Market Segmentation: The Practical Basics

The division of a market into different homogeneous groups of consumers is known as market segmentation. It is a fact that customer needs can vary quite significantly.

In order to maximize the impact that the different components of the marketing mix will have on the target market, one needs to try and segment the market into groups that will be as homogeneous as possible. Achieving this may be quite difficult. The ideal market segment will result in a single customer or consumer. The worst case scenario will be a completely heterogeneous group or segment. The optimum is a segment where the individual elements of the marketing mix will have the highest impact as a will result of the synergy that is created by the mix.

It may not be necessary to change the all the elements of the marketing mix from one segment to the next. For example, in most cases the pricing strategy could be similar.

Segmenting Markets

When companies utilized market segmentation properly, it offers them several opportunities to expand their customer base in the market. This is normally as a result of better matching the needs of the customers in the different segments.

Market segmentation is a vital tool in the deployment of a variety of marketing mixes for a given product in order to a wider customer base to the product by satisfying different needs with the same product.

One of the benefits of correctly and creatively conducting marketing segmentation is that it can play a significant role in assisting companies to recognize ways to improve customer loyalty with existing customers.

During the process of market segmentation specific groups are identified within the larger customer base and questions are asked about their common needs. This often results in practical proposals about more desirable product usages for the customers.

This may include the changing of the packaging to make the product serve the market segment's needs better to changing the distribution network or event the marketing communication message without any change to the core product. Customers normally respond very well to changes in the marketing mix that addresses their needs better as it sends a clear message to consumers that the company do listen to its customers. Apart from expanding the customer base this demonstration of care normally also improves customer loyalty significantly.

Practical Implications

As indicated above, the same basic product can satisfy different customer needs in different segments. If one takes bottled water as an example, it becomes clear that the content in the bottle of most offers for bottled water is identical. It is when compares the marketing mix for each of the "Water" products that the differences emerge.

The consumers in a certain market segment may just need water in a bottle as a convenience item and for this market segment the distribution will probably play the biggest role as they would want to be able to find the product in convenient places.

The health conscience segment on the other hand would need to be satisfied that the content is free of any harmful ingredients. The marketing message for this group should focus on this issue.

Another market segment may be the group who is environmentally conscious. In order to attract this market segment it would be necessary to package the core product (water) in recyclable glass bottles instead of cheap throw away plastic bottles.

A fourth segment may the cost conscious, for them the packaging may not be as important and therefore a less durable bottle may have to be used in order to offer the same quality core product at a competitive price.

In practical terms the identified market segments are normally appraised by evaluating their profiles. During the evaluation of the individual profiles the attractiveness of each market segment is conducted in terms of financial and strategic attractiveness and based on the outcome the target market segment or segments that will be focused on is selected.

Conclusion

In order to keep market segmentation simple and practical a market segment should be of a substantial enough size to be profitable, be measurable in terms of its characteristics, accessible with a particular communication media, be able to be reach via a common distribution channel, be different in its response to a specific marketing mix and not likely to changing too rapidly.

The optimum market segment is based on variables which do not depend on the particular situation and should be establish by proper marketing research that is based on financial appeal, strategic attractiveness and relevant market trends that is confirmed by a suitable and sufficient managerial assessment.

©Carl Marx