Market Segmentation Is Essential to Achieve the Optimum Marketing Mix - Coursework Example

Market segmentation is essential to achieve the optimum marketing mix Marketing today is no more merely about deciding on the marketing mix and the marketing communication mix. Corporations have traversed the length and breadth of the globe to market their products. They have tried to understand the needs of the individual consumers and attempted to cater to such needs. They have realized that all products cannot be sold or marketed in every country or to every individual. in other words success can be achieved by matching the organizational capabilities with the requirements of the marketplace. Deciding on which markets to target is known as market segmentation. Market segmentation is one of the most important essentials in marketing today to maximize benefits. Differences in culture, behavior, the political stability, government regulations, demographics and customer needs across boundaries creates new challenges and provides new opportunities in international marketing. All these factors alter the marketing strategies and these in turn alter the segmentation process. A heterogeneous group of customers are grouped into homogeneous groups or segments. Each market segment needs a different strategy and helps design the right marketing mix. Market segmentation is one of the most fundamental concepts and has been considered a powerful strategic management tool that assists in the decision-making process. Market segmentation is defined as the process of dividing the total market into a number of smaller, more homogeneous submarkets, termed market segments (Daneels, 1995). The basic segmentation in marketing is known as the normative segmentation model which consists of logically sequenced steps - market segmentation, targeting, and marketing mix development. Thus the market has to be divided into homogenous groups (segmentation), then selecting one or more segment known as targeting and finally tailoring a marketing programme to suit the group – known as developing the marketing mix. Once the market has been segmented, after evaluation the target market has to be chosen so that the right marketing mix can be applied. This is the process that has been applied in every industry by manufacturers or now even by the service providers. According to Bond and Morris (2003) the concept or market segmentation comes naturally to human beings. To reach the customers in the most effective way, market segmentation can be based on general variables like demographic, socio-economic, geographical, or psychographic. While demographics looks at the general characteristics like the age, income, education and occupation, psychographic variable delves deeper into people’s lifestyles and attitudes. Geographic segmentation divides the market in terms of cities, countries, regions of even locality. It also includes the size of the area, population and climatic conditions. When people are segmented based on their attitudes it is known as attitudinal segmentation but even though they appear to be having different outlook in life, they seem to be buying the same brands. Segmentation reduces uncertainty and simplifies procedures, and helps to unify groups of consumers (Bond & Morris, 2003). Segmentation helps to focus on the specific market and its needs. Segmentation further helps to evaluate the market viability and the needs of consumers with differing tastes, life-styles and motivation to be met (Daneels, 1999). The goal of segmentation is not to have just any customer but to select a homogeneous group of customers and then focus on servicing their needs. It then helps to decide on the right marketing mix for the services or product offered. Nevertheless, segmentation on a particular basis has not always been successful. For instance, different attitude leads to different behavior. Knowing the attitudes help advertise in the right market but even if a customer has a brand preference it may not reflect in his behavior contend Bond and Morris. Thus attitudinal segmentation also does not seem to be sufficient. Segmentation in different industries is based on different factors. In the case of airlines, it is based on customer expectations (Diaz-Martin, 2000). This form of segmentation provides knowledge for customer identification, which aids better customer service. It allows for more competent promotional activities because analysis of the sensitive requirements of the customers is possible. Expectations are based on word-of-mouth publicity, past experiences and promises by the service provider. As far as airlines are concerned, this basis for segmentation is the most effective. When attitudinal form of segmentation as suggested by Bond and Morris was applied in the case of airlines like of United Airlines, British Airways and Singapore Airlines, the results were found to be very flat (Goller, Hogg & Kalafatis, 2002). Driver (1999) suggests segmenting the airlines market based on the differential strategy. They can have differential pricing and in-flight services according to the price of the seat. Feeder markets can be left to new airlines and the established airlines can concentrate on long-hauls and dense routes. While the corporations want more value for money the leisure segment is prepared to accept lower levels of service but they want cheaper fares. British Airway (BA) adopted this strategy for segmentation. BA adopted the differential strategy and went in for pre-segmentation analysis. They first made an offer to the target market segment and depending upon the responses adjusted the marketing mix. This approach gives the strategic direction which includes segmentation, targeting and positioning (Daneels, 1999). BA has already segmented its customers through their slogan. Its public relations strategy of ‘BA Way’ is supported by values and goals. BA claims to provide “service that matters to people who value how they fly”. These words amply demonstrate that they cater to the discerning clients. In the clothing sector, clothing for every season is being produced to suit every market and every generation which enhances the importance of market segmentation (Bakewell, Mitchell, & Rothwell, 2006). The fashion retail market in the UK is split into number of segments – luxury, high street and supermarket/out-of-town discounter (Bruce & Daly, 2006). With the supermarkets having entered the clothing sector, the fashion retail has been redefined. The recent trend in fashion retail sector has been to employ psychological, psychographic and behavioral segmentation variables to develop both products and services (Daneels) but few retailers have adopted this strategy. The target market for Next for Men was the price conscious customers so they had a limited range at competitive prices. For the fashion conscious they had a high priced range and hence catered to all tastes and preferences. They thus adjusted their marketing mix differently for different segments. Store images assist the retailers in determining the positioning strategies (Birtwistle, Clarke & Freathy, 1998) but this was not effectively utilized by Burton Menswear whose primary target was the 25-45 males but they wanted to serve everybody. When they tried to display high fashion in store front, it chased away the older customers who were the historic customers and when they display the classic collection, the younger generation does not step into the stores. This suggests that one should not attempt to cater to all segments from the same store. It also suggests that customers segment themselves rather than the retailer trying to segment the market, a form of reverse market segmentation (Daneels, 1999). In diverse market segments, customers reveal their patronage, states Danneels, in which case the small retailers take a passive approach. They rely on word-of-mouth and footfall to generate business. Again, despite having similar store front strategy and targeted the same segment, Topshop and Gap Topshop faired better due to its quick response times. Segmentation should also have made them concentrate on the right marketing mix but the promotional mix was not focused on by Gap. Gap neglected the core base of the young consumers like responding to catwalks and celebrity fashion shows. Topshop had a less aggressive technique but what matters is not to leave a gap between customer expectations and marketing objectives. Today corporations have become multinationals and international marketing strategy too has gained importance. Market segmentation, according to Souiden (2002) seems to be the most effective, realistic and feasible way that permits the multinationals to apply the hybrid approach. Once the country characteristics are considered in segmentation, they are then sub-divided into four general groups - socioeconomic, political-legal, natural-technical, and socio-cultural. The importance of international market segmentation has decreased due to several reasons – increased international competitors, shorter product life cycles, aggressive prices, political and global economic conditions becoming more suitable to international business, improved communication and transportation and convergence of customer behavior and attitudes of different countries (Bastian, 2006). This led to finding an alternative approach known as transnational segmentation. Transnational segmentation is based on the assumption that international differences are being substituted by intra-national differences. Based on transnational life-style segments there are the “Global Elite” and “Global Teenager” (Hassan & Katsanis, 1991 cited by Bastian) or in the fashion attitude and garment behavior the transnational segments include “Fashion Enthusiastic”, “Fashion Interested”, “Fashion Ignorant”, “Fashion Discerning”, and “Fashion Rejecters.” Transnational segmentation in the case of airline passengers with homogeneous needs include “Demanding”, “Mainstream”, and “Spartans" (Bastian). If all the countries are considered one market, the segmentation is known as transnational segmentation. A study was conducted of the body and skin care products under the brand name of NIVEA (Bastian, 2006). Five different regions of the world were taken for the study which includes Asia, Africa, Australia, Europe and South America. The study revealed a certain degree of divergence in demographic characteristics, brand assessments, and behavioral characteristics of country-specific segments was unavoidable. Even if the education levels were same, the professions differed. Differences were also perceived in brand awareness, advertisement recall and the usage of the product in different countries. There were also differences in the media type available in different countries. Overall transnational segments would allow a high degree of standardization for the product mix but the other elements of the marketing mix would require differentiation, according to Bastion. It would have to be a mix of standardized approach and the adaptation approach. Markets that share commonalities and show homogeneity in conditions could provide a basis for standardized strategy. Macro segmentation in international marketing has limitations and relevant variables at micro levels have to be used (Souiden 2002). While certain components of the marketing mix can be standardized, some elements of the marketing mix would have to be adapted to the local environment. In the fast food sector, McDonalds has already found that it cannot afford to serve the same food in every country. While their basic menu remains the same, in Israel Big Macs are served without cheese in several outlets, in India they serve vegetable McNuggets and a mutton-based Maharaja Mac (Vignali, 2001). In Germany they sell beer while in Turkey chilled yoghurt drinks are available. For each country, have a rigorous pricing process that determines the price for that particular market. While the promotional objective is to build awareness, differentiate products and organizations from competitors, communicate the benefits of a product, build and maintain the overall image and reputation of an organization, and persuade customers to buy a product. With the help of these tools, McDonald’s adopts the local marketing communications strategy. Thus it can be seen that segmentation differs across industries, across countries and is again based on other factors also. While some succeed in segmenting based on attitudes, some adopt the differential strategy. As far as transnational segmentation is concerned, the marketing mix elements would have to be adjusted in differing proportions. Today segmentation cannot merely be based on demographics as each nation and each society has its own characteristics. While the airlines are segmenting basically on the price differential strategy, the apparel industry adopts a different approach. Most concentrate on the store front layout but that too has not been successful in certain cases. In the fast food sector the product and the promotional mix have to be altered to cater to different tastes. Whichever be the basis, segmentation of some sort is essential to develop the right strategy to approach the market. Differentiation has to be maintained in the overall marketing strategy be it within a country or across national borders. Marketing plans have to be standardized to each segment but the strategies would have to differ for different segments. References: Bakewell, C. Mitchell, V. & Rothwell, M. (2006). UK Generation Y male fashion consciousness. Journal of Fashion Marketing and Management Vol. 10 No. 2, 2006 pp. 169-180 Bastian, I. (2006). Methodological Options in International Market Segmentation. Available from URL: http://elib.suub.uni-bremen.de/diss/docs/00010584.pdf [accessed 21 September 2008] Birtwistle, G. Clarke, I. & Freathy, P. (1998). Customer decision making in fashion retailing: a segmentation analysis. International Journal of Retail & Distribution Management Volume 26 • Number 4 • 1998 • pp. 147–154 Bond, J. & Morris, L. (2003), A. class of its own: latent class segmentation and its implications for qualitative segmentation research. Qualitative Market Research, Vol. 6 NO. 2 2003, pp. 87-94 Danneels, E. (1996). Market segmentation: normative model versus business reality. European Journal of Marketing, Vol. 30 No. 6, 1996, pp. 36-51 Diaz-Martin, A. M. (2000). The use of quality expectations to segment a service market. Journal of Services Marketing, Vol. 14 No. 2 2000, pp. 132-146 Driver, J. C. (1999). Developments in airline marketing practice. Journal of Marketing Practice: Applied Marketing Science. Vol. 5 No. 5, 1999, pp. 134-150 Goller, S. Hogg, A. & Kalafatis, S. P. (2002). A new research agenda for business segmentation. European Journal of Marketing, Vol. 36 No. 2 2002, pp. 252-271 Souiden, N. (2002). "Segmenting the Arab markets on the basis of marketing stimuli". International Marketing Review, Vol. 19 No. 6, 2002, pp. 611-636. Vignali, C. (2001). "McDonalds: "think global, act local" - the marketing mix", British Food Journal, Vol. 103 No. 2, 2001. pp. 97-111 Read More