Market Segmentation

Definition

Market Segmentation is the process of dividing a market up into different groups of people in order to meet specific needs.

What ways can the market be segmented in?

•      Age

•      Gender

•      Income

•      Area   

•      Ethnicity

•      Religion

•      Socio-economic group

Why is this done? Because customers differ in…        

•      Benefits they want

•      Amount that they are willing to pay

•      Media

•      Quantities that they buy them in

•      Time and place they buy

Geographic	Demographic	Behavioural	Psychographic
For example, customers within 10 mils of Birmingham	For example, they are educated to A Level standards	For example, customers who want value for money or an impulse buy	For example, customers who prefer to buy organic food
•       Location •       Region •       Urban/Rural •       ACORN classification	•       Age •       Gender •       Occupation •       Socio-economic group •       Income	•       Rate of usage •       Benefits Sought •       Loyalty Status •       Readiness to Purchase	•       Personality •       Lifestyle •       Attitude •       Class

Value of Segmentation       

•      Better matching of customer needs

•      Enhanced profits

•      Better opportunities for growth

•      Return more customers

•      Target market communications

•      Gain share of the market segment

Targeting

•      The business may not want to focus on all segments. Targeting is choosing the segment that they want to focus on.

Niche vs Mass

Niche marketing is where a business’ main focus is one specific segment. In comparison to this there is mass market, which is where the business will meet the needs of most of the people.

Advantages and Disadvantages of Niche Marketing

Features of mass market  

•      Customers from the majority

•      Needs of customers are more general

•      Higher production output and capacity

•      Success usually associated with low cost of operation

Positioning

•      After the segment has been targeted, managers must consider the positioning of their product.

•      This means how the product is perceived compared to competitor’s products.

•      It can be shown on market mapping,

Factors influencing the positioning

•      Price

•      Service

•      Product

•      Image

Influences on the positioning of the business    

•      Strengths of the business (e.g. are they efficient at producing what they sell)

•      Innovation (e.g. how good are they at developing or improving product)

•      Competitors – Too many competitors means they may choose to position themselves somewhere where there are less competitors

•      Market Conditions (such as recession)