Segmentation and Targeting (Marketing)

Analyzing customers in the 3Cs, here's another for the marketing series on Segmentation and Targeting. I'm going to explain these two subjects on a high level and then expand upon their application. Segmentation and Targeting are both essential for analyzing customers and focusing marketing and sales efforts on the customer that is deemed most profitable.

Segmentation simplifies the complexity in understanding customers by boxing them into categories based on consumer characteristics- whether they be demographic, behavior, attitudes or benefits sought.

Demographics: Separating based on "What" consumers are.. whether it be age, income, gender, geographic region
Pros: Easy to segment
Cons: Does not capture behaviors or attitudes

Psycholographic: Separating based on what consumers think and why they buy a product
Lifestyle: How a product reflects their lifestyle and opinions and attitudes of life
Personality: how a product engender's one's personality

Behavior: Segmenting based on usage, response, and loyalty
-Usage Occasions: Ex: Kodak cameras are single usage, outdoors, etc
-Usage Rates: how much people use products? - Everyday facebookers or once a week
-Loyalty: Do you exclusively go on facebook or also myspace too?

History of Segmentation
1. Began with mass marketing - (shotgun) where one product was marketed to everybody
1a. With increasing competition and fragmentation of markets...
2. Came Segment marketing as we know today where companies actively search for segments (example- Mac has 3 different types of computers)
2a. Then there exists another shift towards an information revolution, and JIT manufacturing
3. Finally there are segments of "one" where each product is individualized to the customer with individualized marketing.

A quick rule of thumb: 5% of your customers make 80% of your revenues. 
Formula for expected value including retention: Value = retention x rev x (1/(1-retention)

Targeting Quickfact: You want to target the audience that is highly profitable and has high loyalty
Also, you want companies that are accessible.