Why Is It Thought Necessary for a Firm to Target Specific Segments of the Market - Essay Example

Running Head: Market Segmentation Market Segmentation [Institute’s Market Segmentation The business environment is highly competitive in the 21st century, as thousands of firms have emerged offering services and products to consumers. Some firms attract their customers through cost-effectiveness or price differentiation, while others aim to grasp their market through providing a unique product/service. While the strategies of firms may differ, the target group that firms are aiming to attract may be similar (Greenberg and McDonald, 1989, pp. 95-96). All firms must ensure that the product/service that they are offering is different from their competitors in some aspect. In this era, there is no such thing as a standardized product which is suitable for use by all people. Hence, no firm seeks to target the whole market at large and it is highly difficult to target a large potential market with the same product and the same marketing strategies. No products except maybe staple foods such as fruits, vegetables, bread, butter, and other important dietary supplements are aimed at targeting the whole population of consumers and are standardized products. All other products or services are differentiated and conformed to the needs and wants of various target groups (Greenberg and McDonald, 1989, pp. 95-96). Differentiation refers to adapting the characteristics and marketing of your product/service to fulfill the needs and wants of a particular target market. In order to select the target market for product/ service, a firm must indulge in the process of market segmentation (Greenberg and Mcdonald, 1989, pp. 110-112). Market segmentation is the process of dividing the larger potential market into smaller groups according to similar characteristics. The segmentation can be upon the basis of several variables depending upon the product/service the business is offering and how it plans to target its potential audience. Several advantages of market segmentation enable a business to perform more efficiently and make the business’s selling/ marketing strategies more effective. The first advantage of market segmentation is that segmenting the potential market allows the business to be more focused upon a certain group of customers. This prevents duplication of resources and enables the business to directly target the segment that is more likely to be interested in their product/service offering rather than wasting time and resources upon targeting a massive market that may not be interested in the product/service at all (Yankelovich, 1964, pg. 75-77). Market segmentation allows the business to see the characteristics of its potential customers so that it can create its products according to their needs. For example, after segmenting the market according to the variables of age and gender, a certain cosmetics company found that the most potential lied within the segment of females aged 18-25. This would enable them to customize their products in order to suit the needs of this segment more adequately (Anthanpolusso, 1999, pp. 56-58). Moreover, once markets are segmented, different segments can be made differing offers according to their needs. There may be some segments which may be willing to pay a higher price while others may be price sensitive. Identifying the segments that would be willing to pay a higher price would enable the business to increase its profits. In the same manner, providing the price sensitive segments with initiatives to buy the product might increase the sales and result in more profits for the business (Barnett, 1965, pp. 45-47). Segmenting also allows more opportunities for growth as the same segments can be targeted in different manners. The various customer segments can be given incentives according to the offerings made to them previously. Such schemes include loyalty cards, bonus cards, and other factors. Market Segmentation allows the firm to target the most profitable market segments rather than focusing on less attractive markets. Moreover, it may also allow firms to find dissatisfied needs or a niche market which they can exploit by targeting their products towards that particular market segment. This enables the firm to find new opportunities, enhance sales, and identify new needs. Segmentation also increases brand loyalty and helps a firm retain customers. As products are differentiated to serve the needs of the segmented groups, customers are more able to identify and relate themselves to the product. This increases customer intimacy and thus results in brand loyalty. Customers are then less likely to indulge in brand switching or seeking other brands even if they are priced slightly low (Dibb, 1998, pp. 37-39). One of the most important advantages of market segmentation is the more effective implementation of a marketing strategy. While offers may be altered and characteristics of the product changed to appeal to different markets, it is very difficult to get a message across to a mass market. It is highly essential for the firm to tailor its message according to the characteristics of its target market. Blackberry used to advertise to business professionals during its inception period and in the same manner, many cellular network companies introduce new packages aimed towards the youth (Dibb, 1998, pp. 36-38). Market segmentation would enhance a business’s efficiency and enable the business to organize its activities and properly focus upon its customers. It would enable a business to perform better in areas such as marketing, research and development, and customer relationship management (Plummer, 1974, pg. 107). Hence, marketing segmentation is a highly important process for most businesses. The process begins by dividing the whole market into separate segments according to their various characteristics. These characteristics may be age, gender, geographical location, education, socio-economic class, profession, number of people in household, salary, marital/ relationship status and may other factors (Bean and Ennis, 1987, pp. 36-38). Customers can also be segmented according to their likes and dislikes, their activities, hobbies, the cars they drive, and innumerous other variables. It all depends upon which information you are basing your product and market strategy upon (Bean and Ennis, 1987, pp. 36-38). Segmenting the market by demographic characteristics such as age, gender, social class, salary, and such aspects is most common when targeting consumers for fast moving consumer goods and other basic products. Some companies may want to target the younger generation while some may want to target middle-aged people (Simkin and Dibb, 1996, pp. 51-52). An example illustrating the effect of market segmentation is that of a cellular service provider that found its services being used by females who were homemakers and were between the ages of 22-35. Hence, they formed a package that attracted females belong to this market segment in which females were given subscriptions to recipes, beauty tips, jokes, and other information they would want through the cellular service. These females would also get a certain amount of free minutes for using the cellular service between certain hours (Simkin and Dibb, 1996, pp. 51-52). Hence, in this manner, segmenting enabled the company to target one of their market segments with more focus and tailor their product according to the target segments needs. First, in order to segment the market, data will have to be collected regarding the potential customers in the market. Since the number of customers in the whole market may be so many that it would be impossible for the firm to approach all of them, a sample can be taken that is representative of the population. Random sampling can be used for this purpose (Dickson and Ginter, 1987, pp. 17-18). Market research must be carried out in order to analyze the sample’s characteristics. Some common methods of conducting market research are through interviews, observations, or questionnaires. Once this data is gathered, it must be organized and filtered in a manner, which segregates different groups of customers. For example, through the aid of a questionnaire a firm may notice that males aged 25-35 have the highest salaries and are the ones that are most interested in buying a sports car. Hence, the company can alter its strategy accordingly and devise a marketing campaign that is suitable for men between the age brackets of 25-35 (Dickson and Ginter, 1987, pg. 17). Once the information is sorted and organized, segments will be seen within the data, which show similar characteristics between different groups of customers. Once the segments are formed, the segments that have the highest number of potential customers in them or seem to be the most promising can be selected as target markets. The firm can then devise strategies and marketing campaigns to target these groups of people directly instead of focusing upon low potential groups. New products or changes to the product can be made to better facilitate the company’s customers. In conclusion, market segmentation is one of the most essential and vital concepts that businesses should embed within their systems. The benefits derived from segmentation will depend upon how effectively market research is carried out, which variables are considered, and the ability of the marketer to notice trends and opportunities within the segments created. However, without the use of this concept, firms are unlikely to be able to target their potential audience effectively. While incorporating the process in the business system may be time-consuming, expensive, and rigorous, it will most likely prove to be highly beneficial in lowering costs and eliminating wasted marketing efforts in the future. References Athanapolousso, A. 1999. “Customer Satisfaction Cues to Support Market Segmentation and Explain Switching Behavior.” Journal of Business Research. Vol. 47, No. 3. Barnett, J. 1965. “More Sense about Market Segmentation.” Harvard Business Review. Bean, T and Ennis, D. 1987. “Market Segmentation: A Review.” European Journal of Marketing. Vol. 21, No. 5. Dibb, S and Simkin, L. 2001. “Market Segmentation: Diagnosing and Treating the Barriers.” Vol. 30, No. 6. Dibb, S. and Simkin, L. 1997. “A program for Implementing Market Segmentation.” Journal of Business and Industrial Marketing. Vol. 12, No. 1. 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