Segmentation Analysis Literature Review

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Segmentation Analysis Literature Review

To match the needs of costumers, consumers and producers, not only in case of private people but of businesses or companies, target marketing is needed. To obtain the particular market firstly a marketer has to prepare a market research, after which he segments the market, and then targets a single segment or series of segments, and finally positions within the segment(s). From these processes, I have chosen Segmentation Analysis as the topic of this essay, because it is a crucial element in the “formula” of marketing. In marketing plans mass media strategies are very popular, but it is dangerous to rely on them entirely. In addition, Swenson (1990) says, “Such strategies are no longer as efficient or cost-effective as they once were in that the marketplace is changing. We have moved from a manufacturing-driven to a consumer-driven economy; the mass media itself is fragmenting; we are celebrating ethnic and social diversity, rather than pouring everyone into a homogeneous mould; and the growth rate of the population is slowing with a resultant impact on the demand for goods and services”. Furthermore, segmentation is after market research the first step in STP and herby the second most important in the marketing process. Moreover, if from a marketing strategy a proper segmentation is missed, it will definitely harden the targeting, positioning and easily mislead the whole process.

According to KnowThis LLC (1998-2008) the proper definition of Market Segmentation is the following:

“Because people are different and seek different ways to satisfy their needs, nearly all organizations, whether for-profits or not-for-profits, industrial or consumer, domestic or international, must use a Market Segmentation approach to target marketing. This approach divides broad markets, consisting of customers possessing different characteristics, into smaller market segments in which customers are grouped by characteristic shared by others in the segment.”

To fulfil these duties Market Segmentation must be:
Measurable
Accessible by communication and distribution channels
Relevant
Different in its response to a marketing mix
Substantial enough to be profitable
Durable ( not changing too quickly)

Identifying segmentation variables and segmenting the market The segmentation itself can be done in three separate stages according to the segmentation variables and funds available.

Stage I.
This stage is recommended for those who think that their companies need to move its product to the market quickly. The information bases of this level are the easily accessible demographical, geographical and financial secondary data sources. For example, financial reporting services, government data and trade associations. The benefits of this stage are the low cost and the short time.

Stage II.
The aim of this stage is to move beyond the secondary research methods and collect information, which allows the marketer to target the customer needs much more efficiently. Information at this stage includes learning what options customers have chosen to satisfy their needs, what circumstances within customers’ environment could affect how purchases are made, and understanding local conditions that could impact purchase decisions. This can be done through surveys, purchased market reports, personal contact. The benefits of this stage is a much deeper understanding of the customer needs and wants, however it is time consuming and requires more funds than stage one.

Stage III.
This last and deepest level aims the gathering of segmentation variables, such as psychological and behavioural data. That are certain personal information that many customers are not likely to share with any company. Furthermore, if a marketer possesses these variables he gained competitive advantage over rivals whose segmentation efforts have not gone so far. The question is how can we gain this information?...
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