Why Segmentation

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Consumer Behavior: Market Segmentation

Contents

Introduction1
Concepts of Market segmentation1
Case of a jewelry company3
Conclusion7
Reference8


Introduction
Market segmentation, as a crucial step of marketing, is not what you do to a product, but something you know about your customers. A good knowledge of your customers can enable you to yield twice the result with half the effort. Every consumer is different. Some prefer stylish products, while some want cheap and durable, so it is impossible for a company with limited resource to meet every individual’s need. The best a company can do is to provide products for a certain group of people with same requirement. Thus, the purpose and task of segmentation is to concentrate a company’s energy and resource on a targeted segment so that a competitive advantage can be assured.

Concepts of Market segmentation
When it comes to market strategy, almost all of us will consider these four elements: Product, Price, Place and Promotion. While, before examining 4Ps, we should first segment the market and identify the consumers, which is also called market segmentation. It is the basis of all the other marketing mix. Just like Beane and Ennis eloquently commented, ‘a company with limited resources needs to pick only the best opportunities to pursue’ (Dibb, 1998). Then it comes the market segmentation. Market segmentation is the division of markets into homogenous groups of consumers according to their particular needs and the need of promotion, communication, pricing and other reasons. In another word, each group of consumer share similar habits and attitude towards the product. If the difference between buyers within a segment is small enough, this manager can easily find the right and targeted strategy. As a result, there is a widespread belief that a successful market strategy cannot live without good market segmentation (Gottlieb, 2006).

Market can be segmented according to different variables. Among these variables, there are four traditional criteria, which are also considered as the most important.

-- Geographic segmentation: The consumers of the market are grouped according to their location –nations, states, regions, and countries. For example, a company may utilize the postal or zip code system to assess brand penetration in a certain area (Y,1996). That is because the regional differences exist. For instance, people live in southeastern Asia don’t eat pizza much; instead, their main food is rice. If this company wants to open restaurant chains in southeastern Asia, it must consider the eating habits of this region seriously.

-- Demographic segmentation: It is divided based on the variables like gender, age, income, education level, family size, income and so on. This segmentation is quite popular and convenient to use (Dibb, 1998). Also, there are a lot of data resources available to help the companies to segment their market. Take school as an example, private elementary schools might take those highly educated families as their target market which want to give their children elite education.

-- Psychographic segmentation: This method is to group the consumers based upon their attitudes, values, beliefs and interest. It is important to note that people live in a same region might not have same living styles. Psychographic segmentation is a way to define the consumers with more insight of their personal preferences (Datta, 1996). Take mobile phone as an example, everybody need a mobile phone, but what they need from this gadget is different. Some young people probably use it also as a music player, game machine or a camera to show off in front of their peers. Some old people might rely more on its communication function and just for making calls.

-- Behavioral segmentation: The market is divided by its consumer’s behavior, brand loyalty and intensity of product use. People have different ways to spend money and time; they also...
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