Businesses that could not yet identify their specific benefit segments can use generic segments as their starting point. These generic segments are status seekers, innovators, brand loyalists, smart shoppers, pleasure seekers, and brand connectors.
For each generic segment, the firm can determine the benefits that customers would likely want or seeks. For instance, status seekers look for brands or products that confer social status. This applies to expensive goods or luxury products where price and quality are associated with a certain lifestyle. For the smart shoppers’ segment, they often look for the best deal or best attributes. The same deductive process applies to other generic segments. This helps businesses arrive at specific benefit segments.
Both sellers and buyers may be the objects of benefit segmentation. In the case of Airbnb, it created two types of ads to attract not only guests but also hosts. This is because Airbnb doesn’t directly sell rooms to consumers. It is responsible for finding customers to book rooms. At the same time, it has to ensure that hosts have desirable living spaces. Airbnb uses benefit segmentation so that its ads target both guests and hosts.
Strengths and Weaknesses of Benefit Segmentation
Just like most strategies and approaches in marketing, benefit segmentation has several strengths and weaknesses.
Benefit segmentation may be a better approach compared to the other types of market segmentation. This is because of its widespread application, flexibility, and causality in predicting future buyer behavior. It is applicable in almost any type of business across a varied number of industries because every product or service will always offer certain benefits to its buyers.
- Due to its flexibility, sales reps can convert more leads into customers when they utilize benefit segmentation. This is because the marketing campaigns and sales pitches they create and execute will attract target customers who can relate more to your product or service. With that in mind, reps will call only those people previously identified as the ones who may be looking for the kind of benefits that their products or services offer.
- Benefit segmentation provides better positioning for a product or service. This is because key values are already identified. Samsung is one brand that’s successful in this regard. The company manufactures phones for two audiences. One is the youthful audience looking for fun camera features. The other is the professional who wants longer battery life and better security. Samsung then creates two types of marketing campaigns with each one highlighting benefits that resonate with each target market.
- Benefit segmentation also increases customer satisfaction and retention. Considering that products and services fit the needs of customers, there’s no reason for them to look for other sellers unless their needs change. Hulu, for instance, has made itself a viable alternative to cable TV. It promotes conveniences, efficiency, and cost-savings as the benefits that subscribers can get for their subscription. For as long as these benefits remain, current subscribers will be happy to continue paying monthly fees to access movies and TV shows within their platform.
- Product expansion can also result from benefit segmentation. When Apple released its smartphones, it runs on iOS as its operating system. Samsung saw a demand among many consumers that don’t like iOS or can’t afford the costs of iPhones. Samsung released Android phones that allow users to use smartphones at more affordable prices. Eventually, other brands expanded their product lines to include android smartphones.
As for weaknesses, benefit segmentation can lead firms to become too product-oriented. As an effect of this, they could end up neglecting trends and future needs. This could result in a lack of innovation. This is particularly true for those that have found success by selling core benefits they’ve identified. They wouldn’t want to disrupt their proven business models for fear of losing their market share. They don’t realize that this degree of inflexibility may cause it to overlook growth opportunities.
Overall, firms can’t ignore the advantages of benefit segmentation in creating effective marketing plans. It is an effective approach to reducing the threat of being substituted with a competing brand by creating or designing products with attributes that appeal across different benefit segments. Brands can have an array of benefits to increase their value. But firms can choose to highlight two or three of those benefits to promote a strong and clear position in the market.