Key Word in Marketing - Essay Example

?Segmentation Contents Collecting Relevant Literature: 3 Main Body: 8 Definition and 8 Segmentation and STP: 9 History: 11 Uses of Segmentation: 12 References: 14 Collecting Relevant Literature: Dividing customers as per age, sex, income, education, marital status etc. into different clusters is widely known as customer segmentation. By the help of customer segmentation organizations can put more focus on their customers and use all the resources for the benefit of those targeted customers. As per Jill Griffins, Cisco Systems, Demographic, psychographic are the main factor of segmentation. Other type of customer segmentation is called value based segmentation. Here customer is been categorized as per the revenue they created to the organization. That also include the cost of services and maintenance and cost of maintain relationship with those customers. Procedure of customer segmentation is given below. a. What data needs to be collected and how to collect the same. b. Collection of data and representation of data. c. Analysis of data. d. Proper coordination between several departments of marketing and customer relationship management is necessary. e. Conclusion and recommendation from the data collected from sources and effective development of those recommendations is done here. Explanation of the procedure has to be done in the form of word combination or phrases but it should not be mixed.(Rashidi, 2013) In modern marketing it is one of the main factors of market. In this process, the customers get the most priority and it also helps the organization to maximize its resources to compete in the market. Many researchers claimed that segmentation is a good way to market a product or a service since it does involve a head to head competition with the rivals. Only customer’s satisfaction is the main criteria, so customers get benefitted more out of it. That is one reason why the popularity and acceptance of this method of marketing is increasing widely throughout the globe. Effect of market segmentation is a long term result and organizations get benefited out of it. Market can be divided into four different segments which have been shown in the diagram below: As shown above, the market in divided in four segments, Geographic, Demographic, Behavioral and Psychographic (Weinstein, 2013). A. Geographic: In this type of segmentation market is divided geographically, like continents, countries, states, districts, cities and neighborhoods. The geographical difference has a huge effect on the culture of the society. The consumer’s choice, behavior, attitude and characteristic differ as per the changes in the culture of the society. No organization which has business worldwide can treat the whole world market as a single market. For example, let us take Europe and Africa. There is a vast difference in the lifestyle and the economy in both the continents. The choices and the behaviour also changes accordingly. Another situation that can be considered would be the people residing in regions like Greenland or Alaska versus the population in tropical regions like Brazil or Malaysia. The climate is the major difference here. From a marketer’s point of view, Greenland or Alaska is the best place to sell warm clothes, whereas promotion of cotton garments can be advised in the case of Brazil or Malaysia (Burkard, 2011). B. Demographic: The commonly used Demographics in market segmentation include age, sex, education, income, marital status and number of family members. Age: Any person’s age hugely influence their buying behavior. There are several products where strictly age is described and if restricted age customers try to buy, sellers are strictly instructed not to sale them those product. Products like alcohol, certain drugs, several movies which are only for adults etc. Products like toys, where age group is mentioned. In a toy store it is been mentioned like toys for 1 to 2 years old children, 3 to 5 years old children and 6 to 10 years old children. Parents search for the toys as per their child’s age group (Hiziroglu, 2013). Sex: Choices of products are hugely influence by the gender of the buyer or consumer. Products are categorized as per the genders. Products like- Dress, deodorants, shoes etc. Education: Choices of customers are diversified by the educational qualification of the customers. If customers are educated then sellers do not have to explain everything about the product to the customers as customers can read the specifications of the product by themselves. Also more educated customers like the product which will give them long term satisfaction as they are more intelligent than persons who are less educated (Liao, Chen, & Yang, 2013). Income: This factor directly impacts on a person’s buying behavior and choice of the product. Customers choose those products which fall into their budget chart. For automobile industry customers who buy premium class luxury brands generally they are from higher income group, who buys mid-range cars of non-luxury brands are the persons of middle income group and people who buys used car, small budget cars and two wheelers are from lower income group (Qing, Wenjian, Tiexiang, Jia, Nikolas, Shifu, Ling & Yaoqin, 2013). Marital Status: A person’s marital status directly impact on their buying behavior. People who are married try to spend money on house, kitchen and sofa and bed kind of interior and exterior decorative goods. Married couples choices of goods depend upon both husband and wife’s decision. So they can be put into a separate market segment. Family members: People’s choices of product or buying behavior directly depend upon no. of family member in their house. Family persons with more than one kid try to save more money for the future of their kid and spent less money on impulse products. Whenever a family comes for shopping they spent more time choosing a product because whoever chooses anything that person needs all the family members’ agreement to buy it (McDonald, 2012). C. Psychographic: Factors which influence people’s buying characteristic other than above factors can be psychological factors. Factors like life style, social class, personality fall in this category. Life style in developed countries and that in the third world under developed countries differ drastically. Purchasing power and lifestyle are directly proportional. Social class also falls in this category. It is near about same as lifestyle. But here person’s social class depends on their neighbors, friends, relatives and other social friends. How much they are close to them and what are the standard of those persons. Personality put an impact on persons buying behavior. To keep balance with the personality people always have to buy standard items which must be costly. And people generally try to buy products which suit with their personality and they keep on doing that. So a person’s personality steadily impact on their buying decision. Mentalities of the persons also improvise his/her decision of buying (Wedel, Kamakura, 2000). D. Behavioral: These are can be like user status, usage rate, benefits sought, occasions, loyalty, attitude. Persons who use certain product more and more have a maximum number of usage rates. During several occasions people buy more products which normally they do not buy. Like during Christmas, new year everybody buys new cloths, gifts etc. Loyalty is also a factor which improvises any buyers buying decision. Sometime customers buying from a particular shop over many days or particular brands do not want to shift to new brands or new shop which offers them better services, just for loyalty issues. Sometimes just to maintain status customer buy expensive product and no matter what happen they will not shift to other substitutes (Medioni, Lee, Tang, 2000). Main Body: Definition and description: Dividing market place into different clusters or segments to make them more accessible to the producer and also profitable is called segmentation. It is not possible for an organization to target the whole market and reach every corner of it. Because time and resources are limited and so is the competition law of the government, which does not allow any organization to take the whole market share. It is done by extracting target group of customers from the whole mass who have same choices and affordability. It saves organizations operating cost and effort to penetrate in the whole market. But one thing organizations have to keep in mind that segments should have potential to grow, it can be defined and it is achievable (Brena & Akam 2013). Before segmenting a population organizations must ensure that it has the proper resources that means products to fulfill the demand of that customer segment. Organizations have to analyze that outside that segmented customer sections, promotions will be profitable or not. If organizations find out that selling to those customers outside the earlier segmented area are profitable and organizations have enough resources to cover that much of population and if the organizations beliefs that very soon those new customers can come into organization’s previously segmented customer section and if those number of customers as well as sales and profit are growing then organizations can definitely diversify its business (Rasanen, Rusanen, Kuitunen & Lensu, 2013). In this fiercely competitive and recovering world market where thousands of products from hundreds of countries and everybody want to increase their market share and be the market leader in every market, it is better to maintain market segmentation. Segmentation saves so many organizations from shut down and turns them into the pillar of success (Akhondi-Asl & Warfield, 2013). By the help of segmentation seller or manufacturer can closely observe its buyer or customers and understand their demands, desires and interests. Also helps the organizations to understand how much resources, money, labor, machineries should put into the work to fulfill that much customers demand (The Economic Times, 2013). Segmentation and STP: What market segmentation does is that when a group of customers behave same in certain marketing conditions and if those people’s behavior and attitude is similar to each other then they can be segmented into a particular market segment. It also helps the organizations to attracts and differentiate its products for different segments (Migueis, Camanho, & Falcao e Cunha, 2012). There are certain criteria for segmentation like- I. Homogeneity of the choice. II. Differentiate from other groups. III. Similar reaction from segmented customers in a market condition. For example a sports shoe manufacturer will have different marketing strategy for badminton or basketball players and football or cricket players. Sports shoes manufacturer can be a single entity but for them badminton or basketball and football or cricket players are two different segments of customers. Choice and requirement for those particular sports shoes are different. So demand also varies and manufacturer cannot manufacture homogeneous shoes for every sport, they have to manufacture different shoes for different segments (Hwang, Choi, Lee & Park. 2012). In marketing mix there are three aspects which is the base of it. On those three aspects each and every strategy of marketing mix is build. They are segmentation, targeting and positioning. First the organizations need to segment its market as per their consumers and then target them differently and fulfill their requirement. Only then, an organization can position itself that where it is as per its sector and rivals in the market (Dhandayudam & Krishnamurthi, 2012). History: In the above diagram it is been shown that there are three segmented markets like Market A, Market B and Market C. These three markets have been segmented by a particular organization as per their offerings. Tastes, preferences, behavior, psychology and attitude of the customers of these different segmented markets are significantly different. For them three different marketing approaches as well as strategies need to be taken by the organization. Differentiated products, pricing, and promotional method need to adopt by the organization who intends to capture the different market segments (Chan, Cheng, & Hsien, 2011). In the above diagram it is been shown that sometimes segments can overlap with each other and in those co inside market segments if two types of segments co inside then the characteristics of two types customers is available there. It increases if the number of co inside segments increases. Sometimes it is seen that all the segments can overlap in a particular region and in that region characteristics of all segmented customers are seen. There no barrier for product and market is available. That is the perfect place for competition and every organization just try to bring all the segments into that kind of condition where customers from all the segments share similar tests, preference and financial strength. Here in position 1, Market A and Market B co inside, so there customer behavior will be both type like Market A or Market B. In position 2, Market A and Market C co inside so behavior of those customers of two market groups are seen in position 2. In position 3, Market B and C co inside, so behavior of the customers of position 3 will be both type of market B or Market C. In position 4 all the three market co inside so those customers will have all the characteristics of Market A, B and C (Han, Lu, & Leung, 2012). Uses of Segmentation: Market A Market B Market C Product A Product B Product C In the above diagram it is theoretically described that organizations make different products for the different market segments. Here an organization makes three types of product and it divides the whole market into three categories. These are as follows for products Product A, B and C their corresponding markets are Market A, B and C respectively. The market research organization found out that the demand for Product A is high in Market A, demand for Product B is high in Market B and similarly demand for Product C is high in Market C. In other cases like demand for Product A in Market B and C, demand for Product B in Market A and C and same as demand for Product C in Market A and B is not so good and it is not profitable for the organization to sale products in low demand markets. So organization needs to find out the highest demand for any product in a target market and segment the market accordingly and sell the respective products in particular markets (Tianyi, & Tuzhilin, 2009). References: I. The Economic Times, 2013. Definition of ‘Segmentation’. Available at < http://economictimes.indiatimes.com/definition/segmentation> Accessed on 27/12/13 II. Dibb, S & Simkin, L. 1996. The Market Segmentation Workbook: Target Marketing for Marketing Managers. UK: Cengage Learning EMEA III. Weinstein, A, 2013. Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms. US: Routledge IV. Burkard, N, 2011. Market Segmentation and Branding in the Hotel Industry with Special References to Hilton Cooperation. Germany: GRIN Verlog V. McDonald, M. 2012. Market Segmentation: How to Do It and How to Profit from It. UK: John Wiley & Sons VI. Wedel, M & Kamakura, W.A. 2000. Market Segmentation: Conceptual and Methodological Foundations. USA: Springer VII. Medioni, G., Lee, M., Keungang, C., 2000. A Computational Framework for Segmentation and Grouping. Netherland: Elsevier VIII. Qing, L, Wenjian, Q, Tiexiang, W, Jia, G, Nikolas, G, Shifu, C, Ling, L, & Yaoqin, X 2013, 'Segmentation of abdomen MR images using kernel graph cuts with shape priors', Biomedical Engineering Online, 12, 1, pp. 2-27, Academic Search Elite, EBSCOhost, viewed 27 December 2013. IX. Akhondi-Asl, A, & Warfield, S 2013, 'Simultaneous Truth and Performance Level Estimation Through Fusion of Probabilistic Segmentations', IEEE Transactions On Medical Imaging, 32, 10, pp. 1840-1852, Academic Search Elite, EBSCOhost, viewed 27 December 2013. X. Rasanen, A, Rusanen, A, Kuitunen, M, & Lensu, A 2013, 'What makes segmentation good? A case study in boreal forest habitat mapping', International Journal Of Remote Sensing, 34, 23, pp. 8603-8627, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XI. Brena, C, & Akam, M 2013, 'An analysis of segmentation dynamics throughout embryogenesis in the centipede Strigamia maritima', BMC Biology, 11, 1, pp. 1-35, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XII. Rashidi, S 2013, 'The Study and Prioritization of the Role of Market Segmentation Criteria in Identifying Bank Target Market',International Journal Of Academic Research In Business & Social Sciences, 3, 5, pp. 408-419, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XIII. Liao, S, Chen, Y, & Yang, H 2013, 'MINING CUSTOMER KNOWLEDGE FOR CHANNEL AND PRODUCT SEGMENTATION', Applied Artificial Intelligence, 27, 7, pp. 635-655, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XIV. Hiziroglu, A 2013, 'Soft computing applications in customer segmentation: State-of-art review and critique', Expert Systems With Applications, 40, 16, pp. 6491-6507, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XV. Migueis, V, Camanho, A, & Falcao e Cunha, J 2012, 'Customer data mining for lifestyle segmentation', Expert Systems With Applications, 39, 10, pp. 9359-9366, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XVI. Hwang, J, Choi, Y, Lee, J, & Park, J 2012, 'Customer Segmentation Based on Dining Preferences in Full-Service Restaurants',Journal Of Foodservice Business Research, 15, 3, pp. 226-246, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XVII. DHANDAYUDAM, P, & KRISHNAMURTHI, I 2012, 'AN IMPROVED CLUSTERING ALGORITHM FOR CUSTOMER SEGMENTATION', International Journal Of Engineering Science & Technology, 4, 2, pp. 695-702, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XVIII. Chan, C, Cheng, C, & Hsien, W 2011, 'Pricing and promotion strategies of an online shop based on customer segmentation and multiple objective decision making', Expert Systems With Applications, 38, 12, pp. 14585-14591, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XIX. Han, S, Lu, S, & Leung, S 2012, 'Segmentation of telecom customers based on customer value by decision tree model', Expert Systems With Applications, 39, 4, pp. 3964-3973, Academic Search Elite, EBSCOhost, viewed 27 December 2013. XX. Tianyi, J, & Tuzhilin, A 2009, 'Improving Personalization Solutions through Optimal Segmentation of Customer Bases', IEEE Transactions On Knowledge & Data Engineering, 21, 3, pp. 305-320, Academic Search Elite, EBSCOhost, viewed 27 December 2013. Read More