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When Market Segmentation Becomes a Fault

By: John Malmo

John Malmo began an advertising agency on a cardtable above a delicatessen in 1967 and built it into the largest in the mid-south. He also owned a travel agency, a clock shop, and a snack food manufacturing company. He is president of Koenig, Inc., Management Consulting, specializing in marketing, and he writes a weekly business commentary column for The Commercial Appeal. His 45 years of marketing experience encompass, virtually, every business category. Email him at: jmalmo@archermalmo.com

In the '40s and '50s you could always tell when somebody's dad had made it, because he traded the Chevy for an Oldsmobile or a Buick.

Of course, in those days there were only about 20 brands of cars in America, and things were easy for General Motors because its brands were dominant.

A lot has been written recently about the impending burial of the Olds brand, but little has been said about the fact that GM's proliferation of models in every brand simply rendered its once successful marketing strategy obsolete.

GM pioneered market segmentation with a stair-step offering from Chevrolet through Oldsmobile and Buick to Cadillac, plus Pontiac for the overgrown zoom-zoom segment. GM was the first to really take advantage of differing tastes and pocketbooks. It was a stroke of marketing genius.

During the last 40 years, though, progressively GM abandoned that strategy, and tried to segment the car market within each brand. All of a sudden, there were Buicks that were cheaper than Olds, and Olds cheaper than some Chevy models. Then import brands flooded the market, more than offsetting the demise of bit players such as Hudson, Nash, Packard and Studebaker.

The result is today there are far more brands and models than market segments. That has created war-like competition among more than a dozen different brands and models for each now mushy segment.

In the meantime, Oldsmobile's market segment disappeared. With GM no longer dominant, there is not a large group of buyers that can be identified simply as a market position ``between Chevy and Buick or Cadillac.''

It's another case of a manufacturer smart enough to create a marketing coup under one set of market conditions, but unable to react effectively when conditions changed.

No consumer market is static. Whether it's cars or toilet tissue, buyer segments within each category are fluid. Few segments are the same today as even 10 years ago. A market that had four identifiable segments in 1990 may today have two or a dozen, each different from the original four.

As Oldsmobile became a marketing mess, so can any brand when its buyer segment vanishes, and for which a new segment cannot be identified.

Another Olds lesson is that brand awareness alone is expensive and worthless. Hundreds of millions have been spent for a merry-go-round of unsuccessful advertising positions in search of a segment. Everybody's aware of Oldsmobile. Few identify with it.

The primary lesson from this funeral is that in whatever market segment you are positioned today, that segment will undergo major changes or disappear completely in a very few years.

The solution is to stay close enough to your buyers to spot these changes early, and either reposition your brand or products under the brand banner, or create new products for emerging segments.

© Copyright 2000, John Malmo

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The author assumes full responsibility for the contents of this article and retains all of its property rights. MarcommWise publishes it here with the permission of the author. MarcomWise assumes no responsibility for the article's contents.

 

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