Use Market Segmentation example essay topic

To reach different markets or to promote your products to different locations or people one has to use a method called market segmentation. "Market segmentation describes the division of a market into homogeneous groups which will respond differently to promotions, communications, advertising and other marketing mix variable" (Cumming). Market segmentation is extremely important for companies around the world. If a company doesn't research the area in which they are going to market or they put a product that is either to expensive or to elaborate in an area that can't afford that then they will fail as a company. In my paper I will discussion why market segmentation is used in around the world, the types of segmentation, some techniques used to make segmentation work the best. Market segmentation is to divide the market into smaller segments.

The reason for dividing the market is to make it easier to address the needs of smaller groups of customers, particularly if they have many characteristics in common (Breen). It is easier if you find things in common that are the same such age, gender, benefits, lifestyles, etc. We also use market segmentation to find niches or to identify under-served or un-served markets. "Using niche marketing, segmentation can allow a new company or new product to target less contested buyers and help a mature product seek new buyers" (Cumming). Niche marketing can also take a normally large, identifiable group within a market, break it into sub groups so marketing can become easier. Nicking offers smaller companies an opportunity to compete by forcing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors (Mariotti).

In many markets today, niches are normal, as agency executive observed, "There will be no market for products that everybody likes a little, and only for products that somebody likes a lot (Mariotti). Market segmentation is also used to be efficient. "More efficient use of marketing resources by focusing on the best segments for your offering - product, price, promotion, and place (distribution). Segmentation can help you avoid sending the wrong message or sending your message to the wrong people" (Klein).

The question is when do we use market segmentation. The answer is, anytime you suspect there are significant, measurable differences in your market, you should consider market segmentation. There are things you should consider to see if a market must be segmented. The markets must be large enough to be segmented, if you try to split an already small market it won't work. Differences must exist between members of the market and these differences must be measurable through traditional data collection methods (McElligott). Once the market is segmented, you must be able to design marketing communications that address the needs of the specific segments.

If you can't develop promotions and advertising are specific to each segment, there is little value in having those segments. Each segment must be reachable through one or more media. You must be able to get your message in front of the right market segments for it to be effective. If your were marketing to one-eyed, green aliens then you should invented a market to reach these aliens. Segments must not only be differing on demographic and psycho graphics characteristics, they must differ on the benefits sough from the product (Mariotti). If everyone wants the same things from your product, there is no reason to segment buyers.

The expected profits from expanding your markets and more effectively reaching buyer segments must exceed the costs of developing multiple marketing programs, re-designing existing product and / or creating new products to reach those segments (Cumming). Consumer Markets can be segmented into many different parts in order to sell the product the most effectively. Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cites, or neighborhoods (Breen). This dividing makes marketing easier because a specific people or place of population is singled out and a product is geared to that place. Markets can also be divided by using demographic information such as age, gender, family size, family life cycle, income, occupation, education, religion, race, and nationality. This segmentation is the most popular among customer group because of the precise audience you can reach.

The different elements of demographic segmentation are important and must be discussed in detail. Age and life cycle segmentation is dividing a market into different are and life-cycle groups. This segmentation can e used in conjunction with McDonalds in how they use toys to bring in children, which in turn brings their parents and there fore McDonalds makes money off the child and the parent. Marketers also must be careful the guard against stereotypes when using age and life cycle segmentation. "Although some 70-year-old require wheelchairs, others play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families (Klein).

Companies must recognizes these rarities and market their product extremely carefully. Gender segmentation is dividing a market into different groups based on sex. This type of segmentation can be found when dealing with clothing, cosmetics, toiletries, and magazines. In the 90's though gender segmentation is used in other parts of the market including automobiles.

"Woman buys half of all new cars sold in the United States and influence 80 percent of all new-car purchasing decisions. By the year 2000, women will purchase an estimated 60 percent of all new cars (Mariotti). These drastic changes have been noticed by companies around the world and the advertising and promoting departs have geared their add to women, not just men. Income segmentation is dividing a market into different income groups. This type of market has been common to items such as automobiles, boats, clothing, cosmetics, financial services, and travel. Income segmentation can be seen in where specific stores are located, what items are in what magazines, and the price that items are set at depending on the general income of the area.

For example... Greyhound Lines, with its expensive nationwide bus network, also targets lower-income consumers. Almost half of its revenues come form people with annual incomes under $15,000 (Mariotti). Psycho graphic segmentation is dividing a market into different groups based on social class, lifestyle, or personality characteristics.

People in different segmentation's can have very different psychological makeup. Successful markets based on personalities have been on product such as cosmetics, cigarettes, insurance, and liquor. An example of psycho graphic segmentation is Honda's campaign for its motor scooter. "Honda appears to target its Spree, Elite, and Aero motor scooter at hip trendy 22-year-olds" (Cumming). But it is targeted to everyone trying to be hip and trendy in any age group and any gender. Behavioral segmentation divides buyer into groups based on their knowledge, attitudes, uses, or responses to a product.

Behavioral segmentation can be divided into five different areas; occasions, benefits, user status, usage rate, and loyalty status. Occasion segmentation is dividing the market into groups according to occasions when buys get the idea to buy, actually make their purchase, or use the purchased item. An example of occasion segmentation is when M&M's put green and red candies in their bags in order to celebrate Christmas. This makes to candy more desirable around the holiday because the companies has captured the essence of Christmas just by charging the color of the candy.

Benefits segmentation is dividing the market into groups according to the different benefits that consumers seek from the product. Companies can use benefit segmentation to clarify the benefit segment to which they are appealing, its characteristics, and the major competing brands. They can also search for new benefits and launch brand that deliver them (Breen). User status segmenting is dividing costumers into groups of nonusers, ex-users, potential users, first-time users, and regular users.

Larger markets focus on attracting potential users, but smaller companies focus on attracting current users away from the larger firms. Usage rate can be segmented into light, medium, and heavy product users. In the usage respect marketers usually prefer to attract one heavy user to their product or service rather than several light users. Loyalty status is bases on the consumer's loyalty to a certain product. By studying the loyalty patterns that people have companies can successfully market their product in the right areas and to specific age groups.

For example, "Colgate finds that its loyal buyers are more middle class, have larger families, and are more health conscious. These characteristics pinpoint the target market for Colgate" (Breen). Using multiple segmentation bases is not uncommon for marketers. Marketers use one or even a few of the bases is an advantage for the markets because by using more than on e markets can markets their product directly to the people or place they want. This is more effective than using one because by using one you are limited to a boarder type and area of people. Segmenting business markets are different than segmenting consumer markets.

Business markets only use bases such as geographic location, benefits sought, user status, usage rate, and loyalty status. Business marketers also use additional variables, such as operating characteristics, purchasing approaches, situational factors, and personal characteristics (Klein). These new bases help large businesses target the best market for their products. Segmenting international markets are different from both consumer and business markets.

International markets are segmented by geographic location, economic factors, political and legal factors, and cultural factors. By using these bases markets around the world can be segmented. Many companies use a different approach called inter market segmentation. Inter market segmentation is forming segments of consumers who have similar needs and buying behavior even though they are located in different countries. This type of marketing is the most effective in different countries (Mc Elliot). To effectively segment a market companies follow a few simple rules.

A market must be measurable: Is the size, purchasing power, and profiles of the segments able to be measured? The market segments have to be accessible: Can the market segments can effectively reached and served? The market segments has to be substantial: Are the market segments large enough or profitable enough to serve? The market segments have to be differentiable: Are the market segments conceptually distinguishable and do they respond differently to different marketing mix elements and programs?

The market segments have to be actionable: Can effective programs be designed for attracting and serving the segments. (Mariotti). Market segmentation is one the most important parts of the marketing mix because of its ability to sell specific items to specific people effectively.

Bibliography

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Mariotti, L John, "Maximize Your Marketing Dollars" Fortune Small Business: Monday, January 22, 2001;
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McElligott, Tim, "Customer Specific: The Art and Science Behind Amdoc's Market Segmentation" Telephony: October 16, 2003.