Market Segmentation
Market segmentation is the process of dividing a broad target market into smaller, more defined groups based on specific characteristics such as demographics, behavior, or psychographics. This allows businesses to tailor their marketing efforts and products to better meet the needs and preferences of each segment, ultimately leading to more effective and targeted marketing strategies.
8 Key excerpts on "Market Segmentation"
eBook - ePubMarketing Recorded Music
How Music Companies Brand and Market Artists
- Tammy Donham, Amy Sue Macy, Clyde Philip Rolston(Authors)
- 2022(Publication Date)
- Focal Press(Publisher)
...Businesses focus on the first two groups. Market Segmentation Because most markets are so complex and composed of people with different needs, wants, and preferences, markets are typically subdivided so that promotional efforts can be tailored to fit the particular submarket. For most products, the total potential market is too diverse or heterogeneous to be treated as a single market. One need only walk the lot of the local car dealership or the aisles of the local grocery store to see that we have come a long way from the days of Henry Ford’s Model T in any color you want “so long as it’s black.” To solve this problem, markets are divided into smaller, more homogeneous sub-markets. Market Segmentation is defined as the “process of dividing a market according to similarities that exist among the various subgroups within the market. The similarities may be common characteristics or common needs and desires” (Dictionary of Marketing Terms, 2000). The members of the resulting segments are similar with respect to characteristics that are most vital to the marketing efforts. This segmentation may be made based on demographics, behavior, geography, psychographics, or some combination of two or more of these characteristics. The process of segmenting markets is done in stages. In the first step, segmentation variables are selected, and the market is separated along those partitions. The most appropriate variables for segmentation will vary from product to product. The appropriateness of each segmentation factor is determined by its relevance to the situation. After this is determined and the market is segmented, each segment is then profiled to determine its distinctive demographic and behavioral characteristics. Then the segment is analyzed to determine its potential for sales. If the segment meets the criteria for successful segmentation (subsequently), the company’s target markets are chosen from among the segments determined at this stage...
eBook - ePub- Paul Reynolds, Geoff Lancaste(Authors)
- 2013(Publication Date)
- Routledge(Publisher)
...5 Market Segmentation, targeting and positioning of marketing 5.1 Introduction Now that we have a better understanding of the nature of marketing, we can examine the subject in more detail. A logical starting point is an examination of customers, and this is the theme of this chapter, along with the next chapter, which deals with their purchasing behaviour. Market Segmentation can be defined as: The process of breaking down the total market for a product or service into distinct sub-groups or segments, where each segment may conceivably represent a distinct target market to be reached with a distinctive marketing mix. Definition Market Segmentation can be defined as: the process of breaking down the total market for a product or service into distinct sub-groups. Marketers realise that, to improve their opportunities for success in a competitive market environment, they must focus marketing effort on clearly defined market targets. The intention is to select those groups of customers that the company is best able to serve in such a way that pressure from competition is minimised. The sequential steps in this process are segmentation, targeting and positioning. In this chapter we examine each of these steps, showing how they can be used to improve the effectiveness of marketing decision-making. There are increasingly more segmentation bases available, which means that targeting and positioning strategies are becoming more meaningful. 5.2 The need for segmentation We have seen that the essence of the marketing concept is the idea of placing customer needs at the centre of the organisation’s decision-making. It has also been said that the need to adopt this approach stems from a number of factors, including increased competition, better informed and educated consumers, and, perhaps most importantly, changing patterns of demand...
eBook - ePubMarketing for Tourism and Hospitality
Collaboration, Technology and Experiences
- Alan Fyall, Patrick Legohérel, Isabelle Frochot, Youcheng Wang(Authors)
- 2019(Publication Date)
- Routledge(Publisher)
...13 Market Segmentation, targeting, and positioning Key terms Market Segmentation, targeting, positioning, segmentation criteria, competition Learning outcomes By the end of this chapter, students will: Understand the main stages of the segmentation process (segmentation, targeting, and positioning) Be aware of the various categories of segmentation criteria and their respective contribution to relevant Market Segmentation Understand the importance of positioning for companies and destinations facing fierce competition both on the domestic and worldwide markets Be introduced to a number of case study scenarios and examples that illustrate various Market Segmentation, targeting, and positioning approaches. Introduction The purpose of Market Segmentation is to help companies embark on effective and relevant actions in their markets. Seeking to reach all market segments through common marketing activities is not judicious when a client base is heterogeneous. On the other hand, providing each client with tailor-made services is unrealistic and economically unprofitable. It is only in a few high-end markets, such as tailoring or the luxury hotel sector, that it is feasible and appropriate to allocate resources individual to the company’s best clients. In most cases, Market Segmentation corresponds to the needs of a business model and its concomitant effectiveness that: show the targeting strategies of one or several groups of clients (segments); unite similar characteristics into one group (individual profiles, purchasing behaviors, etc.); isolate characteristics in between groups/segments. The first step of the market analysis is referred to as Market Segmentation. This is where companies establish an operational marketing plan adapted to the targeted groups of clients (product/service meeting the clients’ needs, suitable communication plan, attractive and target-appropriate price range, and distribution network providing optimum contact with the target clients)...
eBook - ePub- George Stonehouse, Bill Houston(Authors)
- 2003(Publication Date)
- Routledge(Publisher)
...A business may operate in one or more product markets. In addition, a business will be interested in understanding markets to which it is considering entry on the basis of its core competences and also markets for substitute products. Each of these markets will have its own characteristics and can be analysed in terms of: customer needs and motivations; unmet customer needs; market segments and their profitability; the number of competitors to the market and their relative market shares; the number of customers and their relative purchasing power; access to distribution channels; potential for collaboration with customers; ease of entry; potential for competence leveraging; need for new competence building. Unless an organization's products are sold at a profit, the business will ultimately fail. Market-driven businesses that set out to meet existing customer needs, anticipate their currently unmet needs and actually seek to shape the needs of their customers are likely to be the most successful. For example, the Dutch electronics company Philips created a new customer need when it developed and launched the CD format for music and computer software. Market subgroups An important part of understanding the market is identifying subgroups within the market that share common needs. Such shared characteristics will cause specific customer groups to have different needs and to act and behave differently to other customer groups (or segments). Fundamentally, segmentation means subdividing the total market into customer subgroupings, each with their own distinctive attributes and needs. Customer groups are commonly segmented according to demographic variables (or ‘people dividers’) such as age, sex, occupation, socio-economic grouping, race, lifestyle, buying habits, geography (i.e. where they live), although other segmentation instruments are widely used (see Chapter 5)...
eBook - ePub- Richard M.S. Wilson(Author)
- 2010(Publication Date)
- Routledge(Publisher)
...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...
eBook - ePubThe Marketing Century
How Marketing Drives Business and Shapes Society
- Jeremy Kourdi, Jeremy Kourdi(Authors)
- 2011(Publication Date)
- Wiley(Publisher)
...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...
eBook - ePubInternational 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 approach...
eBook - ePubMarketing Higher and Further Education
An Educator's Guide to Promoting Courses, Departments and Institutions
- Paul Gibbs, Michael Knapp(Authors)
- 2012(Publication Date)
- Routledge(Publisher)
...4 Market Segmentation, ‘Taking a Position’ and Seeking Differentiation Segmentation Customers – students, academics and other stakeholders – have different needs and only some of these can be satisfied by any one institution. Customization is increasingly breaking down markets into groups with smaller, more specific needs. (However, while this fragmentation of the mass market may well be true in Europe and the US, in other parts of the world – including Russia, China and India – education still has a mass market to aim for with all the substantial benefits this can create.) Segmented markets have three main characteristics: enhanced value, which can lead to higher profit; a better match with customer needs; the ability to exclude those segments that do not match the student/ programme values. They can be identified or created through: benefit segmentation – for example, the availability of low prices or short courses, job relatedness, relevance to recreational interests, immediate recognition for use in the market; demographic segmentation – for example, socio-economic grouping, ethnic origin (this is most often favoured by government for it reinforces their notion of centrally controlled social justice); lifestyle segmentation – for example, continuing professional development for students or lifelong learners. Many segments can be revealed by observing the attributes of certain student groups. Institutions can target one segment or many segments to develop the most appropriate proposition. In the UK, for instance, the notion that learners, particularly mature learners and those from the lower socioeconomic groups, see education as a means to an end and not just an end in itself, has an enormous effect on the type and form of programmes that institutions have to offer. More than that, it makes students behave as traditional customers for a service. They want extra value and today most of that value is in the external worth of the accredited award(s)...
