market segmentation

Examples of market segmentation in the following topics:

• The Importance of Market Segmentation

  • Segmenting example: Kellogg's Frosties are marketed to children, while Kellogg's Crunchy Nut Cornflakes are marketed to adults.
  • Market segmentation allows for a better allocation of a firm's finite resources.
  • Market segmentation can be defined in terms of the STP acronym, meaning Segment, Target and Position.
  • While there may be theoretically 'ideal' market segments, in reality, every organization engaged in a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments.
  • Rather, one or more target markets (segments) must be selected.

• Evaluating Market Segments

  • Segmentation involves classifying people into homogeneous groupings and determining which of these segments are viable target markets.
  • Rather, one or more target markets (segments) must be selected.
  • Thus, market segmentation is a twofold process that includes:
  • An ideal market segment meets all of the following criteria:
  • When an organization adopts this strategy, it focuses its marketing efforts on two or more distinct market segments.

• Developing a Market Segmentation

  • In the concentration strategy, a company chooses to focus its marketing efforts on only one market segment.
  • In the multi-segment strategy, a company focuses its marketing efforts on two or more distinct market segments.
  • They then develop marketing programs tailored to each of these segments.
  • Markets could also be segmented by usage rates.
  • Rolex focuses on a single market segment-- those who want a luxury watch.

• Measuring a Successful Segmentation

  • The key to consumer marketing breakthroughs is often successful and innovative market segmentation.
  • The market segment must be stable enough that it does not vanish after some time
  • The market segment is internally homogeneous (potential customers in the same segment prefer the same product qualities)
  • The market segment is externally heterogeneous, that is, potential customers from different segments have different quality preferences.
  • The market segment is able to leverage the appropriate marketing mix to respond to difference in preferences

• Porter's Competitive Strategies

  • Michael Porter classifies competitive strategies as cost leadership, differentiation, or market segmentation.
  • Porter simplified the scheme by reducing it to the three most effective strategies: cost leadership, differentiation, and market segmentation (or focus).
  • Segmentation targets finding specific segments of the market which are not otherwise tapped by larger firms.
  • Porter explains that firms with high market share are successful because they pursue a cost-leadership strategy, and firms with low market share are successful because they employ market segmentation or differentiation to focus on a small but profitable market niche.
  • Discuss the value of using Porter's competitive strategies of cost leadership, differentiation, and market segmentation

• Determining Segmentation Variable(s)

  • Markets can be segmented primarily according to geographic, demographic, usage, and psychological segments--or a combination of the above.
  • Segmenting the consumer market by age groups is useful for several products.
  • Gender has historically been a good basis for market segmentation.
  • Income seems a better basis for segmenting markets as prices for a product increases.
  • So marketers attempt to observe motivation directly and classify market segments accordingly.

• Marketing Data Types

  • Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives.
  • The process of segmentation is distinct from positioning (designing an appropriate marketing mix for each segment).
  • Improved segmentation can lead to significantly improved marketing effectiveness.
  • Distinct segments can have different industry structures and thus have higher or lower attractiveness Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market intended), the segment is then subject to positioning.
  • We segment the market according to the occasions.

• Concentrated Targeting

  • Concentrated marketing is a strategy which targets very defined and specific segments of the consumer population.
  • An organization that adopts a concentration strategy chooses to focus its marketing efforts on only one very defined and specific market segment.
  • For example, the manufacturer of Rolex watches has chosen to concentrate on the luxury segment of the watch market.
  • This can provide a differential advantage over other organizations that market to this segment but do not concentrate all their efforts on it.
  • However, there is no increase in the total profits of the sales as it targets just one segment of the market.

• Estimating the Addressable Market

  • The market can be categorized into separate groups called segments.
  • Any discrete variable is a segmentation.
  • Minimally, an existing discrete variable may be chosen as a segmentation, also called "a priori" segmentation.
  • When a producer appeals to a market or market segment, the producer must take into account the distinction between the end user or consumer and the purchaser or decision maker.
  • Each entity in the delivery chain will have different needs, so a complete market needs analysis must include all potential segments and all entities within each segment.

• Identifying the Target Market

  • In marketing and advertising, a target audience is a specific group of people within the target market at which a marketing message is aimed at.
  • In addition to the above segmentations, market researchers have advocated a needs-based market segmentation approach to identify smaller and better defined target groups.
  • Apply a valuation approach - Market growth, barriers to entry, market access, and switching is used to valuate segments.
  • Test the segments - A segment storyboard is created to test the attractiveness of each segment's positioning strategy.
  • Modify marketing mix - The segment positioning strategy is expanded to include all aspects of the marketing mix.