Market segment

Meaning and Concept Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feeling and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different. The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. The requirements for successful segmentation are: • homogenity within the segment • heterogenity between segments • segments are measurable and identifiable • segments are accessible and actionable • segment is large enough to be profitable These criteria can be summarized by the word SADAM: • S Substantial: the segment has to be large and profitable enough • A Accessible: it must be possible to reach it efficiently • D Differential: it must respond differently to a different marketing mix • A Actionable: you must have a product for this segment • M Measurable: size and purchasing power can be measured Currently a college student studying the marketing mix is introduced to the Four Ps of the Marketing Mix; Product, Place, Promotion, Price. • Product (service) is whatever it may be that is being sold/marketed. • Price refers to not only the actual price but also price elasticity. • Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover, as well as what types of distribution channel (retail, wholesale, online, etc) will be used. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area. • Promotion simply refers to what medium will deliver the message and what the overall marketing strategy is offering as a benefit. The variables used for segmentation include: • Geographic variables o region of the world or country, East, West, South, North, Central, coastal, hilly, etc. o country size/country size : Metropolitian Cities, small cities, towns. o Density of Area Urban, Semi-urban, Rural. o Climate Hot, Cold, Humid, Rainy • Demographic variables o Age o Gender Male and Female o Sexual orientation o Family size o family life cycle o Education Primary, High School, Secondary, College, Universities o Income o Occupation o Socioeconomic status o Religion o Nationality/race o Language • Psychographic variables o Personality o Life style o Value o attitude • Behavioural variables o benefit sought o product usage rate o brand loyalty o product end use o readiness-to-buy stage o decision making unit When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis.