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Are Market Segments Determined by the Product or the Market Served?

Updated on February 13, 2019
heidithorne profile image

Heidi Thorne is a business author with 25 years experience in marketing and sales including a decade in the hotel and trade show industries.

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A Marketing Chicken-and-Egg Question

So which one should be decided upon first? The product (or service) to be offered? Or the market segment it will serve? It could be argued that if you don't have a product, you can't serve a market. True... mostly. But if you don't have a market segment to serve, why produce a product? Still with me? Definitely a marketing chicken-and-egg question, but one that can have dramatic implications for the future of any business' sales and marketing efforts.

Additionally, an identical or similar product can serve multiple market segments.

So now what?

Product Segments versus Market Segments

Let's take mobile phones as an example here. They're used by almost everyone (literally) from the billionaire to the bankrupt. So they could be considered a product segment, but not necessarily a market segment.

Plus, there can be product segments within product segments. For example, smartphones (those with apps, Internet access and more) could be considered a separate segment from standard mobile cell phones or "feature" phones (phones with some enhanced capabilities such as texting or email, but not the full range of apps available on smartphones).

Market Segments Within Product Segments

Continuing the mobile phone discussion, within that product segment there are multiple market segment layers. These layers are determined more by what the product (or service) means for the customer.

For lower income wireless customers, their mobile phones may be their only access to the Internet, as suggested by a survey done by leading research think tank, Pew Research Center. In their 2015 study, Pew found that 13 percent of lower income (an annual income lower than $30,000) were smartphone-dependent for online access, meaning that they either have limited or no other way to access the Internet. So for lower income users, the smartphone could be their lifeline to the Internet for information, job opportunities, and more.

Contrast this with those who earn a household income of $75,000 or more: Only 1 percent of these smartphone owners were smartphone-dependent for online access. So for higher income users, smartphone access is just another Internet access point.

This truly creates two different markets and two different marketing messaging strategies. For lower income users who are smartphone-dependent, the messaging could be centered around a smartphone as a life necessity. For higher income users, emphasizing convenience of Internet access everywhere on multiple devices might be a more attractive message.

Who's in Charge?

Compounding the situation is the fact that some market segments emerge AFTER a product or service has become commercially available, with customers finding ways to use them in new ways and in new places.

For example, I wrote my book, SWAG: How to Choose and Use Promotional Products for Marketing Your Business, with end user marketers in mind. However, I also, unintentionally, created fans among promotional products sellers like myself, who used the tips to help better serve their own customers.

Don't marketers do research before investing in new product or market development to determine customer segments beforehand? Sure they do. But remember that even when ideal target customers are surveyed, what they say they will buy—and how they will use it—might not be what they actually buy or do in reality.

The Never-Ending Cycle

Every new product or service introduction is a risk. To reduce the risk, market research is typically done prior to investing in development. However, new market segments may emerge which could completely alter how a product is sold and marketed... and may even spawn ideas for even more new products. This creates two very important marketing functions:

  • Constant Monitoring of Sales, Trends and Traffic. Simply measuring the dollars from sales tells marketers little about what is working. Additional insight can be gained from such tools as website traffic and sales trend analysis.
  • Build Communities, Not Just Customers. Building communities of customers through avenues such as social media and events can provide valuable perspective into what makes these markets tick. What's important to them? What type of lifestyles do they have? Armed with this knowledge, marketers can better understand customers and make course corrections at every stage in the product life cycle. Plus, a new or newly discovered demand might suggest even more new products or services that could be developed.

So the chicken-and-egg cycle of product and market segment development continues on... and on... and on...

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2015 Heidi Thorne

Comments

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  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    3 years ago from Chicago Area

    Hey, lawrence01! Love the examples you provided. Yes, these market leadership questions are some of the toughest that any company must answer. Thank you so much for adding this insight to the conversation! Have a beautiful day!

  • lawrence01 profile image

    Lawrence Hebb 

    3 years ago from Hamilton, New Zealand

    Heidi

    I found myself thinking of companies that sought to lead the market rather than wait and see what transpired.

    Back in the mid 1980's Sinclair computers (makers of the first portable 'laptop' with a whopping 48k memory) saw the oil shortage and built the first electric car! It could do 15mph and had a range of 20 miles but was so small other cars couldn't see you, it was a commercial flop and tge company went under but today we have Hybrids and electric cars using technology Sinclair pioneered!

    Then you have Google who isn't interested in following the market but in leading it.

    Working out where they want the market to go and going there first!

    Yes they'll have flops on the way but 'not all the eggs are in one basket' and they make life easier!

    Great hub

    Lawrence

    Shared to Google+

  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    4 years ago from Chicago Area

    Thanks, Larry, for the kind comment! Have a great weekend!

  • Larry Rankin profile image

    Larry Rankin 

    4 years ago from Oklahoma

    Good analysis!

  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    4 years ago from Chicago Area

    Oh yes, FlourishAnyway, sales personnel are VERY aware of the market segments they're serving... or don't want to. And you have a perfect real life example. Thanks for adding your experience to the conversation! Hope all is good and have a delightful day!

  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    4 years ago from Chicago Area

    Hi purl3agony! Even though I already have a business, I also kick around adding new business ventures. But then I have to go through the evaluation process and quickly abandon many of them. Thanks for chiming in! Have a wonderful day!

  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    4 years ago from Chicago Area

    Happy Tuesday, to you, too, billybuc! All of us are "majoring" in marketing all the time. Glad you found something new and interesting. Cheers!

  • billybuc profile image

    Bill Holland 

    4 years ago from Olympia, WA

    I've said this before but it is worth saying again: I majored in marketing and yet I learn something new from you in every article, and for that I thank you.

    Happy Tuesday my marketing guru!

  • purl3agony profile image

    Donna Herron 

    4 years ago from USA

    Thanks Heidi, for sharing another interesting discussion with all of us. I often kick around the idea of opening my own business. Your hub has given me a lot to think about as I put together my plans and consider my options. Thanks for posting and sharing!

  • FlourishAnyway profile image

    FlourishAnyway 

    4 years ago from USA

    You provide excellent examples. Before I got my iPhone, I had a throw away phone and had Verizon for service. The treatment is way different depending on what type of device you own. Better device, better treatment. Once they found out what type of device I was there for, the tone changed completely.

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