Market vs. Category
by Market Edge Senior Healthcare Consultant
One of the most common questions or misunderstandings we see in B2B companies is “What is the difference between a Market Segment and a Category Segment?”
In simple terms, they are two sides of the same coin. – Market Segment identifies a group of customers with similar buying criteria, needs, behaviors and attitudes. – Category Segment identifies the competitive product types a company manufactures, markets, and sells in their targeted Market Segments.
Here is a B2B example: ZipZip (totally made up) is a company that manufactures and sell zippers to clothing and luggage OEMs. Our first question when engaging a client would be, “What markets are you in?” A product focussed response would be, “we are in the zipper market.” Well, not exactly. Use the following construct to be more market focussed: is in the market competing to sell . In the case above: ZipZip is in the Clothing and Luggage Markets competing to sell Zippers.
That was simple, but some may ask why do we need this specific Marketing language to describe something that feels so intuitive? The answer is growth! Understanding that the Market is the customers’ competitive space makes all the difference in business investment strategies. Marketing leaders that recognize the difference between Market Segments and Category Segments know they have two large LEVERS to deploy in their growth strategy. Let’s use our made-up ZipZip example to explain the levers:
LEVER 1 – Prioritizing certain Market Segments over others. ZipZip has a choice to invest more marketing and sales into the clothing or luggage market. These markets include a wide range of segments, including women’s high fashion OEMs, athletic designers, waterproof luggage, e-luggage and many more. All of these market segments have varying end consumer populations, price points, and are growing/contracting at different rates. Picking the right target market segments is a critical decision for the calculating marketing leader.
LEVER 2 – Prioritizing the Category Segments to win the targeted marketing segments. Competing with zippers to meet the needs of the OEMs can be very profitable. Derivative zippers: sizes, teeth, pulls, and integrations, deliver increased value, differentiation and can grow the business. However, what happens when growth in zipper sales slows? Stepping into adjacent categories, e.g., buttons, velcro, laces, boas, or magnets (for those more avantgarde), can help sustain revenue growth with existing clients. Customer relationships, customer needs/gaps analyses, and knowledge of other products currently purchased by the market segment is the key to utilizing this lever.
Be a Calculating Marketer and push your organization even farther with these two questions: – What Market Segments are we targeting? – What Category Segments are we focussed on to serve those target markets?