Segment of the market
Segment is a group of people (customers) who are reacting in the same way to a set of marketing activities. Marketer has to choose which segment is the best for company to archive goals. Customers are divided in groups based on many different factors. Process of identifying target groups based on their needs, geographic, behavioral and other factors is called marketing segmentation.
Segmentation starts with selecting variables to set a segment. Next step is about constructing profile of a potential customer in segments and sub-segments and at the end implement emerging segments.
Segments can be identified in two ways:
- By identifying the potential customer by general characteristic.
General characteristic defines potential customer age, earnings, education, or location. In this case company is able to find out how is really buying the product.
- By the way customer behave which tells what, why, where and when customers are purchasing the product.
Purpose of and benefits from segmentation
Segmentation helps company to choose segment to sell their product or services. The main goal is to analyze market and customers needs. Segments can be defined by groups of people in the same age or sex, people with the same habits or expectations about the product. Every company want perfectly match customers need to avoid expenses. The other purpose of segmentation is to show customers differences from competition's offer.
Segmentation benefits company on many ways like:
- attracting the right customer and make him loyal to the brand,
- product that corresponds to customers demands don't need expensive marketing activities,
- setting a specific segment as a target.
Process of segmentation
By P. Kotler process of segmentation consists of three stages:
- Research - starts with setting a profile of customers needs, behaves, motivations. Then the questionnaire that consist this variables is made.
- Analysis - analyze data to remove highly correlated variables then determining maximal number of differ segments.
- Profile - profiling every group by their demographics, behaves, psychographics.
Every segment is named after characteristic variable that dominates.
By E. J. McCarthy that process consists seven stages:
- General definition of segmented market.
- Formulating demand list of potential customers.
- Defining segments by creating combinations of needs that are answered on the market.
- Removing common features.
- Naming easy to separate segments of the market.
- Making detailed characteristic each of those segments.
- Defining relative scale of segments.
Criteria of segmentation
1 Customers characteristics:
- Demographic - age, gender, education, marital status, religious beliefs.
- Geographic - location (city, suburbs, village), climate, population, political system.
- Economic - profession, earnings, assets.
- Socio-psychographic - lifestyle, social class, personality
2 Purchasing patterns:
- Conditions - type of shopping place, frequency/time/scale of shopping,
- Patterns - loyalty, frequency of use
- Benefits - product knowledge, customer's predisposition
- Dickson, P. R., & Ginter, J. L. (1987). Market segmentation, product differentiation, and marketing strategy. The Journal of Marketing, 1-10.
- McCann, J. M. (1974). Market segment response to the marketing decision variables. Journal of Marketing Research, 399-412.
Author: Monika Stempień