Market Segmentation: Definitions, Objectives, Requirements, and Benefits
Definitions of Market Segmentation
Market segmentation is a process of dividing the total market for a goods or service into several smaller groups, such that. the members of each group are similar with respect to the factors that influence demand. – W.J Stanton
Dividing a market -into distinct groups of buyers with different needs, -characteristics, or behavior who might require a separate product or marketing mix. – Philip Kotler
Segmenting markets simply divides the heterogeneous mass market into groups each of which has one or more homogeneous characteristics. – Ronald W. Hasty and W. R. Ted
Market segmentation is naming broad product markets and segmenting these broad product markets in order to select target markets and develop suitable marketing mixes. – Prof. E. Jerome McCarthy
Objectives of Market Segmentation
1. Better Service
Market segmentation is done with the objective of better service. If the market is segmented all the resources, tools, skills, and techniques can be concentrated, and thus the service of the organization will be improved.
2. Market specialization
Market segmentation leads to market specialization. Steady and continuous service in the distinct markets gives full knowledge of the market. It makes the marketers, experts of the market. The products, human resources, and organizational policies become customer-friendly.
3. Optimum utilization of resources
Targeting the market provides details of the customers and their needs. It helps marketers in production. If the market is segmented, marketers can produce the product according to the desire of consumers. So, the product will meet the demand of the consumers and there will not be a waste of resources.
4. Increase efficiency
Segmentation minimizes the size of the market. With the decreasing size, the activities to be performed by the organization also decrease. So the workload for the marketers will be decreased. This will enhance the capacities of the marketers. Therefore, segmentation is done to increase organizational efficiency.
5. Easy updates of changes in the marketplace
It becomes easy to get updated on changes in the marketplace if it is segmented. Because Of the smaller size, it is easy to identify, analyze and respond to the changing need of customers. Markets are dynamic and human wants keep changing at every moment. Market segmentation helps to take rapid corrective action and develop a marketing mix according to the changing environment.
6. Effective planning and implementation
Segmentation helps in effective and optimum resource utilization, specialization in the market’ and provides detailed information of the environment. This helps in the effective planning and implementation of the marketing programs. Therefore, segmentation helps in achieving the objective smoothly.
Requirements for Market Segmentation
1. Heterogeneous need or variation in demand
Buyers’ needs and wants are different resulting from their buying power, buying motive, buying attitudes, location and age. Segmentation of the market is done to fulfill different needs and wants of people effectively. So, for segmentation of the market customers should respond differently to the subject matter. Differentiation in buyers needs to help the organization for market segmentation.
The different responses of customers should be clearly identified or measured for segmentation. It should be measured on the basis of data or information collected. Customer’s responses based on quantifiable (measurable) information such as age, gender, income level, etc. are easily measurable but qualitative information like lifestyle, feeling, personality, etc. are difficult to measure. For effective market segmentation buyer’s needs should be measurable.
For segmentation, the market segmented should be reachable through existing marketing institutions such as channels of distribution, advertising media, salesforce, etc. If these institutions are not linked with the segments then segmentation is not valued, thus for effective market segmentation, the market segmented should be accessible from the point of marketing tools and distribution channels.
The market segment should be large or substantial enough to give the organization adequate profit. The segments should be able to create enough demand for the goods and services produced by the company. It should attract the aimed costumers spread over different parts of the world to earn profit.
For effective segmentation, the market segmented should be stable in nature for a certain time. When a market is segmented and produced goods accordingly, it takes time to recover the investment. Since market segmentation is an expensive and difficult task, it should be sufficiently stable over a period.
Benefits of Market SegmentationIdentify most profitable market
1. Identify the most profitable market
Market segmentation is the act of dividing a total market into smaller market segments based on certain criteria. The organization can evaluate the size, growth, and profit potentiality of the market segments easily when the market is divided into smaller segments. The organization can evaluate the competitive forces and find which market is better to supply in a profitable manner and where the cost is less.
2. Market specialization
Market segmentation is the process of grouping customers with similar needs from heterogeneous needs. By market segmentation, the organization can define the target market more effectively. By what the marketers can focus the needs of the specific groups only. This leads to market specialization.
3. Goal achievement
Segmentation helps in achieving the goal of an organization. Segmentation helps in effective and optimum resource utilization, specializing in the market, and provides detailed information of the environment. Therefore, segmentation helps in achieving the objective smoothly.
4. Effective use of market resources
By market segmentation, the target market is clearly segmented and defined. Through market segmentation, the marketers identify the actual requirement of the customers and the real position of the competitors. Regarding segmentation, marketers can use their marketing resources to the most promising market. As the segmented market is small in size. it is easy to collect information about the customer’s needs and wants and the resources can be efficiently allocated according to the need.
5. Monitoring change in marketplace
Markets are dynamic and human wants keep changing at every moment. It is easy to identify, analyze and respond to the changing need of humans in the segmented market since it is smaller in size. Market segmentation helps to take rapid corrective action and adapt its marketing mix to the changed situation.
6. Better analysis of competitors
By market segmentation, marketers can identify their rival organizations and can analyze their effects. Marketers become able to focus on their real competitors and identify their strengths and weaknesses. Since an organization faces fewer competitors in segments, true information about competitors’ strategy and marketing mix can be easily obtained. Proper production, distribution, pricing, etc. is possible through market segmentation.
7. Adapt marketing strategies
The marketing firm can design appropriate strategies related to its marketing mix for a market segment. A business firms can develop strategies regarding the target group, their economic status, living standard, and attitude. Marketers can also change the strategies according to the changes that occurred in the market segment.