When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Basic steps in marketing strategy are as follows:-
* ATTRIBUTES OF EFFECTIVE SEGMENTATION
Market segmentation is resorted to for achieving certain practical purpose. For example, it has to be useful in developing and implementing effective and practical marketing programmes. For this to happen, the segments arrived at must meet certain criteria such:- a. Identifiable: The differentiating attributes of the segments must be measurable so that they can be identified. b. Accessible: The segments must be reachable through communication and distribution channels. c. Sizeable: The segments should be sufficiently large to justify the resources required to target them. A very small segment may not serve commercial exploitation. d. Profitable: - There is no use in locating segments that are sizeable but not profitable. e. Unique needs: To justify separate offerings, the segments must respond differently to the different marketing mixes. f. Durable: The segments should be relatively stable to minimize the cost of frequent changes. g. Measurable: The potential of the segments as well as the effect of a specific marketing mix on them should be measurable. h. Compatible: - Segments must be compatible with firm’s resources and capabilities.
* REASONS FOR MARKET SEGMENTATION
Segmentation is the basis for developing targeted and effective marketing plans. Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments. A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers. 1. Facilitates proper choice of target marketing:-
Segmentation helps the marketers to distinguish one customer group from another within a given market and thereby enables him to decide which segment should form his target market.
2. Higher Profits: -
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. A typical segment-based price variation is by region. The generally higher price level in big cities is evidence for this. When differentiating prices by segments, organizations have to take care that there is no chance for cannibalization between high-priced products with high margins and budget offers in different segments. This risk is the higher, the less distinguished the segments are.
3. Facilitates tapping of the market, adapting the offer to the target:-Segmentation also enables the marketer to crystallize the needs of target buyers. It also helps him to generate an accurate prediction of the likely responses from each segment of the target buyer. Moreover, when buyers are handled after careful segmentation, the responses for each segment will be homogeneous. This in turn, will help the marketer develop marketing offer/programmers that most suited to each groups. He can achieve specialization that is required in product, distribution, promotion and pricing for matching the particular customer group and develop offers and appeals for the segmented group.
Example of Ford: - Ford has gained useful insights through segmentation and adapted its offer to suit the Indian target market. For the...