Market segmentation

A market is a group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods and services that can satisfy these needs. The marketer has the option of either approaching the entire set of customers with a uniform marketing approach or adopting a differentiated approach for different sets of customers. While the former refers to mass marketing the latter refers to the strategy of market segmentation

Market segmentation is the process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants. Each of these smaller groups posses somewhat homogeneous characteristics.

At its most basic level, the term “market segmentation” refers to subdividing a market along some commonality, similarity. That is, the members of a market segment share something in common. The purpose of segmentation is the concentration of marketing energy and force on the subdivision (or the market segment) to gain a competitive advantage within the segment.  

Customers in a Segment Must Have: similar needs They all must seek similar benefits They should all be satisfied by a similar retail offering The needs of this customer group should be different from the needs of customers in other segments.

Definition A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. it is distinct from other segments (heterogeneity across segments) it is homogeneous within the segment (exhibits common attributes) it responds similarly to a market stimuli

The Fundamental Criteria for Evaluating a Retail Market Segment: Identifiability: is important because it permits the retailers to determine (1) the segments size and (2) with whom the retailer should communicate when promoting its retail offering. Actionability: means that the definition of a segment must clearly indicate what the retailer should do to satisfy its needs. Accessibility: The target market segment must be reachable so as to serve them effectively.

Measurable Accessible Substantial Differential Actionable Effective Segmentation This CTR relates to the material on pp. 215. Accessible Substantial Size, purchasing power, profiles of segments can be measured. Differential Segments must be effectively reached and served. Requirements for Effective Segmentation Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important. Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer. Substantiality. This refers to the degree to which the segments are large or profitable enough to service. Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues. Segments must be large or profitable enough to serve. Actionable Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Purpose Increase marketing efficiency by focusing marketing efforts to a particular group Maximize scarce marketing resources Find a market with limited competition Select the most profitable segment

Approaches for Segmenting Markets: Geographic Segmentation: This is perhaps the most common form of market segmentation, wherein companies segment the market by attacking a restricted geographic area. For example; corporations may choose to market their brands in certain countries, but not in others.  

Price Segmentation: Price segmentation is common and widely practiced Price Segmentation: Price segmentation is common and widely practiced. Variation in household incomes creates an opportunity for segmenting some markets along a price dimension. If personal incomes range from low to high, then a company should offer some cheap products, some medium-priced ones, and some expensive ones.

Demographic Criteria Demographic variables age gender education income occupation socioeconomic status religion culture

Demographic Segmentation- Gender, age, and education level are common demographic variables. Some brands are targeted only to women, others only to men. Music downloads tend to be targeted to the young, while hearing aids are targeted to the elderly.

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