Market Segmentation

12 Key excerpts on "Market Segmentation"

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  Applied Marketing

  Connecting Classrooms to Careers

  • Daniel Padgett, Andrew Loos(Authors)
  • 2019(Publication Date)
  • Wiley

    (Publisher)

  In it you will learn the basics of segmentation, targeting, and positioning, the foundation for all tactical marketing decisions in the marketing mix. 6.1 Segmentation Companies will not survive if their marketing strategy is dependent upon targeting an entire mass market. The importance of Market Segmentation is that it allows a business to precisely reach a consumer with specific needs and wants. As a marketing professional segmentation will be crucial to your success. Market Segmentation Definition and Purpose As you learned in the previous chapter, one of the primary purposes for conducting market research is to gain a better understanding of what customers want. Companies want to un- derstand what customers value to create more appealing exchanges. Importantly, different customers value different things, which means marketers need some way to distinguish be- tween customers who want one thing and customers who want something else. This process is called Market Segmentation. Market Segmentation is the process of categorizing groups of customers to divide a market into manageable pieces based on customer differences. Anything that might be a useful differentiating factor could be a possible segmentation factor. For example, some customers use their mobile phones mostly to talk, while others primarily use text messaging. Still others are heavy data users, using their mobile phone for communication but also for a host of other activities that require large amounts of data. A wireless provider might distinguish between these different segments, or groups of customers who share common char- acteristics within a market, based on their primary use of the mobile phone. To meet the needs of these different groups based on how they use their mobile phone differently, the wireless pro- vider might offer different service plans based on type and level of usage.

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  Applied Marketing

  • Daniel Padgett, Andrew Loos(Authors)
  • 2023(Publication Date)
  • Wiley

    (Publisher)

  (3) Companies must differ- entiate their offerings from competitors’ offerings in ways meaningful to the specific group of customers on which the company is focused. This chapter provides an overview of how to group customers and how to select a meaningful group as a foundation to build marketing strategy. In it, you will learn the basics of segmentation, targeting, and positioning, the foun- dation for all tactical marketing decisions in the marketing mix. 6.1 Segmentation LEARNING OBJECTIVE Define Market Segmentation and describe the four common categories of variables for segmenting a market. Companies will not survive if their marketing strategy is dependent upon targeting an entire mass market, because markets have fragmented over time as customers become more knowl- edgeable and more demanding, and competitors offer more options over time as a market develops. The importance of Market Segmentation is that it allows a business to precisely reach a consumer with specific needs and wants. Successful segmentation will be crucial to your company’s success. Market Segmentation Definition and Purpose As you learned in the previous chapter, one of the primary purposes for conducting market research is to gain a better understanding of what customers want. Companies want to under- stand what customers value to create more appealing exchanges. Importantly, different cus- tomers value different things, which means marketers need some way to distinguish between customers who want one thing and customers who want something else. This process is called Market Segmentation. Market Segmentation is the process of categorizing groups of cus- tomers to divide a market into manageable pieces based on customer differences. Anything that might be a useful differentiating factor could be a possible segmentation factor. For example, some customers use their smartphones mostly to talk, while others pri- marily use text messaging.

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  The Marketing Century

  How Marketing Drives Business and Shapes Society

  • Jeremy Kourdi(Author)
  • 2011(Publication Date)
  • Wiley

    (Publisher)

  How to measure market share has always been at the centre of controversy in discussions of failure. Defining a market too broadly or too narrowly can both lead to meaningless statistics. There is one definition that is particularly useful: a market is the aggregation of all products or services that customers regard as being capable of satisfying the same need. Companies frequently confuse target markets with products – pensions or mainframe computers, for example. This, coupled with a lack of knowledge about the sources of differential advantage in each segment, signals trouble.

  Many companies pride themselves on their Market Segmentation even though these so-called segments are in fact sectors, which is a common misconception. Everyone with a marketing qualification knows that a segment is a group of customers with the same or similar needs and that there are many different purchase combinations within and across sectors.

  However, the gravest mistake of all is a priori segmentation. Most books incorrectly state that there are several bases for segmentation, such as socio-economics, demographics, geo-demographics and the like, but this misses the point completely. For example, Boy George and the Archbishop of Canterbury are both members of socio-economic group A, but they don’t behave the same. Equally, all 18 – 24-year-old women do not behave the same way, despite being part of the same demographic segment.

  Companies frequently confuse target markets with products and lack knowledge about the sources of differential advantage within each segment.

  In truth, it is the way in which goods and services are made, distributed and used and the resulting purchase combinations that comprise an actual market. So, the task for marketers has been to understand market structure and how a market works, and to identify the different purchase combinations (segments). Approaches such as socio-economics, demographics, geo-demographics and psychographics are clearly extremely useful at a very high level of marketing. For example, young married couples will represent a large group who have a need for furniture, but within this substantial group there will clearly be several different need sets, known as segments.

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  Strategic Marketing Management in Asia

  Case Studies and Lessons across Industries

  • Syed Saad Andaleeb, Khalid Hasan(Authors)
  • 2016(Publication Date)
  • Emerald Group Publishing Limited

    (Publisher)

  This set of customers is called a market segment. The act of Market Segmentation, therefore, represents an effort to identify and categorize groups of customers into clusters that demonstrate some similarity traits. Clustering can also take place at a macro level by clustering communities, regions, or even countries accord-ing to some common characteristics (e.g., language, customs, reli-gion, etc.). Segmentation is defined as the process of identifying specific groups of potential customers with homogeneous attri-butes who are likely to exhibit similar responses to a company ’ s offering or marketing mix. As more marketers begin to realize that there is a trade-off between a standardized price-value proposition and the exclusiveness-distinctiveness ethos that may be desired by custo-mers, a more effective strategy option begins to open up: micro-marketing . Micromarketing enables a marketer to craft an offering by fine-tuning its marketing program on a well-defined set of attri-butes as its competitive offering. The key is to determine the level at which the grouping is done (for a news organization: general news, sports news, or simply cricket news) where the offering is distinct and that distinctiveness can be protected to dominate a particular market segment (i.e., general audience, sports audience, or cricket audience). The challenges confronting micro marketers are threefold: • How to identify similar groups of potential customers (segmentation)? ○ This involves the process of defining segments that have significant potential to respond to marketing efforts. 180 SYED SAAD ANDALEEB • How to choose the segment(s) to target (targeting)? ○ Marketers must decide on the segments that can be reached most effectively, efficiently, distinctly, and profitably.

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  International Marketing (RLE International Business)

  A Strategic Approach to World Markets

  • Simon Majaro(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  Chapter 4

  Market Segmentation on a Global Scale

  The Meaning of Market Segmentation

  The concept of Market Segmentation has triggered the imagination of many marketers during the last decade. It is a strategy which enables the firm to maximise the results of a given marketing effort by exploiting clearly identified strengths in relation to a submarket which is either inadequately satisfied by other manufacturers or where the firm is particularly well placed to do an effective job.

  Every marketer recognises that it is not possible to satisfy the specific needs and requirements of every consumer. It is necessary to deal with groups of consumers or clusters of individuals who manifest similarities in consumption habits, social behaviour, economic characteristics or in some other distinguishable criterion. The extreme logical choices for the marketer are either to focus his attention on a wisely selected subgroup or submarket or to aim to differentiate the marketing programme so as to satisfy the largest number of heterogeneous members of the total market. The former option is economical and if well planned highly effective; the latter can be costly but in terms of sale volume probably much more substantial. At the same time one must not forget that concentration on specific submarkets can be fraught with vulnerability; differentiation, on the other hand, whilst more costly as an approach, avoids the risk of ‘placing all one's eggs in one basket’. It is not possible to determine which is the more appropriate policy for a specific situation without knowing all the pertinent facts surrounding the firm's circumstances and the characteristics of the marketplace in question. However, one of the basic decisions that a company must take in its marketing planning activity is whether it proposes to adopt a Market Segmentation policy or a market aggregation

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  Strategic Marketing Planning

  • Richard M.S. Wilson, Colin Gilligan(Authors)
  • 2010(Publication Date)
  • Routledge

    (Publisher)

  et al. (1979) have suggested that changing values, new lifestyles, and the rising costs of products and services argue the case for what they call ‘counter-segmentation’; in other words, an aggregation of various parts of the market rather than their subdivision. The majority of writers, however, acknowledge the very real strategic importance of segmentation and, in particular, the ways in which it enables the organization to use its resources more effectively and with less wastage.

  9.3 The Nature and Purpose of Segmentation

  During the past 30 years, Market Segmentation has developed and been defined in a variety of ways. In essence, however, it is the process of dividing a varied and differing group of buyers or potential buyers into smaller groups, within which broadly similar patterns of buyers’ needs exist. By doing this, the marketing planner is attempting to break the market into more strategically manageable parts, which can then be targeted and satisfied far more precisely by making a series of perhaps small changes to the marketing mix. The rationale is straightforward and can be expressed most readily in terms of the fact that only rarely does a single product or marketing approach appeal to the needs and wants of all buyers. Because of this, the marketing strategist needs to categorize buyers on the basis both of their characteristics and their specific product needs, with a view then to adapting either the product or the marketing programme, or both, to satisfy these different tastes and demands.

  The potential benefits of a well-developed segmentation strategy can therefore be considerable, since an organization should be able to establish and strengthen its position in the market and, in this way, operate more effectively. Not only does it then become far more difficult for a competitor to attack, but it also allows the organization to build a greater degree of market sector knowledge and customer loyalty.

  Although the arguments for segmentation appear strong, it is only one of three quite distinct approaches to marketing strategy which exist. These are:

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  Marketing Hospitality

  • Cathy H. C. Hsu, Tom Powers(Authors)
  • 2002(Publication Date)
  • Wiley

    (Publisher)

  In this chapter, most of the discussion focuses on segmentation. However, segmen- tation is undertaken for the purpose of target marketing—that is, shaping the mar- keting program and marketing mix to meet the needs of a specific segment or seg- Types of Segments 67 ments. From time to time, the discussion turns from segmentation to target marketing to make the connection clear. Why Segment? The rationale behind segmentation, mentioned earlier, is a good basic starting point. Segmentation gives us a way to understand a marketplace that is diverse and chang- ing. We can, however, be more specific about the advantages of Market Segmentation: 1. Fundamentally, segmentation ties the operation and all its marketing activities to consumers—not to all consumers, of course, but to some recognizable group or groups of consumers who can be expected to respond in a similar way to a marketing appeal. 2. A segmented marketing strategy is aimed at specific consumer groups. As a result, operators and marketers have a clear reference group to use as a bench- mark for making decisions. 3. Segmentation allows the selection of consumer groups that offer the best profit potential at various times. For example, a deluxe resort in a warm climate may target wealthy people and expense-account travelers during the busy season, and rate-sensitive travelers in the off-season. 4. The process of analyzing markets by segment may reveal an unserved or under- served segment. For example, people being relocated or those attending an ex- tended training program have special needs that are not met by traditional hotels. They are less interested in on-premise foodservices, prefer more spacious rooms with adequate work space, and require more opportunities for after-work socializing. Extended-stay properties were developed to meet the needs of this segment.

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  Marketing Strategy

  • O. C. Ferrell, Michael Hartline, (Authors)
  • 2018(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Many of these variables, including demographics, lifestyles, product usage, or firm size, derive from the situation analysis section of the marketing plan. However, a new or revised marketing strategy often requires changes in target mar- ket definition to correct problems in the previous marketing strategy. Target markets also shift in response to required changes in specific elements of the marketing pro- gram, such as reducing price to enhance value, increasing price to connote higher quality, adding a new product feature to make the benefits more meaningful, or sell- ing through retail stores instead of direct distribution to add the convenience of immediate availability. In short, the target market and the marketing program are interdependent, and changes in one typically require changes in the other. Beyond the Pages 5.3 outlines how major cereal companies have addressed changing custo- mers’ demands in the cereal market. Segmenting Consumer Markets The goal in segmenting consumer markets is to isolate individual characteristics that distinguish one or more segments from the total market. The key is to segment the total market into groups with relatively homogeneous needs. As you may recall from our earlier discussion, consumers buy products because the benefits they pro- vide can fulfill specific needs or wants. The difficulty in segmenting consumer mar- kets lies in isolating one or more characteristics that closely align with these needs and wants. For example, marketers of soft drinks do not necessarily concern them- selves with the age or gender of their customers, but rather in how age and gender relate to customers’ needs, attitudes, preferences, and lifestyles. In the discussion that follows, we look more closely at segmentation in con- sumer markets by examining the different factors that can be used to divide these markets into homogeneous groupings.

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  Strategic Marketing Management

  • Richard M.S. Wilson, Colin Gilligan(Authors)
  • 2012(Publication Date)
  • Routledge

    (Publisher)

  Bliss (1980) , for example, has suggested that, while many marketing managers acknowledge the rationale of segmentation, many are dissatisfied with it as a concept, partly because it is inapplicable or difficult to apply in many markets, but also because emphasis is too often given to the techniques of segmentation at the expense of the market itself and the competitive situation that exists. Equally, Resnik et al. (1979) have suggested that changing values, new lifestyles, and the rising costs of products and services argue the case for what they call ‘counter-segmentation’; in other words, an aggregation of various parts of the market rather than their subdivision. The majority of writers, however, acknowledge the very real strategic importance of segmentation and, in particular, the ways in which it enables the organization to use its resources more effectively and with less wastage.

  8.3 The nature and purpose of segmentation

  During the past 30 years, Market Segmentation has developed and been defined in a variety of ways. In essence, however, it is the process of dividing a varied and differing group of buyers or potential buyers into smaller groups, within which broadly similar patterns of buyers’ needs exist. By doing this, the marketing planner is attempting to break the market into more strategically manageable parts, which can then be targeted and satisfied far more precisely by making a series of perhaps small changes to the marketing mix. The rationale is straightforward and can be expressed most readily in terms of the fact that only rarely does a single product or marketing approach appeal to the needs and wants of all buyers. Because of this, the marketing strategist needs to categorize buyers on the basis both of their characteristics and their specific product needs, with a view then to adapting either the product or the marketing programme, or both, to satisfy these different tastes and demands.

  The potential benefits of a well-developed segmentation strategy can therefore be considerable, since an organization should be able to establish and strengthen its position in the market and, in this way, operate more effectively. Not only does it then become far more difficult for a competitor to attack, but it also allows the organization to build a greater degree of market sector knowledge and customer loyalty.

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  Principles and Practice of Social Marketing

  An International Perspective

  • Rob Donovan, Nadine Henley(Authors)
  • 2010(Publication Date)
  • Cambridge University Press

    (Publisher)

  252 10 Segmentation and targeting Acknowledging that different people may respond differently to different products and services and to the way information is presented to them, is a core principle in marketing. In fact, commercial marketers spend a great deal of resources identifying and determining which segments will be most profitable for them. Not surprisingly, then, Market Segmentation and target marketing have been emphasised from the start in the early literature defining or describing social marketing and its application to public health campaigns (e.g., Lancaster, McIlwain and Lancaster 1983 ; Manoff 1985 ; Novelli 1984 ). In today’s social marketing literature, the need to target programmes at different segments of the population is taken for granted. Market Segmentation, the division of the total market into relatively homogeneous but distinct segments, and target marketing, the selection and concentration of marketing resources on one or more of these segments, together constitute the principle of select-ivity and concentration. This principle follows naturally from a focus on consumer or client needs, since it acknowledges that: different sub-groups exist in a population; • the differences occur on a variety of dimensions; and • different strategies and approaches may be necessary to reach, communicate with or • motivate different sub-groups. This last point is crucial: unless the segments respond differentially to different elem-ents of the marketing mix there is no point in segmenting.

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  Marketing Management

  • Dawn Iacobucci(Author)
  • 2021(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  In marketing, we deal with all these customer differences through segmentation. An entrepreneur might create a new gadget, or a brand manager a new line extension, or a consultant a new piece of software, and each might hope that the whole world will like and buy their market offerings. But it won’t happen. And it’s not smart marketing to go after the whole market. Why not? ● ● How could you provide a product that has high enough quality to satisfy premium customers and yet is priced low enough for price-sensitive customers? ● ● How could you afford to place your advertisement in the disparate media that dif-ferent customers enjoy (e.g., online at sites popular with teens or car enthusiasts or home chefs)? How many versions of the ad could you afford to create to communi-cate effectively to those different audiences? ● ● How could you develop a brand image that appeals to the masses seeking comfort in conformity and simultaneously appeal to fashion-setter mavericks or other cus-tomers who seek to express their individualism? The goals are incompatible. Instead of trying to appeal to the entire marketplace, the smart marketer and smart company will try to find out what different kinds of customers might like and decide which groups they can serve best. That strategy begins with Market Segmentation. 3-2 What Are Market Segments? A market segment is a group of customers who share similar inclinations toward a brand. On a continuum from mass marketing to one-to-one marketing, Market Segmentation is in the middle (see Figure 3-1). Mass marketing means that all customers are treated the same. This approach might sound attractive because it simplifies the business (i.e., only one product needs to be offered), but it is usually unrealistic (because customers differ). Think of a simple commodity product like flour. We should be able to mass market flour; flour’s flour, right? Au contraire, Pierre.

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  Marketing (AU), P-eBK

  • Greg Elliott, Sharyn Rundle-Thiele, David Waller, Ingo Bentrott, Siobhan Hatton-Jones, Pete Jeans(Authors)
  • 2020(Publication Date)
  • Wiley

    (Publisher)

  As with this example, it is important to understand that the number of possible segments grows by multiples when an additional segmentation variable is added. Thus, adding gender doubles the number of market segments. This may also explain why there are literally hundreds of different types of sports shoes available, most targeting narrow, specialised segments. With such diversity of market segments, an important requirement of effective segmentation is to understand the target market segments completely: the insightful and creative marketer will know such target market segments implicitly — as if they were close friends. To develop such an intimate understanding of market segments will usually require comprehensive qualitative and quantitative market research (as discussed in the chapter on market research). Pdf_Folio:162 162 Marketing It is also important that market segments are sufficiently different from each other, so that a distinctive offer and message can be created for each target market segment without the risk of overlapping segments and/or sending confusing images and messages. Having developed rich and vivid profiles of the range of possible market segments, it is important to determine how closely the organisation’s current or potential product offerings might match the needs of these market segments. We will examine this next stage in the target marketing process in the next section. SPOTLIGHT Geodemographic segmentation We are all aware of conspicuous differences between the geographic locations in which we live. Localised knowledge assists us in day-to-day decision making and builds our inbuilt preferences. For example, we know where the trendy cafes, the ‘posh’ schools and the best postcodes are in our local area. Geodemographic segmentation is a technique for identifying such geographical areas, usually based on suburbs, postcodes, electorates or local government areas.

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