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Market Segmentation

Market segmentation can be the defined as the process of dividing a market into distinct sunsets of consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix. The strategy of segmentation allows producers to avoid head on competition  in the marketplace by differentiating their offerings, not only of  price but also through styling, packaging promotional appeal, method of distribution and superior service. 
  
Marketers have found that the costs of consumer segmentation research, shorter production runs and differentiated promotional campaigns are usually more than offset by increased sales. In most cases, consumers readily accept the passed-through cost increased for products that more closely satisfy their specific needs. In most cases Market segmentation in just the first step in a three phase marketing strategy.
 
After segmenting the market into homogeneous clusters the marketer then must select one or more segment to target. To accomplish this the marketer must decide on a specific marketing mix that is a specific product, price, channel and promotional appeal for each distinct. Segment. The important step is positioning the product so that it is perceived by the consumers in each target segment as satisfying their needs better than other competitive offerings.

Bases for segmentation


The first Step in developing a segmentation strategy is to select the most appropriate base on which to segment the market. Nice major categories of consumer characteristics provide the most popular bases of market segmentation. They include geographic facts, demographic factors, psychological factors, psychographic characteristics, and sociocultural variables; use related characteristics, use-situation factors, benefits sought and forms of hybrid segmentation such as demographic-psychographic profile, geo-demographic factors and lifestyles.
 
Hybrid segmentation formats each use a combination of several segmentation bases to create rich and comprehensive profiles of particular consumer segments

Two Market Segmentation


1. Geographic segmentation

In geographic segmentation the market is divided by location. The theory behind this strategy is that people who live in the same area needs and wants and that these needs and want differ from those of people living in other areas. To illustrate certain supermarket and specialty related products sell better in one market or a particular region, then in other.

Coffee bean grinders are a "must have" in kitchen of people living in the Northwest, they are much less common anywhere else in the United States and similarly. Star bucks coffee sells plenty of fill-body coffees on the west coast but needed to introduce a line of milder dimensions coffees to better satisfy its. East cost consumers.
 
Some marketing scholars have argued that direct-mail merchandize catalogs, national toll free telephone Numbers, satellite television transmission, global communication network and especially the internet have erased all regional boundaries and that geographic segmentation should be replaced by a single global marketing strategy. Other marketers have for a number of years been moving in the opposite direction and developing highly regionalized marketing strategies.

Geographic segmentation is useful strategy for many marketers. It is relatively small to find geographically based differences for many products. In addition geographic segments can be easily reached through the local media, including news papers, TV and radio and regional editions of magazines.

2. Demographic Segmentation

Demography refers to the vital and measurable statistics of Demographic characteristics, such as age. Sex; marital status income, occupation, and education are most often used as the basis for market segmentation: Demographic help to location a most target market. Whereas psychological and sociocultural characteristics help to describe how its member think and how they feel. Demographic information is often the most accessible and cost-effective way to identify a target market indeed most secondary data including census data, are expressed in demographic terms. Demographic are easier to measure then other other segmentation variable they are invariably in could in psychographic and sociocultural studies because they add meaning to the findings.
 
Demographic  variables reveal ongoing trends that signal business opportunities such as shifts in age gender and income distribution. For example, demographic studies consistently show that "mature adult market" (the 50+market) has a much greater proportion of disposable income then younger counterparts. This factor alone makes consumers over age 50 a critical market segment for products and services that then buy for themselves for their adult children and for grandchildren.

Market was defined "As the place of area in which buyers and  sellers function. Marketing is an exchange process. The products are matched with markets. A marketers and products are the twin factors on which all marketing process are based. "Nothing happens in our economy, unless and until somebody sales something" hence selling is very essential and for selling market is essential. Market is the aggregate demand for the potential buyers of commodity or services.

The process of subdividing market is called as "Market segmentation" The term Market segmentation is the use to sub-divide the market or customers of the product in order to capture more sale effectively and efficiently. Even for product line, having a similar  needs of different market segments or different needs of market segments.

"Market segmentation is the subdividing of a market into distinct sunsets of customers, he any subset may conceivably be selected as a market target to be reached with a distinct marketing mix"

Scope of Market Segmentation


1. Measurability

Demographic and socioeconomic characteristics are objective and measurable but personality, life styles and psychological factors governing buyer behavior such as motivation, perception, and attitude are subjective and non measurable attributes. Hence we want to identify members of the segment on the basis of some common characteristics or behavior pattern.

2.  Accessibility

Even if the segment is identified, it should be within our reach though suitable means of communication and distribution. Our segments indicate that buyers will buy easily as they have low self-esteem. If we are unable to communicate effectively with our prospective buyers, out efforts of promotion will be worthless.

3. Market Responsiveness

The identified segment must respond favorably to our marketing efforts. Here customers demand , their buying motives are very important, lf customer is interested in quality and services and are ready to pay higher price than segmented market must give respond to our marketing efforts.

4. Effective Demand

The segment may respond Favorably. But it must have sufficient buying power (Willingness plus ability to pay). Number of buyers may be small but their buying power must be adequate. Needs plus purchasing power create effective demand A segment must possess effective demand.

5. Adequate Potential

Markers should develop segmentation strategies only for substantial segments. Ability to measure the intensity of need and strength of purchasing power supporting the need can indicate potential of a segment.

Need Of Market Segmentation


1. This adoption of  "mass production
" were automatically segmented.

2. Each product or service was tailored to the needs of the buyer had ordered it.

3. The aim of "mass production" was to standardize products in order to achieve greater production efficiency and lower product cost.

4. This would lead to the lowest costs and create the largest potential market.

5. It is said that today "Never Follow the Crowd"

6. The economic theory of pure competition assumes that all buyers are alike and consumer behavior is unidirectional.

7.  Marketers recognize the important of heterogeneous demand. They are interested in sub-dividing or segmenting the market.

8.  Each segment can be a group of people with similar or homogeneous demand and enterprise can offer tailor-made marketing mix for each market segment or subdivision.

9. A marketing segment is a meaningful buyer group having similar wants. 'Segmentation' is a customer-oriented marketing strategy.

10. Varied and complex buyer behavior is root cause of market segmentation.


Benefits Of Market Segmentation


Market segmentation reflects-reality in marketing. Segmentation ensure-higher customer-satisfaction and improves effectiveness of the marketing programmed.

1. Marketers are in a better position to locate and compare marketing opportunities.

2. When customer needs are fully understood, marketers can effectively formulate and implement marketing programmers.

3. Competitive strengths and weaknesses can be assessed effectively and marketers can avoid fierce competition and use resources more profitably by catering "Customer demand" which is not being met by rivals.

4. It leads to more effective utilization of marketing resources.

Market segmentation helps matching of market opportunities to corporate resources and enables the enterprise to give successful competition in the market.

Other important benefits are Market Segmentation


1. Increase in sales volume

2. Sound marketing programmed

3. Increase in market opportunities

4. Better utilization of market resources.

5. Provides various types of information useful in marketing research, product development, evaluation of facilities of marketing and distribution etc. Better understanding of consumer needs behaviour expectations.


Important Of Market Segmentation Strategies


1. Concentrated Marketing

A firm may decide to concentrate all available resources on one chose segment within the total market. It select a market area where there is strong competition and it can do best in the area.if it succeeds in matching its resources with customer demand, it may enjoy an element of monopoly in that area. Marketer is free from competition.

2. Differentiated marketing

Here organization enters many marketing segments but has a unique marketing mix for each segment. Hindustan lever has one brand of both soap for each market segment.

3. Undifferentiated Marketing

Marketing may not prefer the idea of market segmentation and differentiated market. In that situation, we will have one marketing mix for several markets segments. As he would face more specialized competition in each segment he would have a relatively weak position in all segments.

4. Product Differentiation

By product special features say refrigerator, soaps etc.


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