Market segmentation simply refers to the division of the entire market into different homogenous groups of customers. Market segmentation is very important as it allows the firm to effectively meet their customers’ needs. This is done through the development of products that are targeted towards a particular market segment.
Homogenous here simple means same or alike. This simply means that the needs, styles, tastes and preferences of the customers in that segment are all the same. This makes it much easier for the firm to take care of all its customers use different forms of product differentiation and assortment.
However, for market segmentation to be effective there are a number of requirements that need to be met by each market segment and these are:
The market segment should be measurable. It should be of a realistic size; a size that can be easily accounted for and one that the firm can effectively and efficiently produce products for.
The market segment should be accessible by all distribution and communication channels. Having a market segment that you cannot reach simply does not make any sense. This will simply translate to your products not getting to their intended customers and you will in turn not make any sales.
The market segments ought to have a different response to a marketing mix. The purpose of segmenting a market is to simply set apart different people from each other.
The manner in which a certain market segment responds to a marketing mix should be different from how the next market segment will respond to the same mix. This allows the firm to identify the segment’s specific needs and find effective ways of meeting these needs.
An established market segment should be durable. It should not be one that will fade away within a very short time. Remember that as a firm you will be investing your resources in meeting the needs of this segment; you do not want to be investing your resources that will be gone before you even get a chance to get a good return on your investment.
A good market segment is one that is substantial enough to earn you a profit. The main goal of any business is to make a profit. It is important that the size of your market segment is big enough to help you generate enough sales to report a profit.
Types of Market Segmentation
Market segmentation typically involves dividing a market into categories based on the similar tastes, needs, styles and preferences of the people in the category. There are a number of factors that can influence people and cause them to have the same preferences, styles, needs and tastes. These factors are what give rise to the types of market segments which are; geographic, demographic, psychographic and behavioral.
? Geographic Segmentation
Geographic segmentation involves the categorizing of a market based on regional variables like population growth, population density, climate and region just to mention but a few. People living under the same geographical condition tend to adapt the same lifestyle which gives rise to similar tastes, preferences, needs and styles. This is simply because they are affected by a similar external environment and they are all required to adapt to the conditions of that external environment.
? Demographic Segmentation
With demographic segmentation, the market is categorized according to family status, income, occupation, education, ethnicity, gender and age. These are all very important factors owing to the fact that people of the same age tend to think the same and so do people of the same gender, ethnicity, family status and the rest of them.
Family status, occupation and income all also come in on another level which is the purchasing power of the people. People with a higher purchasing power will be willing to spend more money on products compared to those with a lower purchasing power. Segmentation in this regard is usually done with respect to the price of the product.
? Psychographic Segmentation
Psychographic segmentation takes into account variables such as the lifestyles, attitudes and values of the market. Depending on the backgrounds and cultures in which one has grown in, we all tend to have varying beliefs and attitudes towards different things. This is a very important factor to take into account when marketing and selling your product.
A good example would be if you are in the business of selling and distributing meat; you will have no business if you invest your resources if you fail to take the belief and attitudes of Muslims into account. These is simply because they do not just eat any type of meat, it has to be ‘halal’.
They also do not eat pork. All these are factors that you ought to take into account as you move your product. The lifestyle that people lead is also very important. Apple would have no business marketing their laptops to people who are already used to using their tablets.
? Behavioral Segmentation
Behavioral segmentation takes into account variables like benefits sought, brand loyalty, price sensitivity, usage rates and patterns just to mention but a few. People will only buy products that they know will meet their needs and that is within their budget range. The frequency with which people buy products depends on their usage patterns and rate. Brand loyalty is another very important factor. Customers tend to stick to products that they can identify with.
Steps in Planning a Segmentation Strategy
? Determination of Consumers’ Characteristics and Needs
The first step is to determine the needs of consumers and characteristics of consumers for the product category of your company.
Remember that the main aim of market segmentation is to bring together those who have similar needs and characteristics. To get to know which ones are similar, you will have to find out what these needs and characteristics are first. When you find out what all of them are, you can go on to putting the similar ones together.
? Analysis of Consumer Differences and Similarities
The second step is analyzing the differences and similarities that your consumers are. This is what will help you to develop homogenous groups as you will get to know which ones have similar needs and characteristics and how you can group them in regard to these characteristics and needs.
? Development of Consumer Group Profiles
A profile is simply the criteria that you will use to group your consumers. You will use the needs and characteristics and similarities and differences discovered the first and second step to come up with this profile. All customers who fit into the same profile will then be put into one segment.
? Selection of Consumer Segments
After you have come up with the profiles, it will then be time to group them into different segments. You can use any of the segment types that were discussed earlier on.
? Positioning what your Company is offering in relation to what your competitors are offering
Remember that you are not the only firm in the industry unless you are running a monopoly. There are quite a number of firms in the same industry that are all targeting the same customers that you are. To come out on top, it is imperative that you position yourself in such a way that you have a competitive advantage over your competitors. Make your target market see that you are in a much better position to effectively and adequately meet their needs compared to your competitor.
? Establish a Proper Marketing Plan
Last but not least, you will need to come up with an effective marketing plan. One that will allow you to reach out to your target market, appeal to them and get them on your side. Remember that for a marketing plan to work it has to assure the customers that the product being marketed will be of great benefit to them and it will be good value for their money.