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"Segmentation is fundamental to the marketing process."Discuss why segmentation is so important for effective marketing.Companies today recognise that they cannot appeal to all customers in the market place, or at least not to all buyers in the same way. The buyers are too numerous and diverse in their buying requirements. Through market segmentation, companies can break down large heterogeneous markets into smaller, homogenous segments that can be reached more efficiently and effectively with products and services to meet customers unique needs.Rather than trying to compete in an entire market, sometimes against superior competitors, a company must identify the areas of the market it can serve best and most profitably.
Market segmentation requires three major steps; firstly the market is divided into smaller groups of buyers with distinct needs who require separate products or marketing mixes. A company identifies different ways to segment the market and develops profiles of the resulting market segments. Secondly, each market segment's attractiveness is evaluated and one or more of the market segments are selected. This process is called target marketing. The third step is market positioning. This is where a products key benefits are established and communicated in the market,setting the competitive positioning for the product. Segmentation variables are the dimensions or characteristics of individuals, groups or businesses that are used for dividing a total market into segments. There is no single way to segment a market. Different segmentation variables have to be tried alone and in combination to find the best way to view the market structure. Information concerning basic customer characteristics can be obtained and measured easily, so the use of these variables is widespread. Demographic factors are the most popular bases for segmenting customer groups. Demographic segmentation divides a market into groups based on largely descriptive criteria such as age, gender, race, income, occupation, religion and nationality. Demographics are relatively easy to define and measure and the necessary information is often freely available from public sources. They offer a clear profile of the customer on criteria that can be worked into marketing strategies.The main use of demographic segmentation is as a foundation for other more customer-focused segmentation methods. Geographic segmentation defines customers according to their location. A company may decide to operate in one or few geographical areas, or to operate in all areas but pay attention to geographical differences in needs and wants. Many companies today localise their products, advertising and sales efforts to fit the needs of individual regions;for example, Starbucks offers more desserts and larger, more comfortable coffee shops in the south where customers tend to arrive later in the day and stay longer. Geographic segments are also easy to define and measure. Customer wants and needs change with age. Some companies use age and life cycle segmentation, offering different products or using different marketing approaches for different age and life cycle groups;for example, Mc Donalds targets different age groups from children and teens to adults and seniors with different adverts and media. Marketers must be careful to avoid stereotypes when using this segmentation method. Psychographic segmentation involves intangible variables such as beliefs, attitudes and opinions of the potential customer making it a more difficult area to define. In introducing a product to the market place, companies are trying to appeal to emerging attitudes, beliefs, values and lifestyles;for example,there is an increasing sensitivity to the environment and as a result many companies have adopted strategies that try to appeal to that attitude. Psychographic considerations are becoming increasingly common. Behavioural segmentation divides buyers into groups based on their knowledge, uses or responses to a product. Many marketers believe that behaviour variables are the best starting point for building market segments. Buyers can be grouped according to occasions. Occasion segmentation can help firms build up product usage;for example, holidays such as mother's day and father's day were originally promoted to increase sales in flowers, chocolates, cards and other gifts. Many marketers advertise and prepare special offers in the run up to holiday occasions. A powerful form of segmentation is to group buyers according to the benefits they seek from a product. People want different mixes of benefits from the product they buy; for example, everyone uses shampoo to wash their hair but people want more from their shampoo such as economy, fresh smell, anti-dandruff, shampoo or conditioner in one or a shampoo containing natural ingredients. To some customers price may be important whereas to others natural ingredients may matter most. Defining some of these benefit segments can also indicate the kinds of demographic or lifestyle descriptors that apply to people wanting those benefits.Marketers rarely limit their segmentation to one or few variables. Multiple segmentation bases are used in an attempt to identify smaller and better defined target groups. By going after segments instead of the whole market, companies have a better chance of delivering value to customers and receiving maximum rewards for close attention to customer needs. The obvious gain to customers is that they can find products that seem to fit more closely with what they want. These needs and wants are not only related to product function, but also to psychological fulfilment. Customers may feel that a particular supplier is more sympathetic towards them and therefore they will be more responsive and loyal to that supplier. Organisations that fail to segment deeply enough on significant criteria are likely to lose custom to competitors that do.Market segmentation helps an organisation to target its marketing mix more closely on the potential customer, and therefore they can meet their exact needs. Segmentation can also help an organisation to allocate its resources more efficiently. If a segment is well defined then the organisation will have sufficient understanding to develop precise marketing objectives and an accompanying strategy to achieve them with minimum wastage. There are many ways to segment a market but not all are effective. Useful market segments must demonstrate distinctiveness.Without a distinctive difference, segment boundaries become blurred and there is a risk that a company's offerings will not attract the required customers.However distinctiveness can be taken too far, too much detail in segmentation can lead to fragmentation of effort and inefficiency therefore a defined segment must be of a sufficient size. It is important that the segment is accessible, it must be possible to reach and serve the segment.Market segmentation reveals a firm's market segment opportunities. The firm has to evaluate the various segments and decide how many and which ones to target.After a company has identified its segments, they then have to develop and communicate a product positioning strategy. According to Wind, 180 "A product's positioning is the place a product occupies in a given market, as perceived by the relevant group of customers." Market segmentation offers a number of benefits to both customers and an organisation. Customers get an offering that is better tailored to their specific needs, as well as the satisfaction of feeling that the market is offering them a wider range of products to choose from. An organisation is more likely to gain customer loyalty because of the tailored offering as well as the benefits of more efficient resource allocation and improved knowledge of the market. An organisation can also use its segmentation as a basis for building a strong competetive edge, by understanding its customers on a deeper, psychological level and reflecting that in its marketing mixes. This forms bonds between organisations and its customers that are difficult for competition to break. There are however dangers in segmentation, if it is not done well. Poor definition of segments, inappropriate choice of key variables or poor analysis and implementation of the outcomes of a segmentation exercise can all be disastrous.There is also the danger that if competing marketers become too enthusiastic in trying to 'out-segment' each other, customers will become confused by the variety of choice open to them. In conclusion, market segmentation is a good and necessary activity in any market. If a company carries out effective segmentation, its customers should derive greater satisfaction from the goods and services they have purchased. Customer satisfaction is something all companies should strive for. Please note that this sample paper on market segmentation is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. 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