The Importance of Market Segmentation in the United States - Essay Example

? The Importance of Market Segmentation Introduction The market for any company selling its goods or services, are the qualified consumers who want the service and product to begin with. Qualified customers and potential customers are known as the segment which the marketing plan and research analysis results has determined how the product is to be made or the service designed. Essentially, the segment market has already “told” the company what it wants to purchase. Segmentation marketing means targeting your advertising and marketing programs directly at the specific segment. Why not just generally advertise to the whole market and hope to get even more sales that way? It’s a financial situation where if your advertising is all over the place, without proper focus, you will spend much more money in areas you where you don’t need to. It affects the return in investment (ROI) negatively. The reason why anyone is in business is to make money and reduce losses on all levels (Boone, Kurtz 1999, p. 229). There are two types of products in marketing: consumer products that the general public buy, and business products which are created for the needs of other businesses. A good example would be a company that buys rubber to create tires. Tires can be purchased for the family car (consumer) or tires can be purchased by a car manufacturing plant to put on their automobiles (business). The marketing will be different for both groups with the first group getting literature that says what a great ride one will experience while driving with these tires. That is business to consumer marketing. The other group produces literature which outlines all the technical details such as available tire sizes, rubber density, tread patterns, testing results and other statistical information that most consumers could care less about. This type of literature is business to business marketing ((Boone, Kurtz 1999, p. 229). Examples of specific types of market segments are the over-50 crowd, the Hispanic-American group, single women over 30, married men over 40, sports enthusiasts, religious groups, and so on. These groups can also be segmented with particular criteria such as single women over 30 who live in Chicago and want 100 percent wool sweaters. Four common bases in segmentation are geographic, demographic, psychographic and product-related groupings. The next step is the strategic issue of which segment should be selected, and the following conditions should be met: One where the maximum differential in competitive strategy can be developed; Capable of being isolated out so competitive advantage is preserved; Must be valid even though imitated (Jain, 1997, p. 117). Geographic Segmentation Geographic segmentation deals with location of population most interested and likely to purchase a certain product or service because of where they live. Much of this can be determined through census and job growth data over several year or decades to view qualified patterns that match the criteria for the marketing direction of a product or service (Boone, Kurtz 1999, p. 232). The United States government currently classifies urban data using three specific categories: the Metropolitan Statistical Area (MSA) which is a freestanding central urban area of 50,000 or more in population, with 100,000 in total MSA; the Consolidated Metropolitan Statistical Area (CMSA) which incorporates the largest cities in the U.S. and must include two or more MSA; and the Primary Metropolitan Statistical Area (PMSA) which covers urban counties with social and economic ties to CMSAs. Other factors in geographical segmentation are climate, local food habits, and also determining where competitors are located and how they will affect the market plan. The Geographic Information System (GIS) as one can find on Google Maps, is one example of finding where your competitors are (Boone, Kurtz 1999, p. 234). Demographic Segmentation The study of demographics relates to age, sex, income, education, occupation, household size, all of which can be called socioeconomic segmentation. Traditional gender segmentation refers to women who buy makeup, perfume, specific clothes and shoes, and read books and magazines targeted to their interests. Men tend to buy electronics, clothes and shoes for executive office wear, cologne, beer, and have interests in sports, hunting, boating, and other criteria. Of course, we note that in the last few decades, much has changed in these areas as women also like hunting, boating, sports and electronics too. Even video games that boys and men traditionally played are now being played by women as well. Marketing changes to accommodate these new directions (Boone, Kurtz 1999, p. 235). Segmenting by age groups refer to specific products made for different groups in the population such as over-50s, Generation Xers (born between 1966 and 1976), and Baby Boomers (born between 1946 and 1965). Segmenting by purchasing power, income and expenditure patterns are also important. All of these criteria can also be applied to international segmentation although gathering the data is a bit more difficult due to the lax systems of census and other data gathering systems in other countries. Psychographic Segmentation Psychographic segmentation refers to lifestyles, values, psychological characteristics, and how one operates on a daily basis. Florida could be described as a retiree state because many who live there are elderly retired folks who interactive with one another and do many of the same things their neighbors do. Another version of psychographic segmentation would be are hippies who congregated in certain areas because they liked to do the same things and believed the same values that was part of the hippie culture of the 1960s and 1970s (Boone, Kurtz 1999, p. 242). This can be translated to international markets, but a strategist must take into account the culture of the country being researched and require specific profile components for each country along with each country’s restrictive laws about advertising and marketing (Boone, Kurtz 1999, p. 244). Product-Related Segmentation Information is provided based on a customer’s history of purchasing the product or service by the perceived benefits, usage rates and brand loyalty. Finding out why people do not buy a product or service is also important as part of the marketing strategy and who not to target. Perceived benefits can differ from customer to customer as to why a product is purchased on a regular basis (usage). A box of Arm and Hammer’s baking soda is not only an ingredient in certain recipes but works well in the refrigerator as a deodorizer. MacDonald’s may find that with the principle of 80/20 percent in researching their customers, 20 percent actually account for most of its profits because of habit buying, while 80 percent only purchase once or twice a month. Brand loyalty can represent a photographer who only buys Canon cameras and components, not only because Canon makes good cameras and accessories, but also provides excellent customer service (Boone, Kurtz 1999, p. 246). Segmenting the sample target is an essential part of any market research analyst and strategist. It is the job of the analyst to first determine the ultimate goal of the marketing project. Then the analysis of the marketing target provides the information from which all surveys and other marketing tools of research are designed. There can be several surveys for instance, that target several different segments of the target sample (Zikmund, 1999, p.5). A segmented sample is obtained through databases and new proprietary marketing research from a source outside the firm. These proprietary databases can be in the library, online organizations, or companies who specialize in data from one type of consumer, i.e. colleges (Zikmund, 1999, p.28). When all the data has been complied, it is time to analyze what is there. While there are main segments of sample, there can also be subsets, also known as stratified sampling, meaning either a combination of factors, such as geographics, age, and income, or a more straight forward sampling, such as all users for a particular product (Churchill, Iacobucci, 2002, pp. 490-491). All marketing research, including sample segmentation, must be unbiased and focused on the needs and satisfaction of the customer and subsequently, provide long-term profitability by keeping the customer loyal to the product or service (Zikmund, 2000, p. 22). Conclusion Market research is the most important part of a company or firm’s process in getting a product or service out to the proper market. Without this part, all the rest will just fall apart and the marketing plan fails. While most firms in the United States understand the importance of marketing and segmentation of the target in research, many who enter the international do not do the research needed. This is mainly due to a limited appreciation of different marketing environments and what efforts are required to gain the data needed. Without this kind of research about the different segments of the international market, businesses fail to engage properly in joint ventures with international businesses that could enhance American development and interests. Market research and segmentation, as a very important part of the research process, is crucial to any business’s success in today’s world (Czinkota, Ronkainen, 1995, p.11). Bibliography Boone, L.E., Contemporary Marketing. Dryden Press, Philadelphia, 1999. Churchill, G.A., and Iacobucci, D., Marketing Research: Methodological Foundations, 8th ed., Harcourt, Fort Worth, 2002. Czinkota, M. R., and Ronkainen, I.A., International Marketing, 4th ed., Dryden Publishing, Philadelphia, 1995. Jain, S.C., Marketing Planning & Strategy, 5th ed., South-Western Publishing, Cincinnati, 1997. Zikmund, W.G., Essentials of Marketing Research, Dryden Press, Philadelphia, 1999. Zikmund, W.G., Exploring Marketing Research, 7th ed., Dryden Press, Philadelphia, 2000. Read More