INTRODUCTION
AND DEFINITION OF MARKET SEGMENTATION
BY
SMART
LEARNING WAY
CONTENTS
·
Introduction
·
Brief
introduction about market segmentation
·
Definition
of market segmentation
·
Market
strategy and market segmentation
·
Attributes
of effective segmentation
·
Conclusion
·
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 resources
Better understanding of customer needs
Better understanding of the competitive situation
Accurate 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.
Bibliography:
1) The essence of international marketing
Author : Stanly J. Paliwoda
Prentice –Hall of India, New Delhi
2) Principles of marketing
Authors : Philip Kotler
Gary Armstrong
Prentice –Hall of India Private Limited
3. Marketing management
Author : S.A. sherlekar
Himalaya publishing house
4. management-2
Authors: Anand K. Bewoor,
S. KULKARNI
Tech-max publications, pune
5. Marketing
management
Authors: Douglas .v. ymple
publisher by: john Wiley &sons pvt. Ltd.
6. Strategic management
Authors :Mugh Macmillan,
Mahen Tempoe
published by: oxford university
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