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Segmenting the marketing

What is marketing? | The role and importance of marketing | Market orientation and product orientation |


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Market segmentation is a vital element of marketing. It is customer orientated and is thus consistent with the concept of marketing. It occurs when the total demand in a market is analysed, so that specific sets of buyers, with distinct characteristics, can be identified.

Once this has been done, then it is possible to design products and services that will apply directly to specific market segments. After this, it is possible to design marketing plans that will then aim the specific products directly at the segments chosen. The act of market segmentation enables organisations to:

· define their markets accurately;

· position various products and brands in the right market area;

· identify gaps in the market that might be successfully filled;

· make more efficient use of marketing resources.

There are three commonly used bases for segmenting markets. The first of these categories is geographic. Consumer tastes may vary between differentgeographical areas and so it may be appropriate to offer different products and to market them in alternative ways in each area. For example, large national breweries offer different brands of beer to different areas of the country, even though they could offer a single brand. They will also promote the products in different ways, because they realize that there are regional differences in attitudes and consumers' tastes.

The second basis for segmentation is demographic, i.e. relating to the science of population statistics. This is the most commonly used basis for segmentation and is usually based upon such factors as sex, age, income or ethnic background. For example, manufacturers of washing powders will aim different brands of their products at different ages of consumers. Some brands, such as Bold, will be aimed at the younger end of the market and others, such as Daz, will be aimed at slightly older customers. The promotional strategy for each product is then devised to appeal specifically to the targeted market segments.

The third basis is psychographic, which in turn can be split into three main areas: social class, personality characteristics and lifestyles. There are a number of ways of defining social class. One of the most common is to split the population into upper class, upper middle class, lower middle class, upper lower class and lower lower class. These classes are sometimes classified by letters. An individual's social class will have a great influence upon his or her purchasing patterns in many product categories.

In theory, personality characteristics should be very influential. One would expect an aggressive person to have different purchasing patterns from a timid person. The same could be said for impulsive people as opposed to very cautious people. In reality, such personality characteristics are very difficult to identify specifically and to measure accurately. However, many firms especially in their advertising, still do, attempt to appeal to consumers who have particular personality traits. Thus, we see products aimed at outgoing young people who wish to pursue all sorts of relatively dangerous outdoor activities, such as sky­diving or bungee-jumping. Even though it is not possible to measure the market segment accurately, the seller knows that it is there, believes that it is large and is aiming at it. Lifestyle is a very broad term and often overlaps with personality characteristics. Lifestyles tend to relate to activities undertaken, interests and opinions, rather than personality traits.

There are a number of advantages to segmenting the market:

· It enables the division of the market into distinct areas at which the product can be more specifically aimed.

· Small firms, which could not compete in the whole market, are able to concentrate on one or two smaller segments.

· It is possible to design and produce goods and services that are specifically matched to the demand of a more distinct group of consumers. There are, however, a number of disadvantages. First, there are higher production costs, because it is obviously more expensive to produce a range of products, all aimed at different market segments, than it is to produce a single product aimed at all potential customers. The second disadvantage relates to this point as well. If there is a range of products on offer, then there will be a need for higher levels of stockholding, which will have obvious cost implications. Finally, promotional costs will rise as different strategies are required for different markets and administration costs will also increase as many more products are produced and marketed.

 


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