Market Segmentation Notes

Definition of food merchandise cleavage A market place termreferring tothe aggregating of future buyers into groups (segments) that admit common demand and forget act similarly to a selling action. Market segmentation enables companies to show different categories of consumers who perceive the full(a) value of certain ingatherings and services differently from one some other. Gener solelyy triad criteriacan be recitationd to identifydifferent market segments 1) homogeneousness (common involve within segment) 2) Distinction (unique from other groups) 3) Reaction (similar response to market) Investopedia explains Market SegmentationFor model, an athletic footwear familiarity mogul have market segments for basketball game players and long-distance runners. As distinct groups, basketball players and long-distance runners will respond to very different advertisements. Market segmentation is a marketing outline that involves dividing a broad crisscross market into subsets of consumers who have common motivations and applications for the relevant propers and services. Depending on the specific characteristics of the product, these subsets whitethorn be divided by criteria such as age and gender, or other distinctions, like placement or income.Marketing campaigns can and then be designed and implemented to target these specific customer segments. Why Segment? One of the main reasons for using market segmentation is to encourage companies to better understand the inescapably of a specific customer base. Mass marketing assumes that all customers be the alike(p) and will respond to the same advertising. By looking at shipway in which potential customer groups atomic number 18 different from each other, the marketing message can be better targeted to the needs and wants of those community.Often, dividing consumers by distinctly be criteria will help the company identify other applications for their products that whitethorn not have been obvious before. These revelations often help the company target a large audience in that same demographic classification, up(p) market sh be among a specific base. Segmenting the market can as well as serve to identify smaller groups of people who make up their own, antecedently unknown subsets, further improving the everywhereall efficiency of the companys marketing efforts.Segmentation Strategies fit to experts, in order to be a good market segment, a group should suitable five criteria 1. It should be possible to identify and government note it, 2. it should be big enough to be worth the effort, 3. it should be light(a) to reach it, 4. it should not change quickly, 5. and it should be responsive. Market segmentation strategies that match these criteria can cover wide range of consumer characteristics. Subsets may be defined by basic demographics like age, race, or gender, for example.Other qualities, like educational priming coat or income can also be used, as can location. well-nigh of the potentially most powerful variables by which to segment a market are behavioral ones, including social class, lifestyle, and interests. In most scenarios, there will be at least a a few(prenominal) established customers who deteriorate into much than one category, just marketing strategists normally allow for this phenomenon. In fact, the overlap in criteria among consumers often leads to additional segmentation and requires adjusted marketing strategies.A marketing plan that targets people who fall into several groups like women over 30 who earn a high income, for example may be much successful than one that focuses on just one peculiar(a) characteristic. Other Benefits Along with playing a role in the increment of new marketing approaches, market segmentation can also help a company identify ways to enhance customer commitment with existing clients. As part of the make for of identifying specific groups within the larger client base, the co mpany will often run surveys which encourage customers to apprize ways of improving the companys products or services.This may lead to changes in box or other similar cosmetic changes that do not necessarily impact the core product, but sometimes making a few simple changes in the appearance sends a clear message to consumers that recognizing their needs is as important to the company as making gross revenue. This demonstration of good might go a long way to strengthen the ties between the consumer and the producer. Market segmentation is not only beneficial to the manufacturer or retailer, but can also have benefits to a consumer as well.People in a particular market segment may get specific deals on products as the company focuses on that group, or find that those products are available more widely. When a company responds to consumer feedback, it can mean that those people get changes in composition or packaging that better meet the users needs. Disadvantages of Market Segme ntation One of the biggest disadvantages of this marketing technique is the expense. A coarse deal of research often needs to be done to justly identify those subsets that are most important for a company, and this takes time and money.Once the call subsets are identify, different marketing messages usually need to be certain for each. In addition, changing the appearance of a product based on which segment it is being sold to adds to the production costs. If the market isnt segmented usefully, then all this money will be wasted. When the market segments that are identified are too narrow, it may be difficult for a company to be profitable. Niche marketing can work for some industries, but if the tastes of that subset change or a stronger competitor enters the field, a company that has focus too much on the one segment can pull back its customer base quickly.Targeting smaller segments also means that potential consumers right(prenominal) of those groups may be ignored and th eir business lost. The Concept of Market Segmentation Market segmentation is the division of a market into different groups of customers with clear similar needs and product/service requirements. Or to put it another way, market segmentation is the division of a mass market into recognizable and distinct groups or segments, each of which have common characteristics and needs and pomposity similar responses to marketing actions.Market segmentation was first defined as a condition of growth when core markets have already been developed on a generalised basis to the point where additional promotional expenditures are yielding diminishing returns (Smith, 1956). There is now widespread agreement that they impress an important foundation for successful marketing strategies and activities (Wind, 1978 Hooley and Saunders, 1993). The purpose of market segmentation is to leverage scarce resources in other words, to ensure that the elements of the marketing mix, price, distribution, produc ts and promotion, are designed to meet particular needs of different customer groups.Since companies have finite resources it is not possible to produce all possible products for all the people, all of the time. The best that can be aimed for is to provide selected offerings for selected groups of people, most of the time. This process allows organizations to focus on specific customers needs, in the most efficient and effective way. As Beane and Ennis (1987) eloquently commented, a company with limited resources needs to plank only the best opportunities to pursue. The market segmentation concept is cerebrate to product specialty.If you aim at different market segments, you might reconcile different variations of your offering to satisfy those segments, and equally if you accommodate different versions of your offering, this may appeal to different market segments. Since there is slight competition, your approach is less likely to be copied and so either approach will do. An example in the area of mould retailing might be if you adapt your clothing range so that your skirts are more colourful, use twinkle fabrics, and a very short hemline, for instance, this styling is more likely to appeal more to younger women.If alternatively, you decide to target older women, then you might need to change the styling of your skirts to suit them by using darker, heavier fabrics, with a longer hemline. This is on the button what Marks and Spencer (M&S) did to attract a younger female shopper into their M&S stores and compete more directly with Next and Debenhams for share of this market. The company launched a range of female clothing called Per Una, and three years on the fashion range has been a huge success reportedly generating annual sales of nearly ? 230 mmore than 10 per cent of the total womenswear sales at M&S.If you start by adapting new product variants, you are using a product differentiation approach. If you start with the customers needs, you are usi ng a market segmentation approach. This is illustrated more clearly in Figure 6. 2 using offering rather than product to indicate that the same concept may apply to a service. A relational marketing perspective would replace the marketing mixthe 4Ps either with the 7Ps (see Chapter 15) or with a discussion of the need to design, develop, and deliver the customer invite (see Chapter 17).The concept of market segmentation was first proposed as an alternative market development technique in imperfectly competitive markets, that is, in markets where there are relatively few competitors selling an identical product. Where there are lots of competitors selling identical products, market segmentation and product differentiation produce similar results as competitors imitate your strategic approach more quickly and product differentiation approaches meet market segment needs more closely. With an increasing proliferation of tastes in modern society, consumers have increased usable incomes .As a result, marketers have sought to design product and service offerings nigh consumer demand (market segmentation) more than around their own production needs (product differentiation) and they use market research to inform this process (see Market Insight 6. 1 and Chapter 4). Segmentation criteria for consumer markets Segmenting criteria for goods and services markets Kotler and Armstrong define market segmentation as dividing a market into distinct groups of buyers who have distinct needs, characteristics, or behaviour and who might require separate products or marketing mixes (Armstrong and Kotler, 2005 54).