Segmenting Technology Markets - Lessons Learned from Marketing Leaders

Jul 14

posted by Dr. Art Weinstein in Market Segmentation | 30 Comments

I recently completed a major research project with 70 top-level marketing executives on best practices in market segmentation in 13 high-tech business sectors. The study was  conducted in California, Florida and nationwide. My findings were published in the Academy of Marketing Science and Society for Marketing Advances proceedings, as well as the Journal of Strategic Marketing (JSM) and Journal of Marketing Analytics (JMA).

I began exploring this fascinating B2B marketing arena in 1990 when I did my doctoral dissertation "Market Definition in Industrial High-Tech Markets". A quarter of a century later, I am still learning from the experts in the field and sharing the insights gained with academic, practitioner and student audiences. For example, this work was recently featured in presentations/webinars with organizations such as the Business Marketing Association of Northern California, Direct Marketing Association, Market Research and Intelligence Association of Canada, amongst others.

Here are 10 recent knowledge chunks I gained in this latest round of inquiry:

A.    Segmenting B2B Technology Markets via Psychographics (JSM, 2014)

1.    While psychographics has captured the imagination of consumer marketers, only 22% of B2B companies used psychographics as a segmentation dimension.

2.    The top 5 B2B segmentation dimensions were application, firmographics, geographics, benefits, and value (psychographics was rated 9th).

3.    Those firms that did use psychographics were richly rewarded. It was the most effective segmentation dimension resulting in a 24% increase in business performance.

4.    While only 1 in 5 companies used "formal" psychographics, 3 of 5 (59%) used "informal" analysis - i.e., many years of marketing experience is a good proxy information source for sound decision making. Using formal or informal analysis led to better insights than not using psychographic thinking.

5.    Barry and Weinstein's 3 component, 8 item B2B psychographics model was strongly supported by the respondents (Journal of Marketing Management, 2009).

B.  Target Market Selection in B2B Technology Markets (JMA, 2014)

1.    The 3 most important criteria for target market selection were opportunities in the industry, sustainable differential advantage and profitability.

2.    Market oriented firms were more successful in using technology than production oriented firms.

3.    75% of companies used a differentiation strategy (target 2 or more market segments with 2 or more strategies). 54% of these companies were successful or very successful in their marketing strategy.

4.    Competitive analysis was a strong predictor of target market success accounting for 22% of explained variance.

5.    Firms using creative market selection criteria were more successful than those companies using traditional approaches.

What has been your experience in segmenting and targeting business and technology markets? What are your major challenges in truly understanding your customers and designing winning marketing strategies? What questions do I need to ask marketing executives in follow-up studies?

Art Weinstein, Ph.D., is Chair and Professor of Marketing at NSU. He is an internationally known expert in B2B segmentation who has written four books and dozens of scholarly articles on this subject. He has provided segmentation research, consulting, and training to some of the largest technology companies in the world. Contact him at art@nova.edu to request a copy of articles A or B.

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• #1 by Barry Barnes on 7/14/14 - 10:11 AM

  

  A very nice summary of your on-going research! I guess I'll have to read some of the journal articles so I can better understand the concept of "psychographics" as well as firmographics and geographics, as well as how benefits and value fit into the segmentation strategies.
  
  It's impressive to see that the psychographic model you and Barry developed is so well supported!

• #2 by Mohammed R Ahmed on 7/14/14 - 12:06 PM

  

  Interesting post!! Segmentation, Targeting, and differentiating are part of both marketing and corporate strategy. I am just curios about " (B) 2. Market oriented firms were more successful in using technology than production oriented firms.” Is this a industry specific findings (results) or the findings (results) are applicable to all the industry (capital and non-capital goods). It see some parallel to strategy and business model research that suggested that firms with a good business model will be more successful than firms with technology orientation.
  Thanks.

• #3 by Cinthia Vargas on 7/15/14 - 9:52 PM

  

  It is interesting to see that only 22% of B2B companies used psychographics as a segmented dimension. As I further my studies, the more I read how crucial it is for a business is to retain and capture customers through creative strategies, but also through understanding their needs and wants. How can a company learn their customer’s needs and wants if they don’t study their customers’ personalities, values, opinions, attitudes, lifestyles and interests? Reading your blog, you show how companies succeed when studies are performed to learn these aspects about their customers. A company will be able to cater services/products to customers and create a lasting value in those customers when those needs and wants are met. Great insight! Thank you!

• #4 by Mario Bruno on 7/15/14 - 9:57 PM

  

  Very impressed that after all these year Dr. Weinstein still interested in learning about B2B segmentation. Concerning the Psychographics study, I seem per this blog that it is still a new concept that companies are trying to adopt in order to increase their marketing, since only 22% of companies are using it. This blog also talks about a 24% increase in business performance; I would not be surprise to see the numbers of companies using Psychographics segments increase making Psychographics one of the top 5 B2B segmentation dimensions.

• #5 by Samantha Schemidt on 7/15/14 - 11:01 PM

  

  I found Dr. Weinstein's new findings quite interesting. I didn't know that segmenting technology markets via psychographics could have such a strong impact and how little companies actually use it. I think businesses should really consider this technique when it comes to segmenting a specific market. On another note, the rest of the findings were very insightful too, and once again business owners should rethink their approach on how they deal with their businesses strategies.

• #6 by Lemar Ingram on 7/16/14 - 10:34 AM

  

  While pychographics is clearly a top segmentation technique it seems to be done informally as opposed to having an articulated plan (While only 1 in 5 companies used "formal" psychographics, 3 of 5 (59%) used "informal" analysis). Is there a specific rational that drives this behavior? I ask because my company takes the informal psychgraphic approach and I believe we should transition to a more structured type of psychographic segmentation. I want to formalize the process because it will allow for a faster ramp up with team members new to our business.

• #7 by Michelle Castro on 7/16/14 - 2:35 PM

  

  I found Dr. Weinstein's blog quite informative and eye opening. It's hard to believe that with such empirical support only 22% of B2B companies use psychographics as a segmentation dimension. The fact that companies who do use psychographics have a 24% increase in business performance should be reason enough to take it into consideration. The companies that are not using psychographics are missing out big time, especially if their competitors are taking these psychographic factors into consideration while doing their own B2B segmentation. Psychographics play a major role in understanding your consumers and making sure that your marketing efforts and properly directed, so it was quite surprising to see that so little firms take this area into account.
  
  Another interesting point in Dr. Weinstein's blog was that competitive analysis accounted for 22% of explained variance in target market success, indicating that a properly executed competitive analysis will have a positive impact on an organization marketing strategy. When an organization evaluates it's environment they are more likely to have a better company strategies and thus able to create a competitive advantage in the market. Yet, many companies fail to conduct an environmental analysis and therefore lose out on valuable information that would have otherwise proven quite beneficial to the organizations success.

• #8 by Nathalie Hernandez on 7/16/14 - 3:35 PM

  

  Very interesting to see that Psychographics is such an underused tool in B2B segmentation. I believe that understanding a person or company’s personality, values, opinions and attitudes should be a top property when selling a product or service. By learning more about your customers Psychographics you will be able to produce a product that they need or want. I feel that companies should take more advantage of this tool. I personally would love to learn more about psychographics. Thank you for the insight!

• #9 by Cristina Wongsam on 7/16/14 - 4:58 PM

  

  Good summation on just one of many aspect affecting marketing and competitive advantage. It just goes to show that there is always something new to learn about marketing strategies, as well as new developments and ideas not used before. I can say psychographics were not something discussed when I originally went to school years ago. It exemplifies the need to be open to new ideas and strategies and stay current with new or emerging trends to really succeed.

• #10 by Art Weinstein on 7/17/14 - 10:32 AM

  

  Great to see that there is a lot of interest in B2B psychographics. Hopefully, some of our readers can educate their companies on the value of this segmentation dimension. Formal psychographics is often not used because it is costly (lower cost options such as syndicated data are available), it is not a quick fix (short-term impact can be made via specialized projects as opposed to major studies), and lack of expertise (read some of my articles to get up to speed in this area). While informal psychographics is a good start, it is generally not enough to secure a competitive advantage. The bottom line is that this research shows that this targeting tool works --- it increases business performance. That said, use it!

• #11 by Leeann Dunkley on 7/20/14 - 5:30 PM

  

  I found your blog to be quite interesting, one point that you made that struck me as a bit shocking is that only 22% of B2B companies uses psychographics, why is that when the concept has proven to be so beneficial to organizations and its consumers? I think your research is amazing mostly because marketing is such a critical component of companies today, it is essential to how an organization possesses its customers. I look forward to reading more of your research.

• #12 by Anthony Fernandez on 7/20/14 - 7:23 PM

  

  Very intriguing, informative blog post. As someone who deals mostly with financial statements and numbers all day at work, I am appreciative of learning about the other key aspects of running successful businesses ( i.e.,management, marketing principles and applications). It is one of the key reasons I decided to pursue an MBA in the first place; as a way to broaden my horizons so to speak.
  I am most interested (and alarmed) by the so few amount of B2B companies that use psychographics in market segmentation, considering it has been found to be most effective in increasing business performance. My first question is obviously why is this occurring in the market? Is it simply the case of businesses just now coming to this realization? Should we expect to see these numbers reverse themselves in the near future as companies adapt? I would expect this to be the case considering the strong upside.

• #13 by Roberta Barbosa on 7/20/14 - 8:36 PM

  

  This is a very interesting topic. I discussed a current event on March/2014 about Priceline implementing this kind of marketing strategy. I wasn't aware this was something that could be so beneficial to the businesses. The time I wrote this assignment, I discussed it from a customer's perspective in which I had concerns about online purchases and the sellers gathering information to know too much about my personal life. After reading Dr. Weinstein's post and thinking in having my own business one day, I believe that's one of the marketing strategies
  I should implement to succeed. Thank you!

• #14 by Luis F Galvis on 7/20/14 - 9:40 PM

  

  Dr. Weinstein, I was very pleased to read your blog. Its my first time learning about the term Psychographic and it seems to be more effective when it comes to analyzing a target market than demographics. Technology has change the way things were done before. I am pretty sure this technique is more cost efficient and this will help companies to understand much better the consumers(households) needs. According with what you gained from your finding companies that used a different strategy were successful.Sometimes we have to try new things and approaches to have gains. Innovation is the key.

• #15 by Akinola Olaosebikan Sholotan on 7/21/14 - 1:48 PM

  

  This is a very interesting article. Psychographics which is the study of personalities, values, attitudes, interests, opinions and lifestyle is very important in marketing. It is a very useful factor for increasing revenues of a company. Psychographics would also help in understanding the different way your target markets thinks and react. It would help a company construct the right campaign for a particular product. A questions to ask marketing executives is how do they gather information on psychographics ? To follow up on that question the marketing executives should be asked how reliable are the data collected ? As humans tend to give wrong information when subjected to certain environment.

• #16 by Mariemel Pabon on 7/22/14 - 3:53 PM

  

  This was a very interesting read. I am not surprised that competitive analysis was a strong predictor of target market success. Studying the competition is important in marketing in order to realize what you are up against. Reading about how psycho-graphics is used by some companies was also very interesting. There are multiple challenges when it comes to truly understanding your customers. There is such a variety of personalities, likes, and dislikes, that it makes it difficult to choose what type of product would please most people. Studying personalities and doing research within the market will help assist with this dilemma. One also must be sensitive to marketing strategies, especially in our world today, where there has been a lot of controversies regarding various types of propaganda. Some people may find something amusing, where as others may find it offensive. Remaining neutral, yet innovative and creative is the key to creating a successful marketing strategy.

• #17 by Claudia Soler on 7/22/14 - 10:06 PM

  

  I must do some more research on psychographics in order to understand how this can positively affect a company. It's interesting to see that even though it shows an increase in performance only 22% companies used it.

• #18 by Krystal Minor on 7/23/14 - 1:45 PM

  

  It is very interesting to me that statistics show that psychographics improve profitability of a company, and yet the majority of companies don't utilize psychographics in segmentation dimension. I'm currently taking Managerial Marketing, which has taught us the importance of psychographics when segmenting. It is evident that it's a known dimension to consider, so why are companies failing to use it as a segmentation dimension?

• #19 by Karen Wallace on 7/25/14 - 12:10 PM

  

  Interestingly enough, over the last decade or so psychographics continues to be more than just a collection of information .Based upon my limited research and knowledge of this topic, it appears that that information is collected and establlished to capture the closest match towards the consumer's likes, preferences and spending pattern resulting in a consumer profile. I believe the challenge which lies ahead will involve B 2 C and implemeting strategies that will continue to be relevant and measurable. Psychogrpahics can be very beneficial as busniesses can customize their products/service to meet a specific need. The challenge for the future will be delivering the product/service at the appointed time, this is where weighing consumer behavior against external factors may prove to be the best strategy. The question would be.. Are businesses utilizing results gained from consumer behavior indicators to take advantage of the golden oppourtunity to deliver on time? ...

• #20 by Akinola Olaosebikan Sholotan on 7/26/14 - 3:21 PM

  

  It is a very interesting article. Adapting pschographics which is the studies of attitudes, behaviors and trends of people is very important to increase market share of a company. The questions to ask marketing executives is "who is their target market ?" What do their market market want ?"

• #21 by Luis V Cardona on 7/28/14 - 12:03 AM

  

  I also find surprising that some companies are not using psychographic to understand customer behaviors and therefore understand what customers truly want. While I understand the use of psychographics involve more extensive research from companies and according to Dr.Weinstein is a costly effort, I believe that companies should invest more time and resources in using psychographics to understand customer needs to develop better marketing strategies.

• #22 by Erica Laceria on 7/28/14 - 9:35 PM

  

  Psychographic studies are most definitely the path to the future of marketing and successful business development. Understanding your customers needs, wants and culture makes it useful for entrepreneurs to develop products that will be useful and hot on the market. This methodology of using psychographic studies for business purposes closely relates to my current role at my job. We practice what we believe to be the future of marketing, known as "Inbound". This means of marketing allows us to gather data from the population through delivering free content, and depending on their likes/interaction with our offers/content, we are able to send them more information and offers they will find useful for their own needs. Companies that are currently not practicing these techniques will quickly realize in a few short years that they must in order to remain competitive within their respective markets.

• #23 by Amanda Graziano on 7/30/14 - 6:01 PM

  

  When in comes to B2B segmentation I find it very interesting how little Psychographics are utilized. In order to maximize profit it is essential to understand the person or company your product is geared towards. Through Psychographics an organization cannot only direct their marketing towards their customer but can also adapt their products to their customer needs.

• #24 by Santiago Franco on 8/6/14 - 1:29 PM

  

  As someone transitioning towards a marketing position in a high tech company, this reading presents very interesting points that support my daily observations. Market analysis and segmentation have to be adapted when dealing in a B2B market vs. a B2C market, and traditional marketing methods have to be restructured or disregarded, as the mentality of a business is very different than that of a consumer.

• #25 by Patricia Battifora on 8/6/14 - 2:59 PM

  

  Psychographic segmentation helps dividing the market into different groups based on social class, lifestyle and personality characteristics. It is fundamental in marketing to understand what is our target market. Not all customers have the same wants or needs.

• #26 by Jill Burgess on 8/6/14 - 4:57 PM

  

  Interesting blog post. More interesting is the statistics that were provided. If only 22% of those businesses studied utilized psychographics as a segmentation dimension, I am wondering what was determined to be the cause of the lack of use? It is cost, lack of knowledge in what psychographics is and how powerful the data can be? Psychographics is vtial for market reseachers to better determine their customer profiles and consumer lifestyles. This information has a direct financial impact on a company's ability to meet the needs and demands of their customers and gain a competitive advantage. Thank you for posting this article.

• #27 by Andrea Mieres on 8/10/14 - 1:23 PM

  

  Very interesting research conducted by Dr. Weinstein, i knew that segmenting technology through psychographics could have an impact but never imagined how crucial it could be specially for companies that are using it to gain benefits.

• #28 by Karen Anglade on 8/31/14 - 3:10 PM

  

  Interesting research and direction. Just like people, businesses have characteristics that are specific to them, so it is interesting that psychographics are still so underutilized in B2B marketing. It is somehow a reflection of how marketing can still be undervalued and not utilized properly in business.

• #29 by Gabriella Bevilacqua on 8/31/14 - 5:27 PM

  

  I found Dr. Weinstein’s blog to be very informative and interesting. I especially found it intriguing that firms using creative market selection criteria were more successful than those companies that use more traditional approaches. This demonstrates that innovation and other forms of market selection criteria are developing and changing with the times.I also found it interesting that 22% of B2B companies use psychographics as a segmentation dimension. Psychographics have proven to be effective in understanding the market and ultimately result in a 24% increase in business performance. It seems as though firms would be at a disadvantage if they did not take these factors into consideration in their efforts to understand and serve consumers. This is a very interesting topic to explore in the field of marketing research, and I look forward to gaining insight into Dr. Weinstein’s future research findings, thank you for this information!

• #30 by Jermaine English on 9/10/14 - 11:30 AM

  

  I think my challenges for understanding segments and markets are that people are more accustomed to having their product and services customized, which makes it difficult to meet the needs of individuals versus a market. For example Netflix customizes their products thereby allowing multiple users sharing the account to have their preference of movies and profile. The users wouldn't have to deal with searching for movies of their preferences. Another example of growing market is the fantasy sports market. I have found it difficult to generate a market to meet the needs of the average users of fantasy sports. Meeting customers’ needs will be challenge for business due to growth of customer’s expectation.