WE continue with excerpts from Dr. Ned Roberto?s latest book, ?Segmenting?How Market Segmenting, Self-Segmenting and Desegmenting Are Changing the Marketing Game.?
One common error in marketing involves confusing segment market size with segment population size. In their market research surveys (UAI-Usage-Attitude-Image) or omnibus survey research reports, even leading multinational market research agencies refer to segment market size as equal to segment population size.
But usually, segment market size is not equal to segment population size.
The ?Segment Market Size? Rule defines segment market size as follows:
Segment value market size=(segment population size) x (usage frequency) x (average amount spent).
Segment volume market size =(segment population size) x (usage frequency).
The implication of this rule on estimating segment market size is far-reaching.
For example, even at the third level segmentation, a segment with a small or even the smallest population size is not necessarily the smallest segment market size.
Here?s a Metro Manila survey of vitamin takers to quantitatively clarify the rule.
The survey compares the segment market size of the super-premium vitamin-taking segment?estimated to be just 10 percent of the total adult Metro Manila population?with the sub-economy generic vitamin-taking segment that is about 42 percent. In terms of segment population size, it?s clear that the sub-economy segment is 4.2 times the size of the super-premium segment.
But in terms of segment market size, which is the bigger segment?
According to the survey, the super-premium vitamin takers, who account for 10 percent of the Metro Manila adult population, take the most expensive vitamin (indexed at 100). They also take vitamins twice a day for 300 days of the year.
In contrast, the sub-economy vitamin consumers, who make up 42 percent of the total adult population, take the most inexpensive vitamin, that is about 30 percent of how much the super-premium vitamin is taking, and only when they are sick.
On the average, these vitamin takers are sick twice a year and for about six days.
If you plug in these figures to the formula to estimate each segment?s segment market size index, you will get the following:
Segment value market size INDEX=(% segment population size) x (average usage frequency over a year) x (price paid index)
Super premium segment value market size INDEX=(10%) x (300 days x 2x a day) x (100 price index)=600,000 segment value market size index
Sub economy segment value market size INDEX=(42%) x (6 days x 1x day) x (30 price index)=7,560 segment value market size index
Comparing the two computed segment value market size indices makes clear that the small 10 percent population size super-premium segment is in fact 79 times the segment value market size of the larger 42 percent population size sub economy segment.
So, try to avoid this common error in identifying the market segment with the larger or largest segment market size. In most cases, segment market size is not equal to the segment population size.
You have to consider the two multipliers to the segment population size to get the segment value market size. Those two are: the segment usage frequency and the segment?s average amount spent.
(Dr. Ned?s book, ?Segmenting?,? is available in any National Bookstore or Powerbooks branch. Questions or comments? Send them to marketingRx@pldtdsl.net or drnedmarketingrx@gmail.com.)
