The Challenge of Segmentation

Segmentation is a difficult thing to wrangle sometimes. When internet-based sales starting picking up steam ten years ago, people weren’t sure how to respond, though the thought process really shouldn’t have been much different than for catalog sales. The main difference is that the catalog was now online and accessible to anyone who was interested.

What the internet, and catalogs for that matter, gives you is another channel for selling to customers, even if the audience is different. Thus is the challenge of segmentation. The essential question is this: what do you offer to sell people, where and at what price? OK, maybe it’s three questions. Regardless, there are four basic ways to segment your offering:

  1. Selling the same brand, with the same features and pricing, through different channels—You offer the same thing online or in a catalog that you do at retail for the same price.
  2. Selling the same brand, with differing features and pricing, but through the same channel—Your retail offerings for the same brand are priced differently, based on the features.
  3. Selling the same brand, with differing features and/or pricing, through different channels—What you offer online is exclusive to the channel and different than what you sell at retail, even for the same brand and similar product.
  4. Selling the same product, with the same features, different pricing and brand names, through the same channels—You offer the same product with the same features and through the same channel (online or catalog or retail) but under different brand names.

What’s going to work best for you depends on the product you sell, the channels available to you and your customers and how effectively you can manage the process. A major concern will be how the channels (or brands from option 4) compete with each other and cannibalize sales. Sometimes, none of these options make sense as there is only one way to sell your particular product.

But make no assumptions. Explore the options. Do some tests. See what makes the most sense. And most importantly, sell to your customers where they are, at the price they expect to find and with the features and benefits that deliver on your brand promise.

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