Page 3: Customers and segmentation
Within markets, not all groups of customers are the same - they do not have the same taste, and incomes or want the same things. It is helpful to think of a market as an orange. When you look at the orange from the outside you see a shiny orange skin that all looks the same. However, when you peel off the skin you find that it is made up of a number of segments, each of which exists within the whole. The segments in an orange are more or less identical, but in markets, by contrast, they are different in terms of size and character.
A segment, therefore, is a group of consumers who share common characteristics, that are different from other groups. Different segments may require different versions of the product, they may pay different prices and they may buy the product in different places.
The most common way of segmenting a market is by demographics. Demography is the study of population. Demographic segmentation recognises that different sections of the population have different buying patterns and preferences to others. For example, there is a difference in taste and spending patterns between the old and the young, between men and women, according to locality etc.
Argos tested out demographic approaches but found that this was not a very accurate basis for segmentation. A much more helpful basis has proved to be the frequency of visitors (i.e. the number of times customers visit the website, or visit stores).
A distinction is often made in business between the internal and external customers of an organisation. The external customers of a retailing business are the shoppers who want to be served in an efficient and friendly way. Internal customers are fellow employees that we work alongside in a place of work. If we treat them as customers then we help them to serve external customers well.
The Argos way of working is built on a belief that the external customer is the most important customer. Argos people are a team of colleagues who work together to meet customers needs.