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September 29, 2007

Segmentation in Marketing

Filed under: Marketing management — Jagdish Hiray @ 12:06 pm
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This article explains basic concept of marketing segmentation and different type of segmentation commonly used by companies in today’s market. Article explains each type of segmentation with example to give more understanding of each area.

              Success in marketing in the world today is dependent on a strategy of market segmentation. Market segmentation is the way in which the marketing system maximizes the alternatives available to consumers of products and services. It does so by recognizing that the total market is made up of smaller submarkets called segments of consumers who have needs that are homogenous in many geographic, demographic, economic, cultural and psychological ways. A market segmentation strategy attempts to find such a market and penetrate it to the greatest extent possible by customizing products, services and, the marketing efforts to fit its needs. For example car manufacturers such as Toyota and Ford manufacture cars for different segments of population, giving consumers what they want. Market segmentation is the basis for developing targeted and effective marketing plans.            

             Market segmentation can be categorized into four levels: segment marketing, niche marketing, local marketing and individual marketing.In segment marketing, segments are identified into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. There are a huge number of variables that could be used for market segmentation in theory. They comprise easy to determine demographic factors as well as variables on user behavior or customer preferences. Market segments should be formed in that way that differences between buyers within each segment are as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix.            

             Niche marketing is targeting a product or service to a small portion of a market that is not being readily served by the mainstream product or service marketers. Almost every business-fast food chain, convenience stores was begun to fill perceived voids in the marketing place. Market niches can be geographic areas, a specific industry, ethic or age groups or any other particular group of people. Some of niche markets and products are, organic vegetables: consumers wanting vegetables grown without pesticides, SUV: for drivers desiring a vehicle with room, power and strength, pasteurized goat milk: consumers allergic to cow milk. Niche marketing serves a portion of a unique market or portion of a common market not already served. 

             Another form of segmentation is local marketing – reaching individual communities with specialized messages. The latest trend is to bring marketing down to the neighborhood level and make it personal to the customer. Some marketing experts, advocates targeting your marketing efforts to specific neighborhoods, “making sure your message is delivered only to people most likely to be your customers — those within 10 miles or 10 minutes of your door.” It is all about thinking small and keeping your marketing local. Local marketing offers several advantages; it allows businesses to tap the potential of greatest profit opportunity within their trading area – the customer base that is right in their back yard. Businesses, schools, churches, community events and even fellow retailers can become promotional allies in building cost-effective programs to capture consumer dollars right within reach. Local marketing is face-time marketing. The local marketing approach eschews institutional “exposure” advertising. 

             Today customer is very well aware about what it needs to buy and more focus on its liking and preferences. Therefore companies are more focused towards individual marketing or customization. Individual marketing is traditional form of marketing, offering products and services on individual basis. Many online companies are offering customers a choice based option interactive system that allows online user to design their own products from pool of options available with suppliers. Customizing its products, services, and messages on a one to one basis, customizes a company when it is able to respond to individual customers. However it is not possible for every company to customize its products such as automobile manufacturing companies.

             A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers. It is possible to satisfy a variety of customer needs with a limited product range by using different forms, bundles, incentives and promotional activities. It is often difficult to increase prices for the whole market. Nevertheless, it is possible to develop premium segments in which customers accept a higher price level. Such segments could be distinguished from the mass market by features like additional services, exclusive points of sale, product variations and the like. By segmenting markets, organizations can create their own ‘niche products’ and thus attract additional customer groups. Organizations that serve different segments along a customer’s life cycle can guide their customers from stage to stage by always offering them a special solution for their particular needs.  

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2 Comments »

  1. Thanks for the artical.

    Comment by kazi — December 17, 2007 @ 11:52 pm | Reply

  2. Great information. Thanks for providing it.
    http://arvoreentreasures.com/blog/

    Comment by Charly — December 26, 2007 @ 1:33 pm | Reply


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