Adhesive Classification and Some Further Thoughts on Market Segmentation – Part 2

Posted on 12/7/2012 1:21:43 PM By Jeff Timm

Last month my ASC Packaging Blog discussed market segmentation1 – its definition and examples of how to set up a segmentation strategy.  A colleague of mine who read the blog asked me if I could be more specific on the advantages of market segmentation.  Listed below are the advantages and a few added disadvantages as well to help balance out the discussion.

Advantages of Segmentation

  • Better understanding of your customer's business.  If used properly, this can shift the supplier/ customer power interface back towards the supplier.  Also, customer needs and requirements can be better understood.
  • Better able to forecast and understand changes in the marketplace.   For example, if you know a portion of your product is being used in carpet-backing adhesive, you can track carpet sales or new-home purchases to assist your forecasting efforts.
  • Quicker product-development extensions.  If all the players in a given segment are identified, singular successes can be duplicated quickly by introducing new products to others in the segment.  For example, a new PSA adhesive for a specific substrate.
  • Better focus.  By focusing on a few select segments, you can usually accomplish more than by taking a scattered "shot gun" approach.  More specific strategies and products can be developed based on the requirements of a specific segment.  This advantage eliminates the sometimes time consuming and less profitable “all-things-to-all-people” approach to marketing and selling.
  • Better-trained and focused technical service and sales people.  If segments are clear, the technical service and sales force can educate themselves around the selected segments and focus on segments that drive success.  For example tech service can focus on the segments that need more hand-holding or more development effort.
  • Deriving efficiencies in your operation.  If certain segments cost more to service and sell than others, ways can be identified to lower these costs or discontinue service.
  • Better competitive knowledge.  By effectively identifying your segments, you also can learn your competitors' position by segment.  You may learn why competitors ignore certain segments or heavily concentrate on others. Competitive strategies can be developed to address these findings.
  • More profitable sales.  Segmentation will uncover segments where price is not the major issue or your offering is undervalued and prices can be set to maximize return thru ‘value-in-use pricing.’

Disadvantages of Segmentation

  • Too much time and effort spent.  Sometimes trying to overdo segmentation or fine-tune the offering results in inefficiencies and cost.  For example, trying to sub-segment might uncover new niches, but the effort might have a negative outcome.
  • Too much focus.  Do not direct everything into one or two segment thereby neglecting other profitable or growing segments.
  • Chance to upset customers.  Moving down the value chain to understand your customer’s customer values can be politically tricky.   A clear understanding of the risks involved and of your customer relationships must be established before beginning this process.  The bottom line on this, however, is that you must learn the voice of the customer.  Not understanding your customer’s customer can have severe negative impact on your operation.
  • Total organization not "on board" on segmentation.  The sales and technical-service groups may segment and act in a differentiated manner, but the product group or business-center management may not. Inefficiencies and conflicts may result.

One example of a fantastic market segmentation configuration unfolded for me personally over the Thanksgiving holiday.  Our family and young granddaughters were visiting and in need of pre-dinner entertainment. Our daughter-in-law suggested ShurTech Brands, LLC Duck Tape®.  Buying precut designer sheets and rolls of various colors and patterns of Duck Tape® specifically marketed to the craft segment prior to the Thanksgiving visit was a surprising experience since this was this my first encounter with designer Duck Tape® I also was paying a hefty price premium over the standard roll of Duck Tape used for household projects.  There must be some hefty margins present here.

It turned out to be a fantastic idea as he girls were happily engaged in craft projects using Duck Tape® to make handbags and wallets.  That’s right Duck Tape® handbags and wallets!  It turns out Duck Tape has developed a market segment focused at the craft industry and most obviously young school age girls.

duck tape projects, diy duck tape, diy purses, duck tape purses, how to make duck tape purse

Isabella’s Duck Tape® Shoulder bag - Age 8

This is a true example of a company reinventing itself by transforming a standard PSA adhesive tape into a differentiated craft market segment that adds value to their total product line.  The ShurTech website for this segment is marketing directly to the consumer, their customer’s customer.

Do you have examples of market segmentation that you can share?  Please tell us about them in the ‘post a comment’ section below.

1 “Market Driven Strategy” by George Day

NOTE:  The views and opinions expressed in the Packaging Blog are solely those of the blog author and do not necessarily reflect the views and opinions of the Adhesive & Sealant Council (ASC).

comments powered by Disqus