A Conceptual Model For Evaluating Market Segments - Literature review Example

Conceptual Model for Evaluating Market Segments Analyze major scholarly journals to identify conceptual models and theoretical frameworks for evaluating market segments Increased competition and turbulent market has enabled market targeting, product positioning and market segmentation to be of paramount importance. Market segmentation is the cornerstone of any marketing strategy and ensures that the product is provided to the right market. In fact, Sandhusen (2000) states, “market segments are groups of high potential prospective customers with common characteristics and needs that distinguish them from other high-potential market segments” (p. 274). Customer diversity has made many firms to differentiate products relative to their competitors to attract and keep customers. Thus, organizations can gain competitive advantage when they employ innovative segmentation of the markets. The distinct market segmentation is a strategy that enables an organization to direct marketing efforts toward specified-narrow potential customers. Market segmentation enables marketers to devise attractive market mix, positioning strategies and formulation of the segments to fulfill the requirements of the organizational goals and aims (Sandhusen 2000). Hence, customer-crafted segment improves the organization competitive advantage. Formulation of market segments is a tricky adventure, which should be given supreme focus. To succeed in developing the right market segment, researchers and marketers have put forward various approaches. Benefit-based market segmentation requires the market to be segmented in terms of intrinsic value that the customers gain from the product. Tan & Lo (2008) through the research of Hong Kong Coffee shops were able to segment the customers into four groups: service seekers, quality seekers, atmosphere seekers and marketing oriented customers. This approach seeks to get “inside” of the customers cognitive processes to understand what they like about the product, rather than the traditional methods that revolves around income and demographics. Russel (1968) view that customers do not require a product per se, rather they seek for the derived benefit of the given product. Generally, the principal of benefit-based segmentation tries to identify why customers seek for the product, and then groups all similar whys from other customers to develop the segment. Some times the benefit-based segmentation cannot apply in situations where specific features of a given service or product are paramount. In this case, conjoint analysis plays an important role. Wedel & Kamakura (2000) states, “conjoint analysis is a decompositional approach for the measurement of preferences” (p. 295). The aim of this method is to determine the combination of attributes that influences decision-making or choice of the respondent. “… in decompositional methods those parameters are derived from the decision makers’ holistic evaluative responses (in terms of preference, stated choices and liking) to profile descriptions designed by the researcher” (Wedel & Kamakura 2000, p. 295), which will result in implicit valuation of elements that are liked individually resulting in creation of a given market models. Thus, the different features (path-worth) that are adored by customers may be used to develop the right product that the customers will easily appreciate. Evaluate the major differences in how marketing journals and practitioner articles treat market segmentation Sausen, Tomczak and Herrmann (2005) states, “… there are still some shortfalls in the body of research, which create a gap between theory and practice and lead to failure in the implementation of segmentation” p. 151”. The authors’ links failure of market segmentation to deviation of theoretical concepts and its application in one perspective and on the other there is a gap between strategic marketing and operational segmentation. An aspect that they call “normative nature of segmentation models” and they share the same perspective with Danneels (1996) “… the conventional segmentation-targeting-positioning sequence that is presented in most text books in marketing and retailing … suggests that practitioners should go about their business in a certain way” (p. 36). Moreover, Sausen et al reference Piercy & Morgan (1993) and Wind (1978) in showing the gap that exists between managerial reality and academic research. Sausen et al acknowledges the emphasis that is given to market segmentation, but there is no clear understanding of strategic market segmentation that could have reduced or closed the gap between theoretical writings and managerial or real world applications. There are some exceptional authors’ who clearly understand that most literature and research focus on segmentation methods and means of evaluation. Wedel and Kamakura (2000) thinks of this aspect as “this focus in academic literature may mislead one to believe that segmentation is essentially a marketing research problem. Quite to the contrary, market segmentation does not entail a mere market condition to be identified” (p. 182). Generally, literature and academic research has neglected the link between operational market segmentation and strategic segmentation. Recommend how the differences in scholarly articles and practitioner articles can be resolved The link between operation and managerial is contagious, and is point in which many marketing segmentations fails to achieve its goals. Thus, it is important to correlate market segmentation with managerial analysis an aspect that has been advocated by Piercy & Morgan (1993). Piercy & Morgan infer that it is important that a marketing segmentation strategy should place into consideration internal and explicit – external consistency along side operation and strategic integration. It is important that the internal and external factors that shape the market segmentation should be used in determining the success of the market segmentation an approach shared by Jenkins & McDonald 1997. Describe a process for determining market segments Many academic research and marketers have advanced traditional methods such as geographic, behavioral, demographic and psychographic. These types of market segmentation have been incorporated by many organizations. However, the determination of any market segmentation should fulfill the following criteria: substantiality, accessibility, durability and unique needs. However, Stevens, Winston & Sherwood (1992) presents a market segmentation that revolves around the use of a product by certain consumer patterns. Stevens’ et al (1992) state, “consumers are classified as users or nonusers and users are further classified as light, medium, and heavy users” (p. 35). They (Stevens’ et al) base their argument on that a small percentage of users account for majority of purchasers. Examples that they give are car rental and air travel. Hence, usage rates defines the given market segment. However, there are diverse ways that can be used to develop segmentation process. The various ways will be guided by the organizational product or service. Analyze the effect of internal and external forces on market segments Marketing opportunities are important in any organization. However, the organization has to determine whether it is the core aim of the business mission or organization opportunity. This means that the organization will have to fulfill overall mission and reject those that do not (Stevens, Sherwood & Paul 2006). Stevens, Sherwood & Paul (2006) presents an example of an organization that develops high-quality paints, a market segment that requires large quantities of low-quality paint may be identified, the organization will not start producing the low-quality paint because the organization mission does not support such vision. In fact, Stevens, Sherwood & Paul 2006 state, “Trying to serve the needs of such a segment is in direct opposition to what the company has stated as its mission and must be rejected if the statement of mission is to be retained” (p. 117). Moreover, the resources that the company has determine whether they will venture into the new opportunity. External factors are crucial in determining the way that the market will be approached, and segmented to give the company a competitive advantage. The products in the market, its concentration and customers preferences determine the extent that the organization will venture into. Generally, the internal and external factors determine the extent in which the organization segments its market. Analyze the influence of market segments on marketing strategy Market segmentation plays an important role in framing strategy that will be utilized by the organization. The size of segmented market will determine whether it is worthwhile for the marketing strategy. Factors that develop market segments such as stability, sufficiency and accessibility determines the approach that the product or service will be positioned. Thus, right market segmentation, and formulation and implementation of right marketing strategy are pivotal to the success of the organization. Osborne (2003) states, “A successful firm should embrace market segmentation in defining and implementing marketing strategies” (p. 90). References Arimond, G. & Elfessi, A. (2001). A Clustering Method for Categorical Data in Tourism Market Segmentation Research, 391-399. Retrieved on 30 January, 2009, From http://jtr.sagepub.com/cgi/content/abstract/39/4/391 Danneels, E. (1996). Market segmentation: Normative Model versus Business Reality: An Explanatory Study of Apparel Retailing in Belgium. Europe Journal of Marketing 30, 36-51. Jenkins, M. & McDonald, M. (1997). Market Segmentation: Organizational Archetypes and Research Agendas. European Journal of Marketing 31(1), 17-32. DOI: 10.1108/03090569710157016 Osborne, L. (2003). Market Segmentation Vs. Marketing Strategy. New York: New York Publishers. Piercy, N. & Morgan, N. (1993). Strategic and Operational Market Segmentation: A Managerial Analysis. Journal of Strategic Marketing 1, 123-140. Sausen, K., Tomczak, T., & Hermann, A. (2005). Development of A Taxonomy of Strategic Market Segmentation: A Framework for Bridging the Implementation Gap Between Normative Segmentation and Business Practice. Journal of Strategic Marketing, 13(3) 151 – 173. DOI: 10.1080/09652540500171340 Stevens, R., Winston, W. & Sherwood, P. (1992). Market Analysis. http://books.google.com/books?id=Nqzld78z5cMC&pg=PA34&dq=market+segmentation+classifications#PPA33,M1 Stevens, R., Sherwood, P. & Paul, K. (2006). Market Opportunity Analysis. http://books.google.co.ke/books?id=ySnd8uT5_yAC&pg=PA116&lpg=PA116&dq=internal+factors+market+segmentation&source=web&ots=O96BzOcs2X&sig=cJ4TgFsbUQu38QpqIOAGBinEltM&hl=en&sa=X&oi=book_result&resnum=4&ct=result#PPA115,M1 Sandhusen, R. (2000). Marketing. http://books.google.co.ke/books?id=8qlKaIq0AccC&printsec=frontcover&dq=marketing Tan, Y. & Lo. Y. (2008). A Benefit-Based Approach to Market Segmentation: A Case Study of an American Specialty Coffeehouse Chain in Hong Kong. Journal of Hospitality and Tourism Research, 32, 342-362. DOI: 10.1177/1096348008317388. Wedel, M. & Kamakura, W. (2000). Market Segmentation: Conceptual and Methodological Foundations. Boston, Kluwer. Read More