The Role of Market Segmentation - Essay Example

Market Segmentation Table of Contents Table of Contents 2 Introduction 2 Need for Market Segmentation 3 Basis for Segmentation 4 Necessities of Market Segments 6 Advantages of market segmentation for an organisation 7 Conclusion 9 References 9 Bibliography 11 Introduction Market segmentation is the process of identifying special portions of the market which are different from one another with one factor or the other. Segmentation helps the organisation to perfectly cater to the requirements of its potential customers. Actually it is the process of segregating the total market into market groups which consists of people having similar product requirements and applications of the goods and services available in the market. These subgroups of consumers can be identified by a number of statistics, depending on the motive behind identifying the groups. Need for Market Segmentation The concept of marketing asks for proper understanding of the consumers and then satisfying their needs before the competitors take advantage on it. Still, customers are diversified in their tastes and it is hardly possible to satisfy all the customers at the same time and with same set of products or services. But there is no straight line path for achieving such a feat. It depends upon product to product, service to service, organisation to organisation and upon various other certain criteria. For example, a single product organisation may acquire high sales and cut down advertising costs if they can target customers with high probability of product purchase. Market segmentation helps not only it reducing the efforts of the marketers in targeting their potential customer base but also it plays a major role in developing a sense of customer loyalty among the customers to the new as well as the existing customers. In effect, it will help the marketers to understand their customer in a much better way than before. Distributing questionnaires to the customers form important part of market segmentation. Through help of questionnaires the company will be able to better evaluate their products or services. Thus, suggestions from the customers would help the marketers understand their lacking and thus work upon it, which in turn will help in creating a stronger relationship between the marketers and their customer base (NetMBA, n.d.). Basis for Segmentation Markets are generally large and diversified. Each and every customer is different from one another in several respects and thus to narrow down the diversities of the customers or the market, they can be segmented on such following characteristics which are geographic, demographic, psychographic and behavioural. For example, geographic segmentation may include variables such as region, size of the area segmented according to size of the population, the density of population in a particular area which can be categorised as urban or rural or even on the basis of climate of a particular region . Again for demographic segmentation, the variables included may be age, gender, income, occupation, religion, social class, nationality, education, family size, ethnicity, generation gap, martial status and various other such variables. For psychographic analysis, the customers are segregated according to their lifestyle aspects. Activities, Interests and Opinions (AIO) surveys are the basic tools for measuring lifestyles. Thus, in order to measure lifestyles, the basic five criteria are activities, interests, opinions, attitudes and values. Based on all these attributes a person can be analysed in a proper way which help marketers know better of that person or a group. Behavioural segmentation takes into account the actual characteristics of the customer towards a product and these behavioural aspects can be attitude of a customer towards a particular brand, the benefits sought by the customers, the usage rate of the products, eagerness to buy the product and other such various characteristics (Loudon & Stevens, 2005.). Necessities of Market Segments There are certain criteria which should be matched with the segments otherwise the whole process may turn down faulty and provide no certain benefits to the marketers. The most important of the criteria are that the different attributes of a particular product should be easily identifiable. For example, if one takes up a body lotion as a product, then it should be understandable by the customer what is the nature of the product or what does it specialises in. Whether the lotion is a fairness lotion or a sunscreen or medicative, should be easily identified by the customer. Thus, segmentation shows how helpful it is in creating segments for particular customer base. The other important criteria is that the products should be easily accessible to the customers, the other thing to be taken into consideration is that it is to be seen that the segments to be catered should be sufficiently large otherwise it would not be a good bargain. Durability of the product is also an important factor while creating segments because it directly affects the durability of the customer base. Frequent changes may shoot up the cost for the organisation. Thus, proper market segmentation will develop into a group that are fundamentally homogenous and apparently heterogeneous. In simple word, it means the more the individuals in a segment are alike in their tastes better the segmentation is made and more the different segments are different from each other better stratification is done (Kotler, 2009). Advantages of market segmentation for an organisation Market segmentation benefits an organisation in a number of ways and helps in all round development of the organisation. Few of the benefits can be as follows: Helps in understanding the needs and desires of the customers in a much better way. Assists a two way communication among the probable customers and the organisation. Helps in clutching on to the existing customers and attracting new customers. Helps in better targeting and positioning of a product. Helps in maintaining a soothing relation with the customers. Facilitates reduction of cost in various marketing activities. It targets an increase in market share thereby increasing profits for the firm. Developing service delivery standards. It helps in focussing on to the strategy followed by the organisation. In relevance to the topic, it is very essential to understand the several factors such as geographic, demographic, psychographic and behavioural factors of England and its natives with respect to their attitude towards body lotion. Studies relating to weather conditions, income group, age groups, attitude towards chemicals etc are of greater value when considering a case of market segmentation. For example, the weather conditions in England is fairly unpredictable with warm summers and cold winters with fair bit of rainfall throughout the year which gives scope for varieties of body lotions. Light body lotions are basically used in summers along with heavier moisturiser to protect one’s skin from dryness. The decision lies with the company to decide the target market taking into consideration their profit motive. Also, it depends upon the income group. People with high income will opt for branded products which would suit their status whereas lower income group would be happy with a fairly low priced body lotion. Even the taste and preference varies from age group to age group. Females in their teen would prefer a different lotion than the older women. The other important aspect while market segmentation of body lotions is the nature of the product. Whether the product is herbal or based on chemical is of greater concern for the users. Thus, attitude of people regarding the nature is very important for market segmentation. It can be easily determined with help of market surveys and questionnaires (Business plans, n.d.). The other vital aspect when a body lotion is targeted at the customers’ end is its unique attribute which differentiates it from other set of competitive products. Some of the customer segment is interested in a tan, some want a glow in their skin and some needs a soft beautiful skin. Everybody wishes to buy a body lotion but with a unique key feature according to their requirements. So, marketers need to work upon it and thus create a segment according to the tastes of the customer base. Organic surge and botanicals are some of the famous brands that cater to the segment who are more willing to use natural or herbal products whereas L’OREAL, Olay, Maybelline are generally chemical based cosmetic products hugely sold in England. If studied properly, it can be easily traced that the consumer groups are different for these products and there is greater diversities in age and other social factors. It is upon the marketers to note it and thoroughly study it so as to create a niche for them and thereby move ahead of their competitors (Dickson & Ginter, 1987). Conclusion In today’s competitive scenario with rising population, the marketers are finding it difficult to identify their potential customer base. Every product is not desirable to every one. Here, comes the role of the marketers to understand who their potential customers are and to target them so as to save time and reduce cost which may result in the rise in profits. So, to survive in a long run and still make profits, a company has to satisfy its existing customers and capture newer customers. And undoubtedly, market segmentation acts as a major tool in this regard (Cahill, 2006.). References Business Plans, No Date. Planning Guidelines. Market Segmentation. [Online] Available at: http://www.businessplans.org/segment.html [Accessed at Aug 05, 2010]. Cahill, D.J . Lifestyle market segmentation. Routledge. 2006. Dickson, P.R & Ginter, J.L on Journal of Marketing. AMA.1987 Kotler, P. Marketing Management. Prentice Hall. 2009. Loudon, D. & Stevens, R. E . Marketing Planning Guide. Routledge. 2005. NetMBA, No Date. Market. Market segmentation. [Online] Available at: http://www.netmba.com/marketing/market/segmentation/ [Accessed at Aug 05, 2010]. Bibliography Hassan, S. S. & Et. Al., Understanding the new bases for global market segmentation. Emerald Sight. [Online] Available at: http://www.emeraldinsight.com/journals.htm?issn=0736-3761&volume=20&issue=5&articleid=856468&show=abstract [Accessed at Aug 05, 2010]. Sridhar, G., 2005. Segmentation using attitude change theories. Indian Journal of Marketing. [Online] Available at: http://www.indianjournalofmarketing.com/archives/sep2005.htm [Accessed at Aug 05, 2010]. Read More