Segmenting the energy market: problems and successes

Abstract

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. \n \nDesign/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. \n \nFindings – 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. \n \nResearch 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. \n \nPractical 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. \n \nOriginality/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.

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