Market Mapping and Market Segmentation

Market Mapping & Market Segmentation

Market Mapping and Market Segmentation

A market map defines the distribution and value chain between supplier and final
market segment, accounting for the various buying mechanisms and influencers
found in a market. Market segmentation identifies those groups of customers whose
similar requirements can be satisfied by a distinct marketing mix.

The Marketing Process Company has developed processes and software to help
define both these inter-linked pre-requisites to successful strategic marketing
planning. The software tools, MMap and Market Segment Master, can be used in
support of the 10 stage market mapping and segmentation process shown below,
which is incorporated in a series of workshops.

Market Mapping Direct

Who Buys Who Buys What
$1,400M Corp Large Corp Groups Private
40% C G P
Groups
370ktns
21%
Direct Agent/ Private what what what

850ktns
Nat
27% 300ktns
30%Distrib's
Consults
retail etc where where where
1,250 ktns Distrib's(5) 1,935ktns33%

Overseas Importers
1,970ktns
35%
Independ
Distrib's(245)
400ktns
38%Manuf's
5 0 k t n s 35%Consults
215ktns
49%
2,385ktns3 4 %

200ktns
40%
(20,000)
525ktns
25% 5 0 k t n s 40%Independ 355ktns
15% when when when
Manufs
2,500ktns
45%
Co-Ops
(30)
& Clubs

405ktns
6%
290ktns
3 % Consults(150) Speclst

7 5 k t n s 22%
65ktns8 %
Public'n

Agents/
What is Bought how how how
Total European Market $2B Retail What products,
PMS share - 30% package, quality,
$600M A1 to A17 G1 to G13 P1 to P4
intensity, consultancy,
15%
services Micro- Segments
Where, When and How

Segmentation Segmentation Why

Micro- Segments
Stage 2 Stage 1
Doc in Finance
Market CPIs C1 to C17 G1 to G13 P1 to P4
Size Differ. Reach. the Box Dependent Innovative/new score
Seg 1 Leading Life Cycle Cost
Mgt CFO/IT Financing score
Seg 2 IT networking
Seg 3 Groups Sophistication score

OK
Seg 4 Mainstream
Seg 5 Maximum output
Public Brand-quality score
Seg 6
Brand-service
Seg 7 Extensive Application range score
and compatible with service Price
Intensive
the company! Surg Total 100 100 100

The Market Mapping and Segmentation process, shown graphically above, can be
distilled into a 10 step process, as defined by Professor Malcolm McDonald and Ian
Dunbar in Market Segmentation - how to do it, how to profit from it, and is used to
map and segment your market.

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1
Market Mapping & Market Segmentation

10 Step Market Mapping and Market Segmentation Process

1. Define market (need).

• List the ‘needs’ being met by the current products, as highlighted
by the current customers.
• The definition should focus around the needs of the final
customer (i.e. the final user.).

2. Set parameters for analysis (i.e. specify what is to be included /

excluded).

3. Estimate RAM (Realistically Available Market) i.e. that part of the

market in which your organisation can realistically compete.

4. Draw a map of the market your business is segmenting – CURRENT:

• Identify junctions (i.e. transaction stages).
• Include stages where influence is brought to bear on the
purchase decision [i.e. where influence / advice / decisions
occur (not necessarily a transaction) about which products to
choose].
• Draw a total market map – not just the part you currently deal
with. This will ensure you understand your market dynamics
properly. For example, avoid the word ‘’distributor’ if there are in
fact different kinds of distributors who behave in different ways
and who supply different customers.

5. Initial quantification:
• Total market volumes (units) / value (revenue) and your
organisation’s share, which flows through different channels.
Guesstimates.
• No. of businesses / customers which exist at each junction.

6. Draw a map of the market your business is segmenting – FUTURE:

• Record key drivers (such as e – business) that will have an
impact on channel mix.
• Specify key assumptions.
• Identify new / emerging junctions.
• Need to capture which channels will increase at the expense of
others.
• Adjust total market volumes and your organisation’s share,
which flows through different channels.

7. Expand detail (preliminary segments). Top-line’ picture developed so

far may be hiding important differences between customers. Note at
each junction on your market map (if applicable), all the currently
understood different types of companies / customers that occur there.

• Sketch out the various sub-junctions separately.

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1
Market Mapping & Market Segmentation

• Construct an outline (as opposed to the definitive picture).

Definitive picture can be entered once you have decided at
which junction(s) on the map you should be developing
segments.

• Highlight companies / customers who make decisions about

which product to buy (i.e. split junction into leverage / non-
leverage ‘members’).
• Redraw the market map incorporating the breakdown of junction
types.

NOTE:
Market mapping routine may be challenging the traditional lists
of company / customer types at the various junctions around
whom you currently conduct your marketing effort.

8. Identify the junctions where market segmentation should occur (Market

Leverage Points) on the Market Map
• determine which junctions ‘own’ or ‘influence’ the purchase
decision (i.e. those junctions where a decision is made about
which of the competing products/services should be purchased)
• segment junction furthest away from the supplier
(manufacturer) where decisions are made
• progressively backtrack along map away from final user towards
the supplier

9. If junction ‘owns’ or ‘influences’ the purchase decision, ask:

• Who buys (i.e. dominant profiling characteristics)?

• What, where, when and how do they buy?
• Why do they buy (underlying needs from which CSFs derived)?

10. Use process to segment your market into groups of customers who
share the same needs, behaviours and current channel preference.

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1
Market Mapping & Market Segmentation

Market Mapping and Segmentation Workshops

The objective of the workshop series is to produce a structure for the defined market,
which clearly identifies the different requirements that customers look to be satisfied.
These different requirements can then be used to develop the alternative strategies
that need to be implemented, to better access the segments and tune the product
offers to suit the customer requirements.

It should be noted that most organisations do not have access to the information to
produce a definitive segmentation structure that is 100% accurate. However most
organisations do have sufficient internal knowledge to produce something that is
‘roughly right’ and a reasonable starting point. Where this is not the case, the
process makes it very clear where the information holes are and the importance of
that information. If research is required, the process ensures a rigorous and very
targeted brief can be produced.

The Workshop series is structured in three phases, as follows:

1. Market Definition

A market is defined in terms of a need that can be satisfied by the products or

services customers view as alternatives. Once this is clear, the boundaries for the
segmentation project can be set.

2. Market Mapping

Market mapping is used to develop a clear understanding of how a market actually

works, looking at both the routes or channels to market and the role of influencers. A
key stage in market mapping is to identify who makes the decision between
alternative offers, as it is on these individuals/departments that the segmentation
review will focus.

3. Market Segmentation
Having identified the key junctions on the market map, these are analysed to arrive
at a segmentation structure. This is achieved by answering the following questions:

• Who buys?

Here the output of the market map is captured, by identifying and defining the
different types of decision makers such as large corporates, small independents,
individuals and so on, along with the revenue associated with their decisions.

• What is bought, where? when? how?

The objective of this step is to clearly identify the Key Discriminating Features
(KDFs) used by the decision-makers to choose between one offer and another. In
an airline example this could involve class of travel, fare type, additional services
(chauffeur drive, for example), schedule, airport, loyalty programmes, agency, direct
and so on.

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1
Market Mapping & Market Segmentation

• Who buys what?

The different types of decision makers identified earlier in the process are then
broken down into a series of micro-segments, to reflect the different ‘purchase
bundles’ they put together.

• Why do they buy?

As segmentation is about splitting customers or potential customers within a market

into different groups or segments, (within which customers have the same or similar
requirements), understanding the real needs customers are trying to satisfy by the
purchase bundle they put together is a crucial step. This information is converted
into Critical Purchase Influences (CPIs). For example, some segments will be
influenced by service and convenience, others by price and so on.

It should also be noted that CPIs may relate to how the micro-segment wishes to be
served. For example some large customers may wish to be served by a single point
of contact for all their needs, in which case they would be reached by the channel
serving those needs; for other micro-segments the Internet may represent the best
way to serve the customer.

The final part of this phase involves mapping product groups onto the identified
segments to produce an Ansoff Matrix, which defines the product-markets.

Ansoff Matrix

PRODUCT OR SERVICE
Existing New
Existing

Market Penetration Product Development

MARKET
New

Market Extension Diversification

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1
Market Mapping & Market Segmentation

MMap - The Market Mapping Tool

Market Mapping Tool is used in-house by The Marketing Process Company and
allows the production of market maps quickly and simply. These are some of its
features:

• MMap introduces a uniform language for market maps

• By adopting a single, consistent approach, MMap enables The Marketing
Process Company to produce a series of market maps to allow easy
comparisons between markets
• Maps constructed by MMap will be structurally and numerically consistent
• MMap is versatile enough to allow comparisons of volumes and values and their
percentages and market shares
• Market maps may be easily exported to a word processing or presentation
package
• The structure of the map is continuously checked whilst drawing to ensure
consistency
• Each map is produced in full colour. A re-colouring tool facilitates viewing of :
• routes through a channel
• the influencers of a particular channel and who the channel consequently
influences
• routes into and out of a channel by unique colouring by channel.

An example Market Map for a fictitious financial service market, (produced using
Mmap), shows the source of supply, market channels and (un-named)
product/market segments.
80.00%
Direct
0.50%
Sales (Banks) 35.00%

30.00%

100.00% 90.00% 15.00%

Retail 10.00%
Suppliers 90.00% 10.00% International
Banks 7.00%
Banks

0.50%
2.00%

3.00%
Direct 0.50%
Marketing
1.00% 0.50%

0.50%

0.50% 0.50%

0.50%

0.50%
80.00%
Local
80.00% 75.00%
Banks

3.00% 1.00%
3.00% Direct Mail 1.00%

1.00%

2.00%
1.00%

32.80%

10.00%
Other
10.00% 4.00%
Financial Inst

2.00%
16.00%

3.00%
2.00% Internet 1.00%

1.00%

2.00%
1.70%
1.00%

1.00%
Local Offices 0.20%

0.30%

0.50%

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1
Market Mapping & Market Segmentation

Market Segment Master® - the Market Segmentation Tool

Often companies sell products and services into horizontal segments. In these
cases, the product offer maps onto how the customers run their business, and
segments are often hard to identify in a way that will give maximum leverage in the
marketing plan. To help solve this problem, we have developed a set of tools (MSM
– Market Segment Master) and processes for analysing existing and potential
customer data, and generating and sizing segments.
The tool automatically segments on the basis of similar attributes, which either
directly map onto needs, or can be used to define needs. One of the great
advantages of the tool is that, as we ll as generating segment descriptions, it lists
potential customers who belong to each segment.
A number of novel outputs are produced in order to show the size and relationship
between the clusters found. As an example, below is shown a Spread-Cluster Map.

The colour of the discs represent the strength of a chosen feature (red graded to
green which represents high strength), the diameter represents the number of
customers in a cluster and the distance between the discs represents the relative
difference between clusters.
MSM and Market Segment Master are registered trademarks of Prof Malcolm McDonald and Ian Dunbar.

Copyright © 2003 The Marketing Process Company

Date: 27/06/03
Ref: Mkt Map & Seg v 2003.1