The act of dividing target markets into various segments based on a number of factors, and then devising individual strategies for each of them is a commonly carried out practice.
When the producer of a specific commodity decides to undertake the marketing and promotional activities for that product, what makes him decide how to approach his potential customers?
The customer base is obviously vast and varied with people from all walks of life, of different income groups. Each of these groups of customers require an altered and unique approach. The basis for this approach is arrived at by carrying out market segmentation analysis.
One of the most widely used concepts in marketing management is that of STP, that is, Segmentation, Targeting, and Positioning.
STP implies that the potential customer base is studied by the marketer by an analysis, the most approachable and profitable segment is chosen and targeted, and necessary marketing and promotion steps are taken.
Resources are absolutely vital for a marketer which cannot be wasted on useless purposes. A marketer has to have a specific target audience in mind (for any form of promotion), and then take steps accordingly.
Why Segment Your Market?
Here are the primary reasons:
To avoid wastage of precious company resources.
To divide the market into various segments, or target groups.
To target each profitable group in a unique way that suits that particular segment, and provides adequate returns.
To avoid overlapping and redundant information.
To get maximum response and sales from each group.
Basis for Market Segmentation
When it comes down to practical application, there have to be some fixed parameters that marketers must adopt and enforce in order to achieve the best results and maximum profits. Here are the different factors that determine how the different market segments are arrived at.
This is done on the basis of the physical location and boundaries of the customers. The following considerations are necessary.
Which country the customer resides in.
Are there any limitations on the usage and promotion of the product in the country.
What is the size of the country and its population density.
What are the climate conditions in that country.
This process comes into play when the quality and other characteristics of the general population are taken into consideration.
Following points are to be focused on:
The age and the gender of the target audience needs to be considered.
The common occupations and income levels of the population also play a part.
The religion and language that the people follow also needs to be kept in mind.
The family size and quality of education are also important here.
In this category the attitudes and lifestyle of the consumers are considered. Also known as the IAO (Interests, Activities, and Opinions) model, it plays a major part in devising successful marketing strategies.
The following considerations are necessary here.
The general personality traits of the customers must be kept in mind.
The values of the people and the attitudes that they have towards certain products are crucial pieces of information for a marketer.
The hobbies and the perception of the selling company also have to be obtained.
Here the marketer takes into account the general behavioral patterns of the customers and tries to forecast what reactions they would possibly have to the adopted strategies.
The following points are to be considered:
The benefits that the customers are looking for, and the value they seek and derive.
The degree of brand loyalty and brand satisfaction.
The willingness to buy a product, and also the rate of its usage.
The profitability of marketing there and also the income level of the targeted customer base.
Knowing how to do a market segmentation analysis provides a marketer with a range of information about the possible reactions of the customer, and can also help in devising accurate sales projection charts.
The main objective of marketing is to have the customers purchase the products, and there has to be a means of predicting the sales figures. This information will provide very useful information about the most profitable segment, and the marketer can thus focus his maximum resources on that.
Those segments that are less profitable can either be completely scrapped, or if their potential value is high they can be targeted with more intensity. Market segmentation is hence a necessary tool for the promotional activities undertaken by any company.