Market segmentation and why you should listen to your analyst

An organic farmer found that he was producing so much milk that the local dairy couldn’t cope with his supply. The dairy kindly suggested the farmer might want to make some milk related products and sell them from a stall at the farm.

The farmer started thinking, what should I do - sell wholesome fresh milk, make cheese, yogurt, butter - he decided there were too many choices. The farmer decided to hire a marketing consultant to determine what the market wanted from organic milk products.

The consultant interviewed visitors to the region, local residents and business people. With the data the consultant collected a market segmentation was prepared. It was determined that because there was a cheese shop in the town that also specialised in butter there was no extra demand for these artesan products, so the remaining market demand was identified for variations of pure fresh organic milk. The market was roughly split into two very different customer types:

• Customer Type One wanted Ice Cold milk that would be partnered with juicy fresh strawberry’s from the neighbouring farm to make milkshakes.
• Customer Type Two wanted Hot, Steamed milk that they would add to their Espressos from the neighbouring coffee shop in the village to make delicious espresso macchiatos.

The farmer took the analysis that the consultant had prepared, and after some review decided that there would be a nice mid-point between the two customer types and that with no extra effort he could simply meet the demand by selling milk at warm temperature. This way he wouldn’t need to spend the time preparing the warm and cold milk, the customers would be happy with this he thought.

Three months into the new milk stall, the farmer sold none of his extra milk.

Lesson: listen to your analyst when you are presented with a market segmentation it might be make or break for your business.