In this foundational chapter from Market Segmentation: How to Do It, How to Profit From It, Professor Malcolm McDonald and Ian Dunbar provide a powerful argument for why market segmentation remains the cornerstone of successful marketing. Drawing on academic research, real-world data, and decades of consulting experience, the authors explore how companies must understand their customers’ true needs in order to deliver profitable, competitive value propositions.
Why It Matters
- Most marketing failures stem from weak or misaligned segmentation
- Segmentation is the foundation of strategic marketing — not just comms or sales support
- True customer insight means going beyond demographics and focusing on needs-based segmentation
Key Topics Covered
- The state of marketing and why it’s losing boardroom influence
- Clear definitions of marketing, segmentation, and value propositions
- The role of segmentation in defining markets, strategies, and competitive positioning
- Why pre-defined categories (e.g. demographics, channels) aren’t enough
- A practical 7-step segmentation process:
- Define the market
- Create a market map
- Identify decision-makers and their needs
- Form needs-based segments
- Test and validate segment relevance
- Score segment attractiveness
- Assess your competitiveness by segment
Insight
“Markets are not homogeneous. They consist of customers whose needs differ. Companies must identify the different customer segments and decide which ones to serve.” – McDonald & Dunbar
Download the Full Academic Chapter
This summary highlights core ideas, but the full chapter includes detailed process diagrams, market maps, and case commentary.