Introduction and definition of market segmentation

BYSMART LEARNING WAY

contents☻Introduction

☻Brief introduction about market segmentation

☻Definition of market segmentation

☻Market strategy and market segmentation

☻Attributes of effective segmentation

☻Conclusion

☻Review of the topic

☻Bibliography

introduction to market segmentation

• The market for any product is normally made up of several segments. A ‘market’ after all is the aggregate of consumers of a given product. And, consumer ( the end user), who makes a market, are of varying characteristics and buying behavior. There are different factors contributing for varying mind set of consumers. It is thus natural that many differing segments occur within a market.

• In order to capture this heterogeneous market for any product, marketers usually divide or disintegrate the market into a number of sub-markets/segments and the process is known as market segmentation.

• Thus we can say that market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that difference between buyers within each segment is as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix.

• The importance of market segmentation results from the fact that the buyers of a product or a service are not homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group the customers to market segments by variables that they have in common.

• These common characteristics allow developing a standardized marketing mix for all customers in this segment.

• Through segmentation, the marketer can look at the differences among the customer groups and decide on appropriate strategies/offers for each group. This is precisely why some marketing gurus/experts have described segmentation as a strategy of dividing the markets for conquering them.

• Process of dividing the market according to similarities that exist among the various subgroups should be within the market. The similarities may be common characteristics or common needs and desires. Market segmentation comes about as a result of the observation that all potential users of a product are not alike, and that the same general appeal will not interest all prospects.

• Market segmentation and diversity are complementary concepts.

• Without a diverse market place, composed of many different people with different backgrounds, countries of origin, interests, needs and wants, and perceptions, there would be little reason to segment markets.

• Diversity in the global marketplace makes market segmentation an attractive, viable, and potentially highly profitable strategy.

• The necessary condition for successful segmentation of any market are a large enough population with sufficient money to spend and sufficient diversity to lend itself to partitioning the market into sizable segments on the basis of demographic, psychological, or other strategic variables.

• United states, Canada, Western Europe, Japan, Australia, and other industrialized nations makes these marketplaces extremely attractive to global marketers.

• When marketers provide a range of product or service choices to meet diverse consumer interests, consumers are better satisfied, and their overall happiness, satisfaction, and quality of life are ultimately enhanced.

• Thus, market segmentation is a positive force for both consumers and marketers.

Definition of market segmentation

• Dividing the market by grouping the customer with similar “tastes & preferences” into one segment is called segmentation.

• Different product rangers target different customer.

• Segmentation helps marketers understand the needs of different customer better and serve them with better value propositions.

• If marketers know which segments of the market they are targeting they can design their marketing mix to suit the customer in the segment.

• According to Philip kotler, “ market segmentation is the sub-dividing of market into homogeneous sub-sections of customers. Where any sub-section may conceivably be selected as a market target to be reached with a distinct marketing mix.”

• According to W.J.Stanton, “market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments, each of which tends to be homogeneous markets which are made up of individuals or organizations with similar need, wants and behavioral tendencies.”

• market segmentation allows a marketer to take a heterogeneous market, a market consisting of customers with diverse characteristics, needs, wants and behaviors, and carve it up into one or more homogeneous markets which are made up of individuals or organizations with similar needs, wants and behavioral tendencies.

• mc Donald's and other marketers have market segmentation to be a valuable technique for the following reasons :

efficient use of marketing resourcesBetter understanding of customer needsBetter understanding of the competitive

situationAccurate measurement of goals and

performance.

• The problem is that competitors follow the same logic. They, too have identified the segment with the “large” potential and are directing their efforts as it.

• As a result, the attractive segment might have several brands fighting for it, whereas there might be a smaller segment that no brand is attempting to serve.

• This phenomenon is very common and is called the majority fallacy.

• The segment with the biggest potential is not always the most profitable, It may be much more profitable to attempt to gain a small segment, even if it represents only 5% of the market, than to fight ten other brands for a share of a large segment that represents 70% of the market.

• It is obviously costly to do direct battle with large, established competitors in a broadly based market segment.

• A concentration strategy focusing on a smaller segment is particularly useful to a small firm that enters a market dominated by several larger ones. This is some times called a niche strategy. It may, in fact, be suicidal for the small company to compete with the larger once for the large segment.

MARKETING STRATEGY AND MARKET SEGMENTATION: -

• When it comes to marketing strategies, most people spontaneously think about the 4Ps (Product, Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence).

• Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Basic steps in marketing strategy are as follows:-

ATTRIBUTES OF EFFECTIVE SEGMENTATION

• Market segmentation is resorted for achieving certain practical purpose. For example, it has to be useful in developing and implementing effective and practical marketing programmes. For this to happen, the segments arrived at must meet certain criteria such as:-

• A) Identifiable: The differentiating attributes of the segments must be measurable so that they can be identified.

• B) Accessible: The segments must be reachable through communication and distribution channels.

• C) Sizeable: The segments should be sufficiently large to justify the resources required to target them. A very small segment may not serve commercial exploitation.

• D) Profitable: There is no use in locating segments that are sizeable but not profitable.

• E) Unique needs: To justify separate offerings, the segments must respond differently to the different marketing mixes.

• F) Durable : The segments should be relatively stable to minimize the cost of frequent changes.

• G) Measurable: The potential of the segments as well as the effect of a specific marketing mix on them should be measurable.

• H) Compatible: Segments must be compatible with firm’s resources and capabilities.

Conclusion:• Market segmentation is the technique

adapted by marketing organizations for greater penetration into markets and also to maximize sales turnover and profits. The usefulness of this technique is the same, irrespective of the nature of the product or whether it is a good or bad service. Segmentation can be used as a powerful technique owing to a specific service characteristic, that is, variability.

Market segmentation is also separating the customers into different groups, and sometimes can split up into different age groups because different age customers are interested in different things from the business. Market segmentation is a marketing approach that encompasses the identification of different groups of customers with different needs or responses to marketing activity. The market segmentation process also considers which of these segments to target.

Review of the topic: ☻Introduction☻Brief introduction about market

segmentation☻Definition of market segmentation☻Market strategy and market segmentation☻Attributes of effective segmentation☻Conclusion☻Review of the topic☻Bibliography

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