We address four common concerns with segmentation. Measurable: Consumer markets are relatively easier to measure than the industrial and technical goods market. We also drew on best practices from other fields to provide a step-by-step segmentation approach to guide anyone responsible for branding, marketing, sales, or account management. At the same time, by focusing on the needs of the most desirable customers, companies can improve retention of those customers. For this, you have to group consumers based on market segmentation criteria that are relevant for your company. To meet these , you need to select relevant market segmentation criteria. However if target customers do not use these things it will be difficult to communicate with them.
Hence, depending upon the reach of the company, the segments must be selected. We further expand the model to incorporate information and datapoints that will be available only as you become more involved with prospects and clients. The major problem may be that the segment is hard to identify and measure. In other words, how to segment markets? Often, market segmentation shows that many conceivable combinations of interest in product features, combinations of service needs, or combinations of attitudes are actually very rare in the marketplace. On the other hand if the firm's marketing strategy involves persuading people to replace their smart phone it may be a suitable segment as 95% of the segment are the type of people likely to buy smart phones. Each stage helps you qualify prospects in the segments you develop.
Substantial: The segments should be substantial to generate required returns. Each level of a market segment requires different information and a different marketing approach. If within a segment the behaviour of consumers are different and that they react differently, then a unique marketing strategy cannot be implemented for everyone. The next three chapters provide how-to descriptions of the segmentation stages, illustrated with examples. The segments that a company wishes to pursue must be actionable in the sense that there should be sufficient finance, personnel and capability to take them all.
Relevant: The size and profit potential of a market segment have to be large enough to economically justify separate marketing activities for this segment. Stable: The segments must be stable so that its behaviour in the future can be predicted with a sufficient degree of confidence. For example, if you sell sports cars, then you may find that your global target market is males from the ages of 18 to 55. Rather, it reveals underlying divisions in the market and characteristics of the market segments that can be used for effective and profitable marketing. Thus, attitudes toward distribution and service needs were key factors differentiating the segments.
We provide guidance to refine the results and identify the best targets by adding internal insights as well as data from secondary public and private sources. A firm also needs to know how product sales are growing in the chosen segment. Differences between market segments should be clearly defined, so that the campaigns, products and marketing tools applied to them can be implemented without overlap. Activities with small segments will give a biased result or negative results. As a result, there is no need for the company to be prepared to deal with these combinations.
A smaller firm in the same market, however, might see pursuit of the same segment as an exceptionally fruitful strategy. To read the rest of this case study in pdf format,. Reliable market research should be able to identify the size of a market segment to a reasonable degree of accuracy, so that strategists can then decide whether, how, and to what extent they should focus their efforts on marketing to this segment. Substantial — The segment should be sizeable enough to make the firm profitable. A target market is a group of customers for whom a seller designs a particular marketing mix. We have seen this difference in studies where we used both techniques to analyze the same data.
The market segments are large or profitable enough to serve. Geographic market segmentation divides the market into geographical units, which can be nations, states, regions, cities or even neighbourhoods. But, within that global segment, you have niches of consumers that prefer red cars, cars with leather seats and cars with racing pinstripes. These criteria can be based on geographic, demographic, psychographic and behavioural variables. This diagram effectively captures segmentation requirements and criteria The Market Segmentation Requirements diagram below illustrates the 5 criteria that a successful market segment requires Clearly Defined and Distinguishable Segment The chosen segments should be clearly defined to avoid doubt about which part of the market, the firm's marketing activities are aimed at.
Differential — All the segments should be different than each other and should not overlap. On basis of what criteria will you target your customers? There are many ways to segment a market, but not all segmentations are effective. Worthy of note is the fact that demographic market segmentation variables are the most popular bases for consumer market segmentation. You need to understand what the levels of market segmentation are, how to address them and how they work together to develop comprehensive marketing plans. Unique or Distinguishable or Differentiable: The market segments have to be that diverse that they show different reactions to different marketing mixes. The organisation can identify the marketing opportunities existing in the market by analysing each segment.
An effective segment is defined as, measurable, accessible, actionable and suitable for the firm. In these circumstances, what counts is a segmentation scheme that the firm can implement to create real marketing advantages. Few companies are big enough to the needs of an entire market; most must the total demand into segments and choose those that the is best equipped to. If the segment is too small, potential for sales growth will be limited. At a more tactical level, market segmentation can make the choices a company faces in developing products, services, and marketing messages easier. For example a shop based in South London is unlikely to get a large number of customers from North England.