Segmenting the energy market: problems and successes

Purpose – This paper aims to explore how segmentation is often undertaken in practice, highlighting problems commonly encountered. It is based on the deregulated and highly competitive UK market for energy, namely gas and electricity supply. The case is appropriate for modules in marketing strategy, target marketing and marketing management, at MBA, MSc or advanced UG levels. Design/methodology/approach – The case highlights why this organisation opted for segmentation, how it conducted this project, and the problems faced. These insights are referenced with the segmentation literature. Findings – With little product differentiation possible, gas and electricity tend to be price-driven purchases, which increases the importance of effective segmentation and shrewd target segment selection. Both consumer and business segments are cited, but the case focuses more on the business-to-business outcomes. The approach adopted for selecting which segments to target is also featured. This case explores the use of market segmentation and the practical difficulties encountered. The solutions to these difficulties are highlighted. Research limitations/implications – The case could not disclose the company's identity, but provides an insightful explanation of how segmentation may be conducted and the problems encountered. There is bias towards business segments, rather than consumer ones. Practical implications – Readers will be made aware of the impediments facing effective execution of market segmentation and be well prepared to spot such difficulties in any such projects that they might undertake. Originality/value – Few cases explore the practical issues encountered during segmentation or the creation of a new target market strategy. These difficulties are addressable, but only if they are anticipated or identified expediently. This paper provides such warnings and guidance

Judging the quality of customer segments: segmentation effectiveness

Market segmentation is well established in marketing theory and applied by organisations from all industry sectors. Despite widespread use, developing and implementing segmentation schemes is rarely problem free. Testing the quality and robustness of segments is one of the difficulties which marketers face. The literature describes segment quality criteria which are intended to help with this task, yet there is little evidence of their deployment and efficacy in practice. Using a longitudinal case study from the Eastern European mobile phone market, the practical application, impact and efficacy of these segment quality criteria are examined. The findings reveal the value of combining 'hard' statistical and 'soft' segment quality criteria to test the validity and robustness of segmentation outputs prior to implementing the segmentation. Implications from this case for managers seeking to select and deploy suitable quality criteria are considered