What Is Market Segmentation?

Market segmentation is a marketing term that refers to aggregating prospective buyers into
groups or segments with common needs and who respond similarly to a marketing action Market
segmentation enables companies to Target different categories of consumers who perceive the
full value of certain products and services differently from one another section.
In reality, the most fundamental segmentation decision is really whether to segment at all. When a firm
makes the decision to pursue the entire market, it must do so on the basis of universal needs that all
customers possess. However, most firms opt to target one or more segments of the total market because
they find that they can be more successful when they tailor products to fit unique needs or requirements.
In today’s economy, segmentation is often mandated by customers due to their search for unique products
and their changing uses of communication media. The end result is that customer segments have become
even more fragmented and more difficult to reach. Many firms today take segmentation to the extreme by
targeting small niches of a market, or even the smallest of market segments: individuals.

Criteria for Successful Segmentation

It is important to remember that not all segmentation approaches or their resulting market segments are
viable in a marketing sense.

• Identifiable and Measurable. The characteristics of the segment’s members must be easily identifiable.
This allows the firm to measure identifying characteristics, including the segment’s size and purchasing
power.

• Accessible. The segment must be accessible in terms of communication (advertising, mail, telephone,
etc.) and distribution (channels, merchants, retail outlets, etc.)

• Substantial. The segment must be large and profitable enough to make it worthwhile for the firm. The
profit potential must be greater than the costs involved in creating a marketing program specifically for
the segment.

• Viable and Sustainable. The segment must meet the basic criteria for exchange, including being ready,
willing, and able to conduct business with the firm. The segment must also be sustainable over time to
allow the firm to effectively develop a marketing strategy for serving the needs of the segment.

• Responsive. The segment must respond to the firm’s marketing efforts, including changes to the
marketing program over time. The segment must also respond differently than other segments.

2 types of Market segmentation

Types of Market Segmentation

there are four primary types of Market segmentation

type 1
demographic segmentation

for instance one personal care company might make two deodorant products one labeled as men's
deodorant and one labeled as women's deodorant there are numerous ways to gather
demographic data one way is to ask your customers directly this can be time consuming but
getting the information directly from customers will help ensure its accuracy you can also get
demographic from second party and third-party data providers including marketing service
providers and credit bureaus

Type 4 psychographic segmentation

psychographic segmentation is similar to demographic segmentation but it deals with

characteristics that are more mental and emotional some examples of
psychographic characteristics include personality traits interests beliefs values attitudes and
Lifestyles understanding these aspects of your audience can help you to create content that
appeals to them more effectively a common example of psychographic segmentation are luxury
brands that specialize in customization as we know luxury Brands such as Lewis buton Hermes
and channel Etc are not targeted at people from every class A Certain standard of living and
family income is essential to be able to purchase an expensive luxury product by using
psychographic Market segmentation the marketing team of luxury Brands can divide the target
market according to their social status first and then based on Lifestyles attitudes or
Personalities.
in addition the organic food industry is one of the fastest growing industries that focuses on a
specific target audience .

type 2 Geographic segmentation

Geographic segmentation
a basic but highly useful segmentation strategy
a customer's location can help you better understand their needs and enable you to send out
location-specific ads
for instance a clothing company will show ads featuring warmer clothing to people living in
cooler climates and show the opposite to people living in warmer climates

type 3 behavioral segmentation

behavioral segmentation divides consumers according to behavior patterns as they interact with a
company it studies the behavioral traits of consumers which include their knowledge of attitude
towards use of or response to a product service promotion or brand
here are four major types of behaviors you should look at number one
purchasing and usage behavior let's use your
ride-sharing app of choice as an example a working professional uses the service to commute to
and from the office Monday through Friday however on weekends the user has the extra time
needed to drive Park and walk to their destination so they never use the service then
understanding the behavior of this user the right sharing service could Target discounts on the
weekends to incentivize usage on days they otherwise wouldn't use the app
occasion purchasing – season.. for example Christmas season.. daghan manggawas na mga
decorations in which mahal xa compared atong dli pa ting season niya. Mga Christmas ham.
benefits sought
Benefit segmentation is evident among mobile phone
manufacturers. For example, some customers prioritize camera
quality. Others want phones that serve as status symbols, while
people in the older generation want simple phones that perform
the essential functions of a telephone. As a result of the divergent
demand, companies create different types of phones and position
them based on the targets in the market.

number four Customer Loyalty -rewards card

finally users that exhibit loyal Behavior to your business should not be overlooked one of the
most common methods marketer
use to reciprocate loyalty among customers is establishing a Rewards program a Rewards
program can be as simple as a buy nine get the 10th free sort of mobile stamp card or provide
customer discounts or cash back please keep in mind that the tip to build long-term user retention
and loyalty among your customers is to treat loyalty as royalty.

Section 3 how to implement Market segmentation

generally to effectively Implement Market segmentation there are five steps to follow

Step 1 Define your Market

you should ask yourself is there a need for your products and services. is the market large or
small where does your brand sit in the current Marketplace

Step 2 segment your Market

you need to decide which of the four criteria demographic psychographic Geographic or
behavior you want to use to segment your Market you don't need to stick to just one
in fact most brands use a combination
so experiment with each one and find what works best.

step 3 understand your Market

you do this by conducting preliminary research
surveys focus groups polls Etc ask questions that relate to the segments you have chosen.

step 4 Create your customer segments

analyze the responses from your research to highlight which customer segments are most
relevant to your product or service

step 5 test your marketing strategy

once you have interpreted your responses test your findings on your target market.

using conversion tracking to see how effective it is if uptake is disappointing real look at your
segments or your research methods

section 4 benefits the major benefits of Market segmentation include the following

1. increased resource efficiency

 marketing segmentation allows management to focus on certain demographics or customers
instead of trying to promote products to the entire Market marketing segmentation allows a
focused precise approach that often costs less compared to a broad reach approach

2. stronger brand image

Once the market segment is identified, management must then consider what message to craft
because this message is directed at a target audience a company's branding and messaging are
more likely to be very intentional

3. greater potential for brand loyalty

marketing segmentation increases the opportunity for consumers to build long-term relationships
with a company. more direct and personal marketing approaches May resonate with customers
and foster a sense of inclusion community and a sense of belonging.

4. stronger Market differentiation

Market segmentation gives a company the opportunity to pinpoint the exact message they weigh
to convey to the market and to competitors. this can also help create product differentiation by
communicating specifically how a company is different from its competitors

5. better targeted digital advertising

marketing segmentation enables a company to perform better targeted advertising strategies this
includes marketing plans that direct efforts towards specific ages locations or habits via social
media

Section 5
limitations despite the above benefits here are some disadvantages to consider when
implementing Market segmentation strategies.

1. Higher upfront marketing expenses

Marketing segmentation has the long-term goal of being efficient however to capture this
efficiency companies must often spend resources up front to gain the Insight data and Research
into their customer base in the broad markets.

2. increased product line complexity

Marketing has the downside risk of creating an overly complex fractionalized product line that
focuses too deeply on catering to specific market segments instead of a
company having a cohesive product line.
a company's marketing mix may become too confusing and inconsistently communicate its
overall brand.

3. Greater risk of misassumptions

Market segmentation is rooted in the assumption that similar demographics will share common
needs this may not always be the case.
by grouping a population together with the belief that they share common traits.
 accompany may risk misidentifying the needs values or motivations within individuals of a
given population.

4. Higher Reliance on reliable data

Market segmentation is only as strong as the underlying data that support the claims that are
made this means being mindful of what sources are used to pull in data this also means being
conscious of changing Trends and when market segments may have shifted from prior studies .

Definition of target customer/target market

Target customers, which can be called a target market, is the collection of all customers
that a firm has clearly identified through the market segmentation. They are targeted by
the firm to be converted into its actual customers. Of course, these are customers who
have needs which can be satisfied by the firm's marketing offerings and are able to pay
for those offerings.

Market targeting strategies

A market targeting strategy is a strategy or tatic in which a firm choose (a) market
segment(s) as its target market to serve in order to achieve its marketing goals.

There are 4 market targeting strategies used popularly by firms: Mass marketing,
Segmented marketing, Niche marketing and Micro marketing.
1. Mass marketing

Mass marketing (undifferentiated marketing) is a market targeting strategy in which

a firm decides to ignore market segment differences and offer the same marketing
offerings to all customers.

When using the strategy, a firm tries to exploit what is common in the needs of
consumers rather than on what is different. Products and marketing programs are
designed so that will appeal to the largest number of buyers.
The strategy is rarely used by firms nowadays, which can be only seen in a monopoly
market in some countries. For example: The electricity market in Vietnam (EVN), the oil
market in North Korea... Most modern marketers have strong doubts about this strategy.
Difficulties arise in developing a product or brand that will satisfy all consumers.
Moreover, mass marketers often have trouble competing with more-focused firms that
do a better job of satisfying the needs of specific segments and niches.

2. Segmented marketing

A segmented marketing (or differentiated marketing) is a market-targeting strategy

in which a firm decides to target several market segments and designs differentiated
marketing offerings for each.

For example, P&G markets at least six different laundry detergent brands in the United
States (Tide,ariel, Gain, Cheer, Era, Dreft, and Bold), which compete with each other on
supermarket shelves. Then P&G further segments each detergent brand to serve even
narrower niches. For example, you can buy any of dozens of versions of Tide—from Tide
Original, Tide Coldwater, or Tide Pods to Tide Free & Gentle, Tide Vivid White + Bright,
Tide Colorguard, Tide plus Febreze, or Tide with a Touch of Downy.

By offering product and marketing variations to segments, companies hope for higher
sales and a stronger position within each market segment. Developing a stronger
position within several segments creates more total sales than undifferentiated
marketing across all segments. Thanks to its differentiated approach, P&G is really
cleaning up in the $15 billion U.S. laundry detergent market. Incredibly, by itself, the Tide
family of brands captures a 38 percent share of all North American detergent sales; the
Gain brand pulls in another 15 percent. Even more incredible, all P&G detergent brands
combined capture a 60 percent U.S. market share.

But differentiated marketing also increases the costs of doing business. A firm usually
finds it more expensive to develop and produce, say, 10 units of 10 different products
than 100 units of a single product. Developing separate marketing plans for separate
segments requires extra marketing research, forecasting, sales analysis, promotion
planning, and channel management. And trying to reach different market segments with
different advertising campaigns increases promotion costs. Thus, the company must
weigh increased sales against increased costs when deciding on a differentiated
marketing strategy.

3. Niche marketing

Niche marketing (or concentrated marketing) is a market-targeting strategy in which

a firm chooses a few small but profitable segments or niches instead of going after
many segments or a large share of the gross market.

For example, consider nicher Stance Socks:

“Rihanna designs them, Jay Z sings about them, and the rest of the world can’t seem to
get enough of Stance socks,” says one observer. They’ve even become the official on-court
sock of the NBA and a favorite of many professional players on game day. Nicher Stance
sells socks and only socks. Yet it’s thriving in the shadows of much larger competitors who
sell socks mostly as a sideline. Five years ago, Stance’s founders discovered socks as a
large but largely overlooked and undervalued market. While walking through the sock
section a local Target store, says Stance’s CEO and cofounder, Jeff Kearl, “It was like, black,
white, brown, and gray— with some argyle—in plastic bags. I thought, we could totally
[reinvent] socks, because everyone was ignoring them.”

So Stance set out to breathe new life into the sock category by creating technically
superior socks that also offered fun, style, and status. Mission accomplished. You’ll now
find colorful displays of Stance’s comfortable but quirky socks in stores in more than 40
countries, from the local surf shop to Foot Locker to Nordstrom, Bloomingdale’s, and
Macy’s. Selling at prices ranging from $10 to $40 a pair, Stance sold an estimated 12
million pairs of socks last year. That’s small potatoes for giant competitors such as Hanes
or Nike, but it’s nicely profitable for nicher Stance. Next up? Another often overlooked
niche—Stance men’s underwear.

Through concentrated marketing, the firm achieves a strong market position because of
its greater knowledge of consumer needs in the niches it serves and the special
reputation it acquires. It can market more effectively by fine-tuning its products, prices,
and programs to the needs of carefully defined segments. It can also market more
efficiently, targeting its products or services, channels, and communications programs
toward only consumers that it can serve best and most profitably.

Niching lets smaller companies focus their limited resources on serving niches that may
be unimportant to or overlooked by larger competitors. Many companies start as
nichers to get a foothold against larger, more resourceful competitors and then grow
into broader competitors. For example, Southwest Airlines began by serving intrastate,
no-frills commuters in Texas but is now one of the nation’s largest airlines. And Enterprise
Rent-ACar began by building a network of neighborhood offices rather than competing
with Hertz and Avis in airport locations. Enterprise is now the nation’s largest car rental
company.

Concentrated marketing can be highly profitable. At the same time, it involves higher-
than-normal risks. Companies that rely on one or a few segments for all of their
business will suffer greatly if the segment turns sour. Or larger competitors may decide
to enter the same segment with greater resources. In fact, many large companies
develop or acquire niche brands of their own. For example, Coca-Cola’s Venturing and
Emerging Brands unit markets a cooler full of niche beverages. Its brands include Honest
Tea (the nation’s number-one organic bottled tea brand), NOS (an energy drink popular
among auto enthusiasts), FUZE (a fusion of tea, fruit, and other flavors), Zico (pure
premium coconut water), Odwalla (natural beverages and bars that “bring goodness to
your life”), Fairlife (unfiltered milk), and many others. Such brands let Coca-Cola compete
effectively in smaller, specialized markets, and some will grow into future powerhouse
brands.

4. Micromarketing

Micromarketing is a market-targeting strategy in which a firm tailors its marketing

offerings to suit the tastes of specific individuals and local customer segments. Rather
than seeing a customer in every individual, micromarketers see the individual in every
customer. Micromarketing includes local marketing and individual marketing.

Local marketing involves tailoring brands and promotions to the needs and wants of
local customers.
For example, Marriott’s Renaissance Hotels has rolled out its Navigator program, which
hyper-localizes guest experiences at each of its 155 lifestyle hotels around the
world: Renaissance Hotels’ Navigator program puts a personal and local face on each
location by “micro-localizing” recommendations for guests’ food, shopping, entertainment,
and cultural experiences at each destination. The program is anchored by on-site
Renaissance Hotels “Navigators” at each location. Whether it’s Omar Bennett, a
restaurant-loving Brooklynite at the Renaissance New York Times Square Hotel, or James
Elliott at the St. Pancras Renaissance London Hotel, a history buff and local pub expert,
Navigators are extensively trained locals who are deeply passionate about the destination
and often have a personal connection to the locale. Based on 100-plus hours of intense
training plus their own personal experiences and ongoing research, they work with guests
personally to help them experience “the hidden gems throughout the neighborhood of
each hotel through the eyes of those who know it best.”

Local marketing has some drawbacks, however. It can drive up manufacturing and
marketing costs by reducing the economies of scale. It can also create logistics
problems as companies try to meet the varied requirements of different local markets.
Still, as companies face increasingly fragmented markets and as new supporting digital
technologies develop, the advantages of local marketing often outweigh the drawbacks.

In the extreme, micromarketing becomes individual marketing— tailoring products

and marketing programs to the needs and preferences of individual customers.
Individual marketing has also been labeled one-to-one marketing, mass customization,
and markets-of-one marketing.

Factors should be considered before choosing a market-targeting strategy

Companies need to consider many factors when choosing a market-targeting strategy.

Which strategy is best depends on the company’s resources. When the firm’s resources
are limited, concentrated marketing makes the most sense. The best strategy also
depends on the degree of product variability. Undifferentiated marketing is more suited
for uniform products, such as grapefruit or steel. Products that can vary in design, such
as cameras and cars, are more suited to differentiation or concentration. The product’s
life-cycle stage also must be considered. When a firm introduces a new product, it may
be practical to launch one version only, and undifferentiated marketing or concentrated
marketing may make the most sense. In the mature stage of the product life cycle,
however, differentiated marketing often makes more sense.

Another factor is market variability. If most buyers have the same tastes, buy the same
amounts, and react the same way to marketing efforts, undifferentiated marketing is
appropriate. Finally, competitors’ marketing strategies should be considered. When
competitors use differentiated or concentrated marketing, undifferentiated marketing
can be suicidal. Conversely, when competitors use undifferentiated marketing, a firm can
gain an advantage by using differentiated or concentrated marketing, focusing on the
needs of buyers in specific segments.

Frequently Asked Questions (FAQ)

What is a target customer/target market?

Target customers, which can be called a target market, is the collection of all customers
that a firm has clearly identified through the market segmentation. They are targeted by
the firm to be converted into its actual customers. Of course, these are customers who
have needs which can be satisfied by the firm's marketing offerings and are able to pay
for those offerings.
What are the roles of target customers in Marketing?

Target customers, or a target market, play(s) a center role in all Marketing strategies,
plans and activities. Firms and marketers always try to provide products/services based
on the needs of target customers, pricing based on their ability to pay and a distribution
channel based on the location of the target customers.

The final goal of marketing is providing value to target customers through marketing
offerings and capturing value from those customers in return.
What is a market targeting strategy?
A market targeting strategy is a strategy or tatic in which a firm choose (a) market
segment(s) as its target market to serve in order to achieve its marketing goals.
How many market targeting strategies are there in Marketing?
There are 4 market targeting strategies used popularly by firms: Mass marketing,
Segmented marketing, Niche marketing and Micro marketing.
What is mass marketing?
Mass marketing (undifferentiated marketing) is a market targeting strategy in which a
firm decides to ignore market segment differences and offer the same marketing
offerings to all customers.
What is segmented marketing?
A segmented marketing (or differentiated marketing) is a market-targeting strategy in
which a firm decides to target several market segments and designs differentiated
marketing offerings for each.
What is niche marketing?
Niche marketing (or concentrated marketing) is a market-targeting strategy in which a
firm chooses a few small but profitable segments or niches instead of going after many
segments or a large share of the gross market.
What is micromarketing?
Micromarketing is a market-targeting strategy in which a firm tailors its marketing
offerings to suit the tastes of specific individuals and local customer segments. Rather
than seeing a customer in every individual, micromarketers see the individual in every
customer. Micromarketing includes local marketing and individual marketing.

Intro
0:00
as we know different auto manufacturers Target significantly different groups of
customers for example Toyota normally targets people with middle range incomes who are
looking for vehicles with good value for money when thinking about Toyota people think of
durability quality safety and reliability in contrast Mercedes-Benz always targets to upper-class
drivers who think of luxury style and social class Mercedes-Benz is a brand that evokes images
of luxury wealth and success for many people owning a Mercedes is a status symbol it is a way
to show the world that they've made it Market segmentation can help companies to Target just a
people most likely to become satisfied customers of their products or services so what is market
segmentation and how to implement it what are its major types example benefits and limitations
in this video I will discuss these questions with you section one what is market segmentation