Sunday, April 8, 2007

Benefits of market segmentation

There are a many benefits that can be resulting from segmenting a market:

  1. Segmentation is a useful approach to marketing for the smaller firms. It allows target markets to be matched to company competencies and makes it more achievable for the smaller firms to create a defensible niche in the market.
  2. It assists recognizing gaps in the market that are not served or under-served. These can provide areas for new product development or extension of the existing product or service range.
  3. In mature or declining markets it may be possible to identify particular segments that are still in growth. Focusing on growth segments when the overall market is declining is a major strategy in the latter stages of the product life cycle.
  4. Segmentation allows marketers to match a product or service to the needs of the target market.
Also market segmentation allows:
  1. Allocate company resources to the segments potentially more profitable;
  2. Fine-tune a range of products to demand rather than occupy a position of strength in some areas and ignore or minimize other areas of potential profitability important;
  3. To give the company the opportunity to detect early signs of a fundamental evolution of the target market, enabling it to adjust to time the market;
  4. Establish more precisely the main advertising and quantify the segments covered by each of these routes;
  5. Select media advertising more responsive to the needs and allocate more adequately the total budget between them;
  6. Determine the periods that are most conducive to advertising campaigns, ie those where the target is most receptive.
The segmentation is neither more nor less than a year classification of consumers dialing a given market. The interest of segmentation is that involves a significant number of people depending on the characteristics that unite them and set them apart from other groups, these characteristics may be demographic, of course, but the most powerful and interesting are those attribute to the features of the lifestyle of the person, and its values (psychographic segmentation).

Why there to find new segments?
Companies are constantly looking for new segments, to develop marketing approaches even more powerful, more adapted to join a convincing potential buyers of the product / service.

They not new consumers But there is a new way to define one or more groups of people, to find what unites them, namely the values, lifestyles sought, in fact what is important for all members of this group of people. Companies are constantly looking for a new segment that portrayed a marked and important change in these values and lifestyle pursued (or claimed) by a growing number of people. That was the whole point of the so-called "emerging segment" because the people who compose it may present needs and aspirations that are not well met by supply of products / services.

Successful segmentation requires the following.
  1. homogeneity within the segment
  2. heterogeneity between segments
  3. segments are measurable and identifiable
  4. segments are accessible and actionable
  5. segment is large enough to be profitable
These criteria can be summarized by the word DAMAS:
  1. D Differential: it must respond differently to a different marketing mix
  2. A Actionable: you must have a product for this segment to be accured
  3. M Measurable: size and purchasing power can be measured
  4. A Accessible: it must be possible to reach it efficiently
  5. S Substantial: the segment has to be large and profitable enough
Variables Used for Segmentation
1. Geographic variables
  • region of the world or country, East, West, South, North, Central, coastal, hilly, etc.
  • country size/country size : Metropolitan Cities, small cities, towns.
  • Density of Area Urban, Semi-urban, Rural.
  • climate Hot, Cold, Humid, Rainy.
2. Demographic variables
  • age
  • gender Male and Female
  • family size
  • family life cycle
  • education Primary, High School, Secondary, College, Universities.
  • income
  • occupation
  • socioeconomic status
  • religion
  • nationality/race (ethnic marketing)
  • language
3. Psychographic variables
  • personality
  • life style
  • value
  • attitude
4. Behavioral variables
  • benefit sought
  • product usage rate
  • brand loyalty
  • product end use
  • readiness-to-buy stage
  • decision making unit
  • profitability
  • income status
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis. Other techniques used to identify segments are algorithms such as CHAID and regresion-based CHAID and discriminant analysis.