Market segmentation involves dividing and identifying the potential segments in the population which can serve as potential customers or target market for the firm. For example, if a company sells candies, its potential market segment include all the kids in various regions of the country. A company has to do pros/cons of each and every segment in order to determine which segment is the most profitable potential segment. On the basis of analysis done in market segmentation, firms select one or two most promising segments and targets their products to those segments. Segmentation can be done on the basis of income level, age group, demographic segmentation, life style, behavioral segmentation etc. For example Mercedes targets its luxury cars only to the segment which has higher income and has higher life style. Market segmentation is important because it allows the firms to evaluate which segments the firm is catering to. If a company targets wrong segments, it owing to the fact that marketing strategies are made on the basis of market segmentation and any mistake in the beginning can cause organization to incur losses in millions.
In the market segmentation theory it is assumed that short term and long term rates are determined in separate or segmented markets. Some investors prefer short term securities. They invest in short term bonds. Again, there are some investors who prefer long term bonds. As a result bonds having different maturity periods are not perfect substitutes for one another. Such an argument implies that lenders and borrowers are interested in bonds of only one maturity and even if the return on a sequence of shorter bonds were considerably higher than the return on those bonds, they would not attempt to switch into shorter bonds. Therefore, expectation concerning short rates would have no role in determining long rates. Thus even if short term rate increases in any period of time this theory implies that investors will not shift from long term bonds to short term bonds in order to enjoy higher rate in the short run. Thus even if the short run rate of interest increases it will not influence the long term rate of interest.
This theory is based on institutional practices followed by the commercial banks and insurance companies and investment trusts. While the commercial banks mostly deal in short term securities, insurance companies and investment trusts mostly deal in long term securities. This theory is however not free from defect as it overlooks the fact that there is considerable degree of overlapping between different markets. Same institutions operate in different markets dealing in securities of different maturities.
Market segmentation is based on the fact that the total market for all the commodities or products is not homogeneous but the market is heterogeneous and the producers and marketers are in continuous search to find out more and more potential markets to sell their product for this they divide the whole market in to small segments that is known as market segmentation.
Elements of market segmentation are as follows.
1: Company resources:
Manufacturing firms or companies spend a large amount of money to implement their market segmentation. It is not only a paper work, the head of institution must allocate proper budget for the implementation of market segmentation program, out of total funds.
2: Product characteristics:
The marketer must differentiate the homogeneous products and heterogeneous products available in the market. There are some products which are homogeneous in nature, for example, salt, milk etc which cannot be segmented, so undifferentiated marketing program is enough for these items or these items can be segmented with the other items available in the market.
3: Competitive marketing strategy:
The marketer or producer must prepare a weekly or monthly or quarterly report about their competitors and at the end implement their strategies and then on the basis of these reports he should design his own marketing program and then this should be implemented in a best manner.
Anand) The purpose for segmenting a market is to allow your marketing/sales program to focus on the subset of prospects that are "most likely" to purchase your offering. If done properly this will help to insure the highest return for your marketing/sales expenditures. Depending on whether you are selling your offering to individual consumers or a business, there are definite differences in what you will consider when defining market segments. Category of Need The first thing you can establish is a category of need that your offering satisfies. The following classifications may help.
For businesses: • Strategic - your offering is in some way important to the enterprise mission, objectives and operational oversight. For example, a service that helped evaluate capital investment opportunities would fall into this domain of influence. The purchase decision for this category of offering will be made by the prospect's top level executive management. • Operations - your offering affects the general operating policies and procedures. Examples might be, an employee insurance plan or a corporate wide communications system. This purchase decision will be made by the prospect's top level operations management. • Functional - your offering deals with a specific function within the enterprise such as data processing, accounting, human resources, plant maintenance, engineering design, manufacturing, inventory control, etc. This is the most likely domain for a product or service, but you must recognize that the other domains may also get involved if the purchase of the product or service becomes a high profile decision. This purchase decision will be made by the prospect's functional management. For the individual consumer: • Social Esteem or Pleasure - your offering satisfies a purely emotional need in the consumer. Examples are a mink coat or a diamond ring. There are some products that are on the boundary between this category and the Functional category such as a Rolex watch (a Timex would satisfy the functional requirement and probably keep time just as well). • Functional - your offering meets a functional requirement of the consumer such as a broom, breakfast cereal or lawnmower. Segmentation of Needs Then you should establish what the need is and who is most likely to experience that need. Your segmentation will be determined by a match between the benefits offered by your offering and the need of the prospect. Some "need" categories for segmentation include: Reduction in expenses Prospects might be businesses that are downsizing (right sizing), businesses that have products in the mature stage of their life cycle or individuals with credit rating problems. Improved cash flow Prospects might be businesses that have traditionally low profit margins, businesses that have traditionally high inventory costs or individuals that live in expensive urban areas. Improved productivity Prospects might be businesses that have traditionally low profit margins, businesses that have recently experienced depressed earnings or individuals with large families. Improved manufacturing quality Prospects might be businesses with complex, multi-discipline manufacturing processes. Improved service delivery Prospects might be service businesses in highly competitive markets, product businesses requiring considerable post-sale support or individuals in remote or rural areas. Improved employee working conditions/benefits Prospects might be businesses where potential employees are in short supply. Improvement in market share/competitive position Prospects might be new entrants to a competitive market. Need for education Prospects might be businesses or individuals looking for books on business planning, or seminars on Total Quality Management. Involvement with social trends Prospects might be businesses concerned with environmental protection, employee security, etc. Or individuals who believe in say 'no' to drugs, anti-crime, etc. Specific - relating to product/service characteristics Prospects might be businesses or individuals interested in safety, security, economy, comfort, speed, quality, durability, etc. Factors that segment prospects Having determined the more general segmentation characteristics you can proceed to a more detailed analysis of the market. There are literally thousands of ways to segment a market, but the following are some of the more typical segmentation categories.
Market segment: - isolating broad segments that make up a market and adapting the market to match the needs of one or more segments.
A company that practices segment market recognizes that buyers differ in their needs, perceptions and buying behaviours. The company tries is isolate board segments that make up a market and adopts its offers to more closely match the needs of one or more segment. Thus, general motors have designed specific models for segments with varied combinations of age and income. Segment marketing offers several benefits over mass marketing.
Market segmentation: - dividing a market into distinct groups of buyers with different needs, characteristics or behaviours who might require separate products or marketing mixes. In element market consist of buyers, and buyers differ in one or more ways. They may differ in their wants, resources, locations, buying attitudes, and buying practices. Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can reach more efficiently with products and services that match their unique needs. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view the market structure. Here we look at major geography, demographic, psychographic, and behavioural variables.
I could but I won't. I spent the time studying, so should you. I bet you have a book that has all the answers in it. Open it, read it and learn. It's really quite amazing.
Whenever a firm develops a certain product or service, it does so for a specific type of customers because the firm’s offering may not have the same value for all the people. The firm’s customers have different demographic characteristics based on which the customers can be divided into certain groups. This division can be done on a basis of a large number of variables like age, gender, income and so on. The process of dividing customers into groups that are distinct from each other and can be identified on the basis of certain variables is called marketing segmentation. This makes it easier for the firm to profile, understand and distinguish the various groups in the customer base.
