segmentation

Examples of segmentation in the following topics:

• The Importance of Market Segmentation

  • Market segmentation allows for a better allocation of a firm's finite resources.
  • Market segmentation can be defined in terms of the STP acronym, meaning Segment, Target and Position.
  • While there may be theoretically 'ideal' market segments, in reality, every organization engaged in a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments.
  • To increase marketing efficiency by directing effort specifically toward the designated segment in a manner consistent with that segment's characteristics
  • Rather, one or more target markets (segments) must be selected.

• Developing a Market Segmentation

  • This allows them to focus all of their efforts on a single segment.
  • There are two major segmentation strategies followed by marketing organizations: a concentration strategy and a multi-segment strategy.
  • This strategy is advantageous because it enables the organization to analyze the needs and wants of only one segment and then focus all its efforts on that segment.
  • In the multi-segment strategy, a company focuses its marketing efforts on two or more distinct market segments.
  • Markets could also be segmented by usage rates.

• Evaluating Market Segments

  • Segmentation involves classifying people into homogeneous groupings and determining which of these segments are viable target markets.
  • Rather, one or more target markets (segments) must be selected.
  • Thus, market segmentation is a twofold process that includes:
  • An ideal market segment meets all of the following criteria:
  • The other segmentation strategy is a multisegment strategy.

• Determining Segmentation Variable(s)

  • Markets can be segmented primarily according to geographic, demographic, usage, and psychological segments--or a combination of the above.
  • As noted, religion is an interesting basis for demographic segmentation.
  • Segmenting the consumer market by age groups is useful for several products.
  • Gender has historically been a good basis for market segmentation.
  • The heavy user is an important basis for segmentation.

• Selecting Target Markets

  • Strategic targeting can optimize the return on investment by selecting the best segments in the market for return on investment.
  • The purpose of identifying various market segments within the broader market is to refine the targeting of paid and organic advertising.
  • What are the demographic, psychographic, behavioral, and geographic characteristics of each segment?
  • Is is practically feasible to enter where the ideal segment is (i.e. geographically)?
  • Recognize the importance of segmentation and how to translate data into smart decisions

• Estimating the Addressable Market

  • The market can be categorized into separate groups called segments.
  • Any discrete variable is a segmentation.
  • Segments can be obtained by any number of approaches.
  • Minimally, an existing discrete variable may be chosen as a segmentation, also called "a priori" segmentation.
  • Each entity in the delivery chain will have different needs, so a complete market needs analysis must include all potential segments and all entities within each segment.

• Identifying the Target Market

  • In addition to the above segmentations, market researchers have advocated a needs-based market segmentation approach to identify smaller and better defined target groups.
  • Identify clusters of similar needs - Demographics, lifestyle, usage behavior and pattern is used to differentiate between segments.
  • Apply a valuation approach - Market growth, barriers to entry, market access, and switching is used to valuate segments.
  • Test the segments - A segment storyboard is created to test the attractiveness of each segment's positioning strategy.
  • Modify marketing mix - The segment positioning strategy is expanded to include all aspects of the marketing mix.

• Concentrated Targeting

  • Concentrated marketing is a strategy which targets very defined and specific segments of the consumer population.
  • For example, the manufacturer of Rolex watches has chosen to concentrate on the luxury segment of the watch market.
  • An organization that adopts a concentration strategy gains an advantage by being able to analyze the needs and wants of only one segment and then focusing all its efforts on that segment.
  • However, there is no increase in the total profits of the sales as it targets just one segment of the market.
  • The primary disadvantage of concentration strategy is related to the demand of the segment.

• Measuring a Successful Segmentation

  • The key to consumer marketing breakthroughs is often successful and innovative market segmentation.
  • Red Bull has been an enormous hit with its target youth segment across the globe.
  • The market segment must be stable enough that it does not vanish after some time
  • The market segment is internally homogeneous (potential customers in the same segment prefer the same product qualities)
  • The market segment is externally heterogeneous, that is, potential customers from different segments have different quality preferences.

• Segmentation for B2B

  • B2B firms will segment their customers differently, due to different buying habits and procedures between businesses and end-users.
  • Machinery and equipment (e.g. computers, bulldozers) are end products sold only to OEM and end user segments.
  • Industrial marketers may segment markets by looking at the different ways and situations in which a product is used.
  • After making field visits to gain insight into the situation, he divided the market into slow speed and high speed segments.
  • Marketers may segment markets by identifying groups of customers who consider the same buying factors important.