Concepts of Market Segmentation - Research Paper Example

 MARKETING UK Sofa-bed market is in its growth stage. The market has been growing for the past few years steadily. The reason is that people have become more conscious about their lifestyles and want value for money. They are more willing to improve their living style and want to spend as much on it as they can. Furniture items are a part of the lifestyle of the consumers. They spend as much money on these items looking for the items that add comfort to their lifestyles. Keeping in view the growing UK furniture market, it is quite evident that there are many market players present. But there are no high entry barriers and exit barriers. Market segmentation is the best way to go about this business. It is the only way through which the new entrants can gain advantage and start earning profits. There are different concepts about market segmentation and the starters can use any of these concepts or even a combination of them to segment their target market. Principles of Segmentation There are four basic principles in general that are used for market segmentation; Geographic segmentation, Demographic segmentation, Psychographic segmentation and Behavioral segmentation. Sofa-bed market is a market for consumers; therefore the bases for segmenting consumer markets will be appropriate. Market segmentation can be done based on the geographical regions. Business targets that geographical area where it thinks its target market is present. Presence of target market can be done through the market research. Geographical segmentation can be based on different regions, cities, rural or urban areas. Then follow the second concept of demographic segmentation. In demographic segmentation market is divided into groups on the basis of variables such as age, gender, occupation, family size, income, religion, education, family life cycle etc. Demographic segmentation is an important principle of segmentation because even if the target market is segmented using non-demographic terms, a link has to be traced back to the demographics because it is the only right way to estimate the size of the market and the selection of the media vehicle to reach that segment efficiently. Usually a combination of demographic variables is used to segment the market. An example of this would be the age and life-cycle stage. According to this segmentation, the consumer wants and abilities change as they age or mature. Gender is also an important variable because men and women have different attitudes and behave differently when it comes to products and buying decisions. Income, another important demographic variable, determines the ability of the consumer to participate in the market exchange. Regarding income, it does not always provide with the accurate segmentation, because there are other factors such as attitudes, values and lifestyle that affect the buying decisions of the consumer. Social class is another important demographic variable that needs to be taken into consideration while segmenting the market. Social class builds up preferences amongst consumers for different brands and products. Many companies design products and services which cater to specific social classes. Psychographic segmentation is what follows the important demographic segmentation. Psychographics is the science of using psychology and demographics together to better understand the consumers. Under the psychographic segmentation, consumers are divided into different groups based on the personality traits, lifestyle or values. Lifestyle and values have the most significant impact on the consumers’ buying behavior. It is very likely that people under the same demographic group will have very different psychographic profiles. Then comes the Behavioral segmentation. In behavioral segmentation, marketers divide consumers into groups on the basis of their response and attitude towards the product. Behavioral variables include occasions, benefits, user status, usage rate, buyer-readiness stage, loyalty status and attitudes. Occasion segmentation is done when products are offered on different occasions. Consumers are also grouped according to the benefits that they seek. Different people will seek different benefits from the same product. User status is also important because every product has its nonusers, potential users, first-time users and regular users. It helps in identifying the potential consumers who can be turned into the users of the product through some marketing efforts. Markets can also be segmented into light, medium and heavy product users. Loyalty status and attitudes of the consumers towards a product or a brand are also important behavioral variables, based on which the market segmentation can be done (Kotler, P. 2000; Lamb, C. W., Hair, J. F., & McDaniel, C. D. 2002) Segmentation in relation to the UK Sofa-bed market UK Sofa-bed market can be segmented on the basis of geographic, demographic, psychographic and behavioral segmentation together. First the segmentation will be done on the geographical basis. The manufacture will first decide the region that it will be serving. It could be a region within UK or it could be the whole UK. But as a starter it will be better to start up with a small region within the boundaries of UK. After the geographic segmentation, further segmentation can be done based on the demographic variables. For the UK Sofa-bed market age, income, gender and family size will be the most important demographic variables. The female gender will be used to segment the market. Then females of age 30 and above will be targeted because they are mostly married and are looking after their house. These females will mostly be married with large family sizes. Then comes the income variable. The segmentation will be done on the basis of the income. The target segment will have moderately high income so that they could afford the Sofa-beds. Next will be the psychographic segmentation. As mentioned earlier, it is not necessary that consumers within the same demographic group will have the same psychographic profiles. Females above 30 years that been chosen as the target market are going to have different psychographic profiles. They will have different personalities and lifestyles. Based on their personalities and the lifestyles that they follow, they will make the buying decisions, therefore segmentation can be further done based on the personality traits and lifestyles of these females. Females are chosen as the main consumers because usually they are the ones who make purchased for the household purposes. First geographic, then demographic and then psychographic segmentation have helped narrowing down the target market segments that the manufacturer will serve. Lastly comes the behavioral segmentation that can be used to segment more accurately the target market of the Sofa-beds. Females with positive attitude towards sofa-beds will be targeted. Similarly the medium and heavy users of sofa-beds will be targeted. Then the females who are seeking benefits from the sofa-beds will be targeted. This behavioral segmentation will further help in narrowing down of the target market and will give a clear picture of the target audience to the manufacturer so that it knows whom exactly is it serving (Kotler, P. 2000; Cahill, D. J. 2006) Relevance of segmentation, targeting and positioning decisions to the development of the marketing mix Market segmentation further helps in the positioning of the product. What the marketer of the sofa-bed manufacturer can do is that build a product positioning map. The product positioning map will have all the competitors mentioned within the grid. Those areas on the map that are empty will show those markets that have yet not been exploited. These markets can be tapped by the manufacturer, especially the new entrant. But this all depends on the manufacturer whether it will go for the untapped markets or will serve the markets that have been already exploited by the competitors. Usually it is more feasible to serve the already exploited markets because the untapped markets may provide with high profits but there is also a huge risk associated with it (Sarvary, M., & Harvard Business School. 2000) Market segmentation, targeting and positioning are relevant in helping in the development of a marketing mix. Marketing mix consists of four basic components; product, price, place and promotion. The manufacturer is well aware about the attributes of the product that it is offering. Targeting and market segmentation helps the manufacturer to build customer profiles. Through these profiles the manufacturer is able to understand the needs of its consumers and identify exactly what the consumer is looking for. Accordingly, the manufacturer can offer the product. Similarly the positioning helps the manufacturer to compare its product to that of the competitors. Manufacturer will know what attributes it needs to add to its product offering in order to meet the competition. Plus positioning also helps in pricing. The manufacturer might charge prices somewhere near to that offered by the competitors or might go for lower prices to grab the market share. It will help the manufacturer to decide on the pricing strategy that it will use. Segmentation and positioning also helps in determining of the place component of the marketing mix. The manufacturer will know which geographical area it’ll be serving and will place its product accordingly. It will help the manufacturer to decide about the factory location so it can reduce its distribution costs. It will also help it determine the distribution channels that could be used because all the information about the competitors will be available. Targeting, market segmentation and positioning helps in determining the marketing efforts need to be done by the manufacturer in order to reach the target market. It can go about the competitors’ promotion strategy or develop a new one in order to reach the target market. It will also help to determine the most effective media vehicle that could be used to reach the target market. Marketing Mix The most profitable market segment for the sofa-beds in UK would be the market segment based on demographics and psychographics. Demographic variables like income will play an important role here. It will help to determine what quality the manufacturer should offer in order to meet the demand of its target market, without increasing its cost. The income level will help to determine that what quality level and other attributes are being considered by the market segment. They all will be incorporated in the product. Similarly the gender and family size will also matter. Different sizes of sofa-beds could be offered like small, medium and large to meet the demands of those families which are large. Design of the sofa-beds should be made in such a way to attract the females above 30 years. The design should also signify better lifestyle. Keeping in view the incomes of the target segment and also the prices offered by the competitors, the pricing should be done accordingly. Moderate pricing should be done which means that it should not be cheap but not too expensive to put-off the consumers. Pricing is a crucial decision because pricing also reflects the quality of your product. Cheap pricing will be symbol of poor quality. Customers are more aware now and want the best value for money; therefore prices should be moderate and not too high. The placement should also be done accordingly. The segment that the new sofa-beds manufacturer is targeting mainly lives in the urban areas. Therefore the distribution channel should be within the vicinity and the factory unit should also be nearby to cut down on the distribution costs. Then the promotion should also be done in the similar manner. There should be seasonal discount offers. Then there should be occasional sales. Different sales promotions should be done. Advertising is also an important part of promotion. It is a form of attracting customers. Advertising budget should be made. Initially TVC’s can be made and could be run on the local cable channels. Other than that, print ads can be placed in magazines and newspapers. A billboard can be set up within the targeted geographical area in order to create awareness about the new sofa-bed brand. These all promotional campaigns should depict one thing clearly to the consumers that the brand provides with the best value for money. In addition the promotional campaigns should focus on the quality and comfort attributes of the product and also build a level of trust in the consumers’ mind. An online website could be developed to facilitate the customers to make purchases from their homes. The manufacturer should build a catalog of its sofa-beds so that customers can view them and compare them at the same time. It will help in easing out the decision making. If this is done successfully, the new UK based sofa-bed brand can surely capture the market (Kotler, P. 2000; Stafford, M. R., & Faber, R. J. 2005; Cahill, D. J. 2006) References Cahill, D. J. (2006). Lifestyle market segmentation. New York: Haworth Press. Sarvary, M., & Harvard Business School. (2000). Target market selection and product positioning. Boston, Mass: Harvard Business School Pub. Lamb, C. W., Hair, J. F., & McDaniel, C. D. (2002). Marketing. Cincinnati, Ohio: South-Western. Kotler, P. (2000). Marketing management. Upper Saddle River, N.J: Prentice Hall. Stafford, M. R., & Faber, R. J. (2005). Advertising, promotion, and new media. Armonk, NY: M.E. Sharpe. Read More