|Question:||How do I decide which customers to go after?|
|Answer:||To begin, consider various “coverage patterns.” These patterns are simply the ways a firm might choose to allocate products to the various segments. While various coverage patterns exist, they can usually be categorized into five possible patterns, as shown below. |
Single-segment concentration: With this approach, you select a single segment on which to concentrate. With limited resources, this is a good approach.
Product specialization: With this approach, you concentrate on making a particular product and sell it to a variety of segments. This coverage pattern helps to build a strong reputation in a certain product category. Of course, there are downside risks if your product is made obsolete by another product.
Market specialization: In this coverage pattern, you concentrate on a specific segment and provide a variety of products or variations of a product which match the benefits that customers in that segment care about. This pattern also helps to build a strong reputation and provides you with specific experience benefits by serving a particular segment. Of course, you will be more dependent on this segment, which may be costly if the segment’s needs change.
Selective specialization: Here you select a number of segments and appeal to them with different products. This approach allows you to diversify your risk since if one segment becomes unattractive, you can continue to make money in other segments.
Full-market coverage: Here you serve all segments with all products. This approach is viable for firms with a large amount of resources.
A firm needs to think clearly about their resources and the risks inherent in these different coverage patterns when making decisions about which and how may segments to choose. You have to resist the temptation to pursue a coverage pattern that requires resources you do not have.
All of this, of course, assumes you know what a segment is. If you don't, read this tutorial that will explain it to you.