Market segmentation

CONSUMER MARKET SEGMENTATION STRATEGIES IN AGRICULTURAL MARKETING (322-2) UWU/EAG/11/0021 W.S.P. Jayathilaka Export Agriculture  INTRODUCTION Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference. It is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs A market segment is a small unit within a large market comprising of like-minded individuals. One market segment is totally distinct from the other segment. A market segment comprises of individuals who think on the same lines and have similar interests. The individuals from the same segment respond in a similar way to the fluctuations in the market. It can be defined as a “Grouping people according to their similarity related to a particular product category”. Segmenting Consumer Markets 4 commonly used bases for Segmentation Descriptive Geographic Demographic Behavioural Psychographic Benefits Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities. Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits. Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Occasion Benefits sought User status Usage rate Loyalty status Foundations of Market Segmentation Market segmentation is about describing and dividing people. It seeks to identify the people who may have want or need for your product, then divides them into groups so that may be served more efficiently and profitably. The purpose of segmentation is the concentration of marketing energy and force on the subdivision (or the market segment) to gain a competitive advantage within the segment. At its most basic level, the term “market segmentation” refers to subdividing a market along some commonality, similarity, or kinship. CRITERIA FOR SELECTING MARKET SEGMENTS Measurable A segment should be measurable. It means you should be able to tell how many potential customers and how many businesses are out there in the segment. Accessible A segment should be accessible through channels of communication and distribution like: sales force, transportation, distributors, telecom, or internet. Durable Segment should not have frequent changes attribute in it. Substantial Make sure that size of your segment is large enough to warrant as a segment and large enough to be profitable Unique Needs Segments should be different in their response to different marketing efforts (Marketing Mix). Consumer and business markets cannot be segmented on the bases of same variables because of their inherent differences. SEGMENTATION PROCESS Four step market segmentation process To develop a successful marketing strategy, it is important to identify the appropriate consumer segments. There are four steps you should perform to conduct the market segmentation process effectively. Step 1: Identify segmented markets The first step of the market segmentation process is to identify the segmented markets. It is important to select the segmenting strategy that most accurately categorizes consumers according to your product or service. For example, suppose that your company manufactures infant safety seats. The decision to use the age-oriented strategy to segment the market may not be effective because people become parents at different ages. Promotions and advertising directed toward twenty-something parents may not appeal to older couples with children. Step 2: Analyze each segment After identifying potential market segments, it is important to research and analyze the consumers that comprise each segment. You must determine the similarities that connect the members of each segment, and identify the differences that separate one segment from another. During the analyzing step, you should outline the buying habits, product usage rates, attitudes, and lifestyle choices that represent a typical customer in each segment. Demographic and geographic information will provide a clear customer profile to help you determine the market segment best suited for your product or service. Step 3: Evaluate market opportunities The customer profiles you create help you identify the market segments that offer the sufficient benefits you need to achieve company goals and objectives. When evaluating each segment, you should consider your ability to reach the targeted consumer, the number of potential customers within the segment, your ability to measure the segment's progress, and the segment's compatibility with your company's mission. Step 4: Select target segments The fourth step of the market segmentation process is to select the appropriate target segments. The research, examination, and evaluation of the market segments allow you toevaluate the profit potential of each segment. Once you select one or more target segments, you can develop products and marketing strategies to satisfy your customers' needs. ADVANTAGES AND BENEFITS OF MARKET SEGMENTATION Following are some of the benefits as cited in leading marketing books. 1. Customer needs It is easier to understand the exact needs of the customer and target the marketing strategy at a particular group. It is much easier and more successful to create and promote specific and customised products and services. 2. Profit Potential Mass marketing is a strategy of the past. Target marketing and positioning creates new potential customers and new ideas for new products and services. Companies can create better products and hence maximise their potential profit. 3. Growth Segmenting the markets creates further opportunities for business growth. Specific groups require specific products. 4. Retaining Customer It is a great way to retain customers. Firms can establish a life-long relationship with their consumers via formulating an effective market segmenting strategy. 5. Right Target Market The company's resources are utilized for producing the right product for the right customer. 6. Market Share Segmenting business and consumer markets is important to maintain existing market share and expand it. A successful company needs to gain competitive advantage by looking closely at the specific needs of customers and devising strategies to provide maximum benefit and value. LIMITATIONS OF MARKETING SEGMENTATION Market segmentation has its own limitations and marketers have pointed certain disadvantages. 1. No highly customised product. Only group served not individuals. 2. No link to competitive advantage 3. Lack of suitable process Others have identified limitations such as: Infrastructure Barrier: The firm may not have suitable infrastructure to make the right product. This may result in loss of profits, market share, failures etc. Process Barrier The process of creating segments may not be followed correctly or the segments may not be created at all. Implementation Barriers The company fails to implement the market segmentation strategy. REFERENCES http://www.linkedin.com http://marketing717.blogspot.com/2009/03/four-step-market-segmentation-process.html 8