Market Segmentation: A Key to Success for Pharmaceutical Companies
The idea of dividing a market up into homogeneous segments and targeting each of them with a distinct product or message, is now at the heart of marketing theory. Rising costs and demands for affordable health care continue to challenge the traditional business assumptions and economics of the pharmaceutical industry. Also, this is raising internal […]READ MORE >>
The idea of dividing a market up into homogeneous segments and targeting each of them with a distinct product or message, is now at the heart of marketing theory.
Rising costs and demands for affordable health care continue to challenge the traditional business assumptions and economics of the pharmaceutical industry. Also, this is raising internal development risks, costs, and time requirements for clinical trials. To add to the complexity, pharma markets have become fragmented as providers, patients, physicians, and payers look for focused solutions that have optimal safety and efficacy profits for a narrower population of patients. Additionally, the role of greater transparency, reference pricing, and changes in decision-making are essentially shifting decision-making authority away from individual physicians to healthcare administrators and payers. These dynamics result in the complexity of product decision-making and continue to challenge the effectiveness of traditional commercial models in the pharmaceutical industry.
This is where the role of market segmentation comes into play. Market segmentation process enables pharmaceutical companies to move beyond product features and benefits or brand position to see specific needs through the eyes of specific market segments and this is an essential component of success for pharmaceutical companies.
At Infiniti Research, we understand the impact that target market segmentation strategies can have on your business. And to help companies expand, diversify, and tackle market competition, our team of experts have highlighted a step by step guide to market segmentation to help pharma industry players become market leaders.
Are you looking to create a new market segmentation strategy? Understanding what your target market segments want, regional market developments, and analyzing factors impacting business segments may hold the key to success. Reuqest free brochure to know more about the benefits of our market segmentation solutions.
What is Market Segmentation?
Market segmentation is the process of segregating a market of potential customers into segments, or groups, based on various characteristics. The segments created consist of customers who will respond similarly to marketing strategies and who share traits such as similar needs, interests, or locations. The sole objective of the market segmentation process is to be able to design a marketing strategy, mix or program that matches, and is as impactful as possible, for each specific segment. It helps companies spend their marketing and advertising budgets much more wisely. Also, it enables companies to refine their product or service offerings for specific segments. Businesses are more likely to be able to meet the needs of a smaller, targeted segment, and therefore be much more successful.
What are the Different Types of Market Segmentation?
Demographic segmentation is one of the widest and simplest types of market segmentation used. Most businesses use it to get the right set of people to use their products or services. Target market segmentation generally divides a population-based on variables. Demographic segmentation also has its own variables such as gender, age, income, family size, occupation, race, religion, and nationality. This type of market segmentation is most commonly used due to the fact that it has readily accessible information through existing customer relationships and can easily eliminate unnecessary data of the audience with just a few inclusions.
This is a type of target market segmentation that divides the population on the basis of their usage, behavior, and decision-making patterns. Behavioral segmentation divides your customers by their previous behavior in relation to your brand. It checks parameters including:
- Previous purchases
- Awareness of the business
- Patterns of purchase
- Usage level
- Knowledge of the product
- Rating of product or service
Psychographic segmentation is a type of market segmentation which uses activities of people, lifestyle, opinions, as well as interests to define a market segment. Psychographic segmentation is very similar to behavioral segmentation. But it also takes into account the psychological aspects of consumer buying behavior. These psychological aspects may be consumers social standing, his lifestyle as well as his activities, interests, and opinions.
This type of market segmentation divides people on the basis of geography. Your potential audience will have different needs based on the geography they are located in. Geographic segmentation segments your audience depending on where they are located. Segmenting in this way is best used when the location of a customer influences their purchase decision. This is nearly true for almost all the businesses and this makes geographical segmentation one of the most popular forms of segmentation used. The fact that nearly every business tends to have some kind of geographical information on their customers also makes this one of the easiest methods to implement.
What are the Benefits of Market Segmentation?
Benefit #1: Enhances the focus of the company
Target market segmentation is an effective method to enhance the focus of a firm on market segments. Better focus means better business. This helps in designing campaigns specifically for the target segments and aids in better returns and profitability.
Benefit #2: It boosts competitiveness
Naturally, if the focus increases, competitiveness in that market segment will also increase. This can also help in increasing market share and the chances of a new competitor entering might get low. Additionally, brand loyalty increases. Thus, market segmentation also boosts the competitiveness of a company from a holistic view.
Benefit #3: It helps in market expansion
Market segmentation can help in the immediate expansion of the market of any firm. If your market strategy is based on geography, then while catering to a particular territory, you can immediately expand to a nearby territory. Thus, the market share of business increases resulting in more revenue and profits.
Benefit #4: It helps in customer retention
By using market segmentation process, customer retention can be encouraged through the life cycle of a customer. Target market segmentation helps a company to focus on the needs and demands of specific segments effectively and customers feel valued. This increases their faith in a particular brand and they prefer to stick to that brand for future purchases.
Benefit #5: It helps in better communication
One of the factors of marketing mix which is absolutely dependent on segmentation, targeting, and promotions is communications. The communication of a company needs to be spot on with its target market. Thus, if you need a target market, you need a proper segmentation model. It is possible for a company to communicate with its customers effectively only if it understands the target market well.
Benefit #6: Helps in increasing profitability
Target market Segmentation improves brand recall, competitiveness, customer retention, brand equity, and communications. Thus, if it is influencing so many factors of your business, then definitely it has an impact on the profitability of the firm. One of the USP’s of top brands is their segmentation. They are in fact targeting segments which have no need for negotiation or bargaining. Thus, their profitability is high.
Market Segmentation Strategies: Tick the Checklist
A good market segmentation strategy is one which is able to easily measure leads, sales figures, and engagement rates for any single market. If it’s not, then it probably overlaps too much with different segments and needs to be checked.
If any single segment overlaps too much with another, then probably it shouldn’t be a segment in its own right. A good market segmentation strategy requires every single segment to be substantially different and unique.
Accessible through promotional and communication channels:
If you are able to communicate with your target segments easily, then you can expect your market segmentation strategy to be effective. It does not matter whether this promotion or communication occurs via social media, advertising, telemarketing or e-marketing. As long as you can reach the consumers within it, you can expect to maximize your ROI.
Market segmentation strategies can work effectively if market segments are not fluid but durable. How can you possibly expect to meet the demands, and communicate with, a segment that is consistently shifting and changing? It would be very difficult and would require infinite resources. Therefore, you need to ensure that your market segments are durable and stable in order to maximize your profits.
For your target market segmentation process to yield maximum benefits you need to check if all of your market segments are responding in the same way to the marketing mix or differently. If the response is the same, then it is likely that they are actually not different segments.
How can Market Segmentation Help Pharmaceutical Companies?
In order to stay competitive in today’s transforming healthcare environment and engage better with physicians and patients, pharmaceutical companies need to shift from being product-focused to being customer-focused. They need to improve the effectiveness of communications and interactions with customers, including both physicians and patients, to meet objectives of marketing and help promote better health outcomes. Market segmentation can help them doing so in the following ways:
#1: Market segmentation in pharmaceutical marketing provides a better way to understand your target customers. This makes it easy for pharmaceutical companies to create marketing campaigns that really resonate with customers.
#2: Market segmentation provides detailed information on consumer personalities, emotions, values, interests, beliefs, and attitudes. This, in turn, can help pharmaceutical companies to identify their issues correctly and provide the required solutions.
#3: Market segmentation in pharmaceutical marketing is a very powerful tool as it looks more closely at the attitudes and motivations of consumers, providing pharmaceutical companies with important information on what customers want and why they want it.
#4: Psychographic type of market segmentation provides crucial information on the factors driving behavioral change among customers. Messaging based on customer attitudes and motivations are more likely to activate desired behaviors and strengthen the relationship between patient and brand.
#5: Target market segmentation helps pharmaceutical companies to analyze augmenting behavioral and demographic data with key insights on consumer personalities and motivations.
Keeping tabs on target market segments, forecasting demand-supply shifts, tracking emerging market trends, developments in the regional market, and gaining insights on the potential impact of changing factors on business segments is not an easy task. It requires developing an understanding of your customers, their attitudes and behaviors, competitors’ products, and much more. Request a free proposal below and gain unlimited access to our portfolio of market intelligence services.LESS >>