Analyze the Basic Features of Effective Market Segmentation
Mariam Peyton is a professional Financial Analyst. She holds a Masters degree in Economics. She specialises in financial analysis and forecasting. Her expertise includes studying the financial performance of companies, markets and entire industries looking for trends, insights and information that can help you glean rich insights for use in academic and market research.
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When operating a business, it may not be able to fulfill all the customers’ needs and desires from time to time. It may find some hurdles whilst trying to meet the customers’ exact necessities. This is so because different individuals have different preferences which means that a product manufactured rarely satisfies everyone. To remedy this, companies usually adopt a strategy that is known as target marketing. This involves distinguishing an organization’s entire market into various segments and arranging marketing strategies for each segment so as to increase its market share. This strategy entirely focuses on the customers’ tastes and preferences. It enables businesses to access small groups of individuals and to offer them the best services and products that meet their preferred wants and desires.
A market segment is a group of people with the same tastes and preferences. The purpose of market segmentation is to identify segments, select strategies for the segments, and determine how many segments need to be served. The process of market segmentation is where an organization splits customers in a market into smaller groups so that it can focus entirely on them. Market segmentation is usually based on demographics, which means that the market is divided based on characteristics such as gender, family size, age, income, occupation, education level, and nationality among others.
Market segmentation is a key tool for marketers to identify and target the most profitable segments, design appropriate marketing strategies, and achieve competitive advantage. This assignment will analyze the basic features of effective market segmentation. The basic features of effective market segmentation are: Measurability, Accessibility, Substantiality, Differentiability, and Actionability
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Analyze the Basic Features of Effective Market Segmentation Case Study
Key Learning Outcomes
By the end of the case, students should be able to:
- Define market segmentation and explain its purpose and benefits for businesses.
- Identify the four main types of market segmentation: geographic, demographic, psychographic, and behavioral.
- Apply the criteria of measurability, accessibility, substantiality, and actionability to evaluate the effectiveness of market segments.
1.0 INTRODUCTION
Market segmentation is the process of dividing a large and heterogeneous market into smaller and more homogeneous groups of customers who share similar needs, wants, or characteristics. Market segmentation is a key tool for marketers to identify and target the most profitable segments, design appropriate marketing strategies, and achieve competitive advantage. This assignment will analyze the basic features of effective market segmentation.
The basic features of effective market segmentation are:
Measurability: The size, purchasing power, and characteristics of the segments should be measurable and quantifiable. This allows marketers to estimate the potential and profitability of each segment and allocate resources accordingly.
Accessibility: The divisions should be reachable and servable through effective marketing channels. This means that marketers should be able to communicate with and deliver their products or services to the segments in a cost-efficient way.
Substantiality: The subdivisions should be large and profitable enough to justify the marketing efforts and investments. This means that marketers should avoid creating too many or too small segments that may not generate sufficient sales or profits.
Differentiability: The sections should be clearly distinguishable from each other in terms of their needs, preferences, or responses to marketing stimuli. This means that marketers should avoid overlapping or ambiguous segments that may confuse customers or dilute the marketing message.
Actionability: They should be responsive and receptive to the marketing strategies and programs designed for them. This means that marketers should be able to influence the behavior and attitudes of the segments through effective marketing mix elements.
Let's look at some examples of market segmentation in various industries to demonstrate these characteristics:
Marketers in the vehicle sector might divide the market based on factors like wealth, way of life, personality, desired benefits, usage frequency, level of loyalty, etc. In contrast to a budget car brand, which may target low-income consumers who seek affordability, dependability, and fuel efficiency, a luxury automobile brand may target high-income customers who prefer prestige, quality, and performance.
Marketers in the hospitality sector might divide the market based on elements like location, demographics, psychographics, and travel objectives, among others. For instance, a hotel chain may target business travelers who value comfort, convenience, and service, whereas a chain of hostels may target backpackers who value affordability, camaraderie, and adventure.
Marketers in the education sector might divide the market based on factors like age, educational attainment, learning preferences, job objectives, etc. For instance, a traditional institution may target young students who like organized, engaging, and accredited courses, whereas an online learning platform may target adults who prefer self-paced, flexible, and personalized courses.
These illustrations demonstrate how market segmentation can assist marketers in better understanding their target market and adjusting their marketing tactics accordingly. Marketing professionals may add value for both their clients and their companies by implementing the fundamental components of an effective market segmentation strategy.
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