What Is Segmentation and Marketing Strategy

Topics: Marketing, Marketing plan, Strategic management Pages: 17 (4588 words) Published: April 5, 2011

Segmentation may be defined as the process of dividing a heterogeneous market into homogeneous sub-units.

To get a product or service to the right person or company, a marketer would firstly segment the market, then target a single segment or series of segments, and finally position within the segment(s).

Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a 'segment'.

Importance of segmentation

The essence of the marketing concept is the idea of placing customer needs at the centre of the organization’s decision-making. The need to adopt this approach stems from a number of factors, including increased competition, better-informed and well-educated customers and, perhaps most importantly, changing patterns of demand. Primarily it is the change in patterns of demand that has given rise to the need to segment markets. Market segmentation is one of the central pillars of modern marketing and is found at the very core of the marketing process. Some writers suggest that segmentation is the most important activity within modern marketing. This claim is debatable but what is true is that the general principles and processes of market segmentation are absolutely vital to effective marketing strategies for the vast majority of firms operating in today’s highly competitive economy. This change in patterns of demand stems from the fact that higher standards of living and a trend towards individualism has meant that consumers are now more able to exercise their choice in the market place. Market segmentation can be defined as the process of breaking down the total market for a product or service into distinct sub-groups or segments where each segment may conceivably represent a separate target market to be reached with a distinctive marketing mix. Segmentation and the subsequent strategies of targeting and positioning start by recognising that increasingly, within the total demand/market for a product, specific tastes, needs and demand may differ. It breaks down the total market for a product or service into individual clusters of customers, or segments. Here, customers who share similar demand preferences are grouped together within each segment. Effective segmentation is achieved when customers sharing similar patterns of demand are grouped together and where each group or segment differs in the pattern of demand from other segments in the market.

Segmentation Process

Market Segmentation consists of 3 steps:

1. Survey: During this process the researcher conducts interviews and collects data through a questionnaire on product usage, brand awareness, brand loyalty and attitude towards products.

2. Analysis: During this stage the researcher analyses the data to identify segments in the same market.

3. Profiling: Each segment is given a name based on its dominant characteristic.

Criterias of segmentation.

Segmentation is a form of critical evaluation rather than a prescribed process or system, and hence no two markets are defined and segmented in the same way. However there are a number of underpinning criteria that assist us with segmentation:

Is the segment viable? Can we make a profit from it?

Is the segment accessible? How easy is it for us to get into the segment?

Is the segment measurable? Can we obtain realistic data to consider its potential?

The market which is segmented must meet the following criteria:

1. Measurability of segment/ Identifiable: Here, the base(s) used should preferably lead to ease of identification in terms of who is in each segment. It should also be capable of measurement in terms of the potential customers in each segment. It must be capable of being identified as a separate section of the overall market and must...
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