Segmentation and Targeting
2007/// Filed in: Marketing
Market segmentation is the process through which the total market is broken down to create distinctive groups. Kotler defines a market segment as "consumers that respond in a similar way to a given set of marketing stimuli."
The concept of segmentation was first introduced by Wendell Smith ("Product Differentiation and Market Segmentation as Different Alternative Strategies"). Segmentation is disaggreative in its effects. It consists of viewing a heterogeneous market as a number of smaller homogeneous markets. Thus, the first step in the segmentation process is to "segment" the market so that we can target the segments we want to pursue (i.e. determine in what markets we want to compete). Bases for segmentation include:
-1. Demographics: age, sex, religion, marital status, socio-economic, etc.
-2. Geographics: location, climate, terrain, population density
-3. Psychographics: AIO=Activities, Interest, Opinions & VALS=values, attitudes and lifestyle (need-driven, outer-driven, inner-driven)
-4. Behavioral
Regardless of the base for segmentation used, a target segment should be: 1) identifiable (well-defined), 2) economically reachable, 3) large enough to be profitable, and 4) more homogenous than the original market.
Doyle points out reasons to segment. These include: 1) targeted communications, 2) enhanced customization and customer service, 3) better matching of the customer needs, 4) enhanced profits, 5) enhanced opportunities for growth, 6) stimulation of innovation, and 7) market segment share.
Following the identification of the segmentation variables, a firm must decide those segments it aims to target and the positioning strategy.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Smith, "Product Differentiation and Market Segmentation as Alternative Strategies"
The concept of segmentation was first introduced by Wendell Smith ("Product Differentiation and Market Segmentation as Different Alternative Strategies"). Segmentation is disaggreative in its effects. It consists of viewing a heterogeneous market as a number of smaller homogeneous markets. Thus, the first step in the segmentation process is to "segment" the market so that we can target the segments we want to pursue (i.e. determine in what markets we want to compete). Bases for segmentation include:
-1. Demographics: age, sex, religion, marital status, socio-economic, etc.
-2. Geographics: location, climate, terrain, population density
-3. Psychographics: AIO=Activities, Interest, Opinions & VALS=values, attitudes and lifestyle (need-driven, outer-driven, inner-driven)
-4. Behavioral
Regardless of the base for segmentation used, a target segment should be: 1) identifiable (well-defined), 2) economically reachable, 3) large enough to be profitable, and 4) more homogenous than the original market.
Doyle points out reasons to segment. These include: 1) targeted communications, 2) enhanced customization and customer service, 3) better matching of the customer needs, 4) enhanced profits, 5) enhanced opportunities for growth, 6) stimulation of innovation, and 7) market segment share.
Following the identification of the segmentation variables, a firm must decide those segments it aims to target and the positioning strategy.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Smith, "Product Differentiation and Market Segmentation as Alternative Strategies"