Importance of market segmentation

Importance of market segmentation
Primary topic
Related topics
Methods and techniques

Market segmentation is fundamental aspect of marketing. We can describe all markets as heterogeneous, meaning that they all consist of many different individuals, whose preferences and personal needs may vary. [1] Segmentation's main purpose is to address those differences by separating customers into sets based on variety of factors. Nowadays, even the most niche products are accessible by customers all over the world - addressing them in relevant may be a key to success of one's company. It is growingly difficult to a deliver a highly desirable product due to market saturation and well-established competition - focusing on a particular subset of customers and adapting our marketing to fit their expectations seems to be a valid approach. [2] Market segmentation can also affect and even form the basis for the rest of marketing strategies and techniques - knowing the specific target group on the early stage may influence (and improve) other aspects of it. [3]

Advantages of market segmentation[edit]

  • precise targeting of markets/customers reduces cost of marketing activities and leads to more optimal resource utilization - aiming at specific subsets can cause the developed mechanisms to be reusable and minimizes the chances of dramatically changing the previous, possibly mismatched approaches
  • provides technique for better strategic decision – when more specific cases are taken into consideration, the inaccuracies of some assumptions may become emphasized and some particular practices may turn out to be clearly non-applicable
  • employees can better understand customer, its needs and reflect to overall atmosphere and concerns among the group, they can also provide more immediate response to constantly changing expectations
  • R&D department can create new products for specific segments of the market – within a smaller range of product users the field for improvements and innovations may be more distinguishable
  • competition in smaller market segments can be less strong
  • various marketing activities can be more focused – with the knowledge of target market sector the demands and requirements (and therefore relevant techniques) are more apparent and clear
  • effective market strategy leads to higher customer satisfaction
  • specialization on smaller market is easier to achieve
  • brand-awareness is easier to build within a smaller group of clients
  • segmentation improves functioning of marketing information system
  • communication with customers is more effective - various forms and channels of communication are relevant, depending on the target group
  • all aforementioned increase the performance and profitability of other marketing activities

Importnace of different types of segmentation[edit]

Different types of segmentation may have different impact on company's marketing strategies. Examples include: [4]

  • Geographic segmentation - customers preferences and distribution issues may vary in different locations
  • Demographic segmentation - perhaps the most natural - customers of different age and gender clearly have different habits and expectations
  • Psychographic segmentation - considering particular groups of people divided by lifestyle may provide a lot of information about their doubts and attitudes towards our product and its field

References[edit]

Footnotes[edit]

  1. Heterogeneous. (n.d.) In Collins English Dictionary
  2. Martin, G. (2011). pp 16
  3. Wind, Y and Bell, D. (2007) pp 223
  4. Thomas, JW. pp 1-4

Author: Izabela Pyszczek