Market Segmentation by Level of Understanding of Beneficiaries

There are many methods of market segmentation. Segmenting based on demographics (e.g. age) or geography (e.g. people residing in the Northeast USA) is perhaps the most obvious and common method.

However, demographics and geography are nonspecific and often yield little useful information. Segmentation based on geography is essentially stating everyone who lives in a particular region has the same needs and wants. Segmentation based on demographics is stating everyone who is 25 to 30 years-old has the same wants and needs. This is likely an over-generalization.

One method for more useful segmentation is categorizing segmentation characteristics into one of three categories based on the level of customer (beneficiary) understanding: 1) Observing; 2) Seeing; 3) Knowing. Observing is the least useful category. Seeing is of intermediate usefulness. Knowing is the most useful category. Discovering segmentation characteristics in the Knowing category can provide a competitive advantage through possession of unique information, a well-tailored customer value proposition, and strong relationships with beneficiaries (1).

                            Segmentation exists on a continuum of understanding.

1. Observing: This is the most superficial of the categories. This is where the aforementioned demographic and geography segmentation criteria would fit. A nonprofit can often obtain this information from the census bureau or industry reports. Some potentially useful information fits in this category. However, a competitive advantage is unlikely to develop because this information is readily available to organizations.

For example, it may be useful to know the age breakdown of a given geographic area if a nonprofit is operating a community center strength and conditioning program designed for older adults.

2. Seeing: These are characteristics of beneficiaries that are determined through a closer look at the market. This could be done at the level of the entire market or at the level of the current beneficiaries. This often takes the form of enrollment and usage behavior. Industry reports and review of program attendance can provide this information.

For example, a nonprofit offering a strength and conditioning program for older adults could research fitness industry reports to determine the enrollment behavior of older adults. This nonprofit could also research what additional programs their beneficiaries attend at their own nonprofit or outside the nonprofit.

3. Knowing: This category requires the greatest amount of research, but offers the greatest benefit. Typically, this information comes from direct interactions with beneficiaries to comprehend their individual needs. This increased comprehension allows the nonprofit to tailor services to their beneficiaries’ needs.

For example, the nonprofit staff may notice that some of the strength and conditioning class attendees are chronically late to class. Speaking with these beneficiaries directly could lead to significant insights. The nonprofit may discover through discussion with these beneficiaries that they lack personal transportation and take a bus to class. The nonprofit may discover the bus schedule is out of step with the class schedule. Perhaps class times should coincide with bus times? Perhaps beneficiaries would rather avoid transportation entirely and attend classes by video?

Attention to the level of segmentation criteria being used is a strategy to improve nonprofit impact. Simply analyzing the type of criteria being used can help a nonprofit recognize opportunities. If the entirety of market segmentation has been through observing criteria, the nonprofit likely has little knowledge of its beneficiaries. This nonprofit should consider acquiring knowledge of other levels of segmentation.

It is not necessary to exclusively use Knowing criteria. However, striving to use at least some knowing criteria can help a nonprofit offer tailored services that maximize benefit.

1. Gildea J. Business Marketing Lecture. 2022.

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