Quick Study Notes for Market segmentation
Definition of market segmentation
- The process of splitting a market into smaller groups with similar product needs or identifiable characteristics, for the purpose of selecting appropriate target markets.
What are segmentation bases?
- A definable characteristic, identity or behavior of an individual consumer that can be utilized to classify consumers into related groups.
Why Use Market Segmentation?
- Identify attract target markets
- Greater market understanding
- Help develop marketing mix
- Gain stronger competitive position
- Identify market gaps and competitive opportunities
- Develop marketing strategies based on a stronger market understanding
- Think differently about the market
- Successfully compete as a niche marketer
- Avoid being a mass-marketer
- Have more product offerings in the same market
Main segmentation bases/variables with quick examples
Geographic: Where a consumer lives. Examples: Country, region, climate
Demographic: The consumer’s demographic profile. Examples: Age, occupation, marital status
Psychographic: A consumer’s lifestyle and interests. Examples: Values, activities, hobbies
Benefits sought: The reason for needing the product. Examples: Safety, esteem, convenience
Behavioral: The consumer’s product interaction. Examples: User status, occasion, brand familiarity
To remember the different segmentation bases, simply describe yourself as consumer for a particular product category. That is, your age (demographic), country (geographic), interests (psychographic), brand knowledge (behavioral), and why you want the product (benefits sought).
Why use different segmentation bases?
- Gain a competitive advantage
- Identify unmet market needs
- Deeper market understanding
- Meet strategic goals (such as growth or innovation)
- Ability to access to data and undertake data mining
- Need to fragment the market to decrease competitive rivalry