MARKET SEGMENTATION

INTRODUCTION

Market segmentation refers to dividing the heterogeneous markets into smaller customer groups having certain homogenous characteristics that can be satisfied by the firm. (American Marketing Association.)

Market segmentation is subdividing of a market into homogenous subsets of customers, where any subset may conceivably be selected as a market target to be reached with distinct marketing mix. (Philip Kotler 2001).

Objectives of market segmentation

v To make grouping of customers on the basis of the homogenous characteristics such as nature, habit, behaviours, income, age, professions, religion

v To identify the needs, testes, priorities, buying motives of target consumers

v To determine marketing strategies, targets and goals of the firm

v To make the activities of the firms consumer-oriented

v To identify the areas where the customers may be created and market areas can be expanded

LEVELS OF MARKET SEGMENTATION

There are four levels of market segmentation according to Philip Kotler

A market segment consists of a large identifiable group within a market, with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. For example, an automaker may identify four broad segments in the car market: buyers who are primarily seeking (1) basic transportation, (2) high performance, (3) luxury, or (4) safety.

Niche Marketing

A niche is a more narrowly defined group, typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into subseg ments or by defining a group seeking a distinctive mix of benefits. For example, a tobacco company might identify two subsegments of heavy smokers: those who are trying to stop smoking, and those who don’t care.

Niche Marketing can be defined as the marketers’ effort to position their product or service in smaller markets that have similar attributes and have been neglected by other marketers. These smaller market segments should also be profitable.

An attractive niche has the following characteristics:

v The customers in the niche have a distinct set of needs.

v They will even pay a premium to the firm that best satisfies their needs.

v The niche is not likely to attract other competitors.

v The niche gains certain economies through specialization.

v The niche has size, profit and growth potential.

Individual marketing is the extreme level of segmentation in which marketers focus on individual customers. In fact, almost all the business-to-business marketing is individual marketing. 

Local Marketing is a level of segmentation where by most marketers that have a global presence tend to offer customized products to suit the local markets. Target marketing is leading to marketing programs tailored to the needs and wants of local customer groups (trading areas, neighborhoods, even individual stores) .

The levels of market segmentation according to Solomon Michael in his book, Marketing: Real people, Real choice are as follows:-

Concentrated segmentation, distributing one product to the entire  market create a larger market potential and to how cost or low price while realizing higher profit however costumers preference may change which demand  a change of products.

Differentiated market segmentation, this is where by the firm introduce separate product to a variety of market segment. This requires more recourse since separate product and marketing strategies are needed for each segment. The greater marketing production and administrative cost required in a differentiated segmentation and therefore the firm must make sure that it is well economically in order to carry this kind of segmentation.

Undifferentiated segmentation, it occurs when the organization tergets the same product to several market segments simultaneously. The term undifferentiated market may be contradictory since segmentation requires different products to specific segment  

EFFECTIVENESS OF MARKET SEGMENTATION

The effective market segmentation is carried out under the following criteria:-

Identifiable The characteristics of the segment’s members must be easily identifiable. The marketing manager must have some means of identifying members of the segment i.e., some basis for classifying an individual as being or not being a member of the segment. There must be clear differences between segments. Members of such segments can be readily identified by common characteristics.

Measurable The characteristics of the segment’s members must be easily identifiable. This allows the firm to measure identifying characteristics, including the segment’s size and purchasing power.

Substantial The segment must be large and profitable enough to make it worthwhile for the firm. The profit potential must be greater than the costs involved in creating a marketing program specifically for the segment.

Accessible The segment must be accessible in terms of communication (advertising, mail, telephone, etc.) and distribution (channels, merchants, retail outlets, etc.).

Responsive The segment must respond to the firm’s marketing efforts, including changes to the marketing program over time. The segment must also respond differently than other segments.

Viable The segment must meet the basic criteria for exchange, including being ready, willing, and able to conduct business with the firm.

Sustainable The segment must also be sustainable over time to allow the firm to effectively develop a marketing strategy for serving the needs of the segment.

Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mixes. If two segments respond identically to a particular offer, they do not constitute separate segments.

Actionable: Effective programs can be formulated for attracting and serving the segments.