Market segmentation

[M H Parvez]

Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects.

The purposes of market segmentation

Market segmentation is conducted for two main purposes, including:
?   A better allocation of a firm's finite resources
?   To better serve the more diversified tastes of contemporary Western consumers

A firm only possesses a certain amount of resources. Accordingly, it must make choices (and appreciate the related costs) in servicing specific groups of consumers.

Moreover, with more diversity in the tastes of modern consumers, firms are taking noting the benefit of servicing a multiplicity of new markets.

Overview of segmentation process
Segmentation can be defined in terms of the STP acronym, meaning Segment, Target, and Position.

Segment
Segmentation involves the initial splitting up of consumers into persons of like needs/wants/tastes.
Four commonly used criteria are used for segmentation, which include:
? Geographical (a country, region, city, town, etc.)
? Psychographic (i.e. personality traits or character traits which influence consumer behavior)
? Demographic (e.g. age, gender, socio-economic class, etc.)
? Behavioral (e.g. brand loyalty, usage rate, etc.)

Target
Once a segment has been identified, a firm must ascertain whether the segment is beneficial for them to service.
The DAMP acronym (meaning Discernable, Accessible, Measurable and Profitable) are used as criteria to gauge the viability of a target market. DAMP is explained in further detail below:

? Discernible - how a segment can be differentiated from other segments.
? Accessible - how a segment can be accessed via Marketing Communications produced by a firm
? Measurable - can the segment be quantified and its size determined?
? Profitable - can a sufficient return on investment be attained from a segment's servicing?

The next step in the targeting process is the level of differentiation involved in a segment serving. Three modes of differentiation exist, which are commonly applied by firms. These are:
? Undifferentiated - where a company produces a like product for all of a market segment
? Differentiated - in which a firm produced slight modifications of a product within a segment
? Niche - in which an organization forges a product to satisfy a specialized target market

Position
Positioning concerns how to position a product in the minds of consumers.
A firm often performs this by producing a perceptual map, which denotes products produced in its industry according to how consumers perceive their price and quality. From a product's placing on the map, a firm would tailor its marketing communications to suit meld with the product's perception among consumers.

Source: Internet