Updated April 27, 2023
Introduction to Market Segmentation Advantages
People often confuse market segmentation advantages with psychographics, values, behaviors, lifestyle, and multivariate cluster analysis procedures. However, the Market Segmentation Advantages concept is far broader. It permeates the exercise of business all over the world.
So, what is Market Segmentation? At the most grass root level, Market Segmentation is the subdivision of a market according to some commonality, kinship, or similarity. The members of a market segment have something in parallel. The primary purpose of Market Segmentation is to concentrate the marketing vigor on the market segment to gain the upper hand in that specific segment. In other words, the core of all marketing strategy is the marketing force applied, and Market Segmentation Advantages is the tool that helps achieve this force.
Businesses generally like to segment their market for a variety of reasons. It is a common observation that the needs and desires of customers differ to at least some extent, and thus businesses that create special offers for each segment do more good than harm to themselves. Such an act offers better quality products or services and helps increase the business’s profitability.
Market segmentation definitions and examples are excellent means of determining ways to reach your customers. Market Segmentation Advantages allow you different options to enter a market, but usually, it takes work to quantify the impact of an approach. Upon breaking off a large market into smaller segments, it becomes easier to focus your strategies specific to each segment, paying attention to as many groups of customers as possible. By following this targeted approach, you will have a competitive edge as you focus on individual customer needs, thus allowing your business to stay on top of all the latest trends and prospects in your niche market. Segmenting your market appropriately requires a winning business plan.
Market Segments can be Seen in Two Perceptions
Two perceptions to see market segments. They may be:
- A collection of products or service providers in a specific industry
- A specific group of buyers
For this, let’s look at the example of a mobile phone that defines the group of firms selling mobile devices or the consumers buying them. Both market segmentation advantages will attract an efficient business house. Knowing this information, he can determine the market share of his own business and look for openings to elevate his market share. It allows you to target those segments that want to purchase items similar to your products or services. Because past behaviour is an excellent predictor of future behaviour, it increases the potential for sales. It also enables you to target buyers of a major brand, selling add-ons and added services.
When you know customers who already buy a specific item, you can market your products more efficiently and convince them to buy. For example, it is a common observation that clients who avail of haircuts at a salon most often look to purchase hair styling products or spa services. An efficient salon owner would also be very interested in knowing how the whole group of salons in a particular area performs and how their offerings compare with the competitors. If you are entirely new to market segmentation advantages, you can take professional help from business strategists offering a large variety of services in your area.
Market Segmentation not only helps a business to reach out to new customers, but also a focused approach towards your existing customers significantly aids in building the loyalty of your present customers. When you, as an efficient business owner, ask for specific feedback from targeted factions of customers, you will discover some great solutions for the improvement of your product.
But, what’s even better is that when you, as a business house, do implement those ideas received from significant segments of your market. It shows your concern towards them and proves how customer-centric you are.
A worthy market segment should fulfill several necessary conditions to be worthy of being a target. Given below are a few of the conditions that you need to consider:
- The segment must be measurable quantitatively.
- To make money from the part, it must be well-known.
- The segment must exist for at least some period to be measured.
- Business owners must be able to contact their prospective customers through their marketing efforts.
- Business owners must be able to translate prospects into customers cost-effectively.
- Your customers in a specific segment must like similar products and services.
- The potential customers of different parts must have diverse product preferences.
- The intended customers must at all times respond to definite marketing activities.
- There should be sufficient data to follow a planned sales approach.
A business owner must consider many factors before beginning to segment the market. A marketer, thus, must try to segment his market segmentation advantages as thoroughly as possible so that a result is a small group of customers. The advantage of such a strategy is that it provides him with a base of viable prospects for his products or service. Thus, one can save a significant amount of money on advertising and marketing for those unlikely prospects that won’t be interested in them.
Knowing better about the market segments where you are operating and selling makes it easier to formulate and manage your goals. This practice ensures you avoid irrelevant competition and always focus on your goals and objectives.
For example, a small grocery store must focus on its customer segment and avoid trying to think of competing with large departmental stores like Walmart or BestBuy. Thus, effective market segmentation can help a business promote its brand to a large sample of prospects and lead it to a winning strategy.
Before knowing the different market segments, we must first understand that this article focuses on consumer markets, not business markets. Here are the most common market segments that business strategies use and how they impact the pricing decisions of those businesses these days:
Types of Market Segmentation Definition And Examples
Following are the different types:
1. Geographic Segmentation
It is the most common form of market segmentation advantage, wherein the organizations subdivide their target customers by geographic location. Market Segmentation Example is when a company markets its products or services in one country and not another.
A few restaurant chains in the United States like to operate in just one market, state, or region. There are also some regional variances in consumer liking, which is another major cause of geographic segmentation. For example, certain companies might try to sell their redeye gravy only in the southeastern US and marketers of meat products like beef and pork may try to avoid some regions like South Asian countries.
A chainsaw manufacturer may market segmentation benefits its efforts more in the forest areas than elsewhere. Air-conditioner sellers would like to focus more on Middle Eastern countries than European regions. Geographic segmentation can come in various forms, such as rural v urban, north v south, interior v coastal areas, high-elevation v low-elevation areas, etc. It also proves that Geographic Segmentation is sometimes an alternative to other forms of market segmentation benefits.
2. Distribution Segmentation
Different channels of distribution can reach out to other markets. For example, a company making typical pet supplies might sell them under a brand name to supermarkets, a different name to pet stores, and yet another name to veterinarians.
Small companies usually do such a distributional segmentation to allocate each distribution channel’s unique name to gain the advantage. Some other examples of Distribution Segmentation are a fashionable line of clothing sold only at inexpensive departmental stores or a premium shampoo sold only through upscale beauty salons.
3. Media Segmentation
Although not a very common form of marketing segmentation, some companies use it sometimes. The basis of market segmentation is that different media reach different audiences.
The firms that rely on this type of market segmentation tend to pour their entire allocable budget into one form of media to dominate the segment of the media that uses that particular media. Organizations with some influence over a form of media and can prevent others from using that media commonly use media segmentation.
4. Price Segmentation
Price Segmentation is the most widely used and effective form of market segmentation benefits. The main motive behind this form of market segmentation is the variance in the household incomes of customers, thus market segmentation along the price dimension.
When the incomes are low, rational says that a marketer should offer some cheap, medium-priced, and a few high-priced products. Companies like General Motors historically. Other major automobile brands like Chevrolet, Pontiac, Buick, and Cadillac have varied pricing strategies to appeal to almost all income groups, especially the high-income groups adopt such a kind of Price Segmentation.
5. Demographic Segmentation
Some standard demographic variables are age, gender, housing type, income, and educational level. Thus, some marketers target only men, while others focus solely on women. Some brands target specific products to specific factions of society.
For example, companies should market hearing aids more to older people than youth, and vice versa, valid for music downloads. Educational level is an important cause of market segmentation demographic. For example, some insurance and financial products are marketed more to the educationally well-off irrespective of their economic status, than to the lesser educated ones. Market Segmentation demographic is a commonly adopted and highly effective form of market segmentation definition and examples.
6. Time Segmentation
Although time segmentation is less common, when applied brings about great results. Some products, such as Christmas cards and fireworks, are sold only during specific days of the year. Some stores are open later than others, and some are open on weekends. Chili is marketed more in the fall season than in other seasons. All these practices have one thing in common, i.e., companies market them according to time segmentation.
The time element is a remarkable basis for market segmentation advantages. In addition, the segmentation of markets can be by hobbies, religion, sports team loyalties, special interest groups, political affiliation, university attendance, and other variables. Market segmentation can be applied to every facet of human imagination.
7. Psychographic or Lifestyle Segmentation
Last and certainly not the minor type of market segmentation strategy is psychographic or lifestyle segmentation. It bases itself on multivariate analyses of consumer attitudes, behaviors, perceptions, emotions, beliefs, and interests.
Psychographic segmentation is a legitimate method to segment a target market, provided the marketer can identify the appropriate market segmentation variables. In this method, qualitative research techniques such as depth interviews, focus groups, and ethnography play a vital role in establishing the various market segmentation advantages.
Common Mistakes
The entire Market Segmentation process tends to be lengthy and complicated, thus, increased are the chances of errors. Some of the most common mistakes that marketers make in market segmentation include the following:
- Segmenting a segment. It usually happens when a marketer wants to sell a specific product or service to a particular segment pre-identified for that product itself. However, the problem arises when a client asks that a tiny portion of the market is segmented. Theoretically, this is true, but the resulting segments are only valuable if they are more prominent. A general rule is to segment the entire market and include all age groups, genders, income groups, religions, etc. To be more practical, the market must be primarily defined as a market segmentation strategy analysis.
- Overlooking the “universals. ” A good practice is avoiding repetitive statements in a segmentation questionnaire. Almost all people who agree with or disagree with these statements are termed “universals.” Variables need to move up and down for the multivariate analysis to function.
- Create only a few segments. There is an actual limit to the number of segments businesses can efficiently target. As a rule of thumb, those who create more than four or five segments usually end up with segments that would be too small to be meaningful. However, it might not always be true either.
Conclusion
The notion of market segmentation is sturdy. Market segmentation advantages are a technique applied to collect greater marketing force to a market subdivision. On the contrary, recovering many funds must occur on psychographic segmentations that go inoperable.
Psychographic segmentation’s most significant utility lies in positioning, pursuing advertising messages, and outlining new product avenues. I hope the article will enlighten you with the practices and market segmentation strategy types and could supplement your marketing database with significant ideas. Don’t wait. Go forth and segment!
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