Understanding Meaning of Market
Segmentation
Market segmentation
means dividing the total market for a product into different parts i.e segments
on certain bases and using each segment fully for the purpose of marketing and
sales promotion. Due to segmentation, each segment will have uniform features
and suitable marketing mix can be introduced for promoting sales in each
segment.
Market refers to
the aggregate of all demand for a particular product/service. It also refers to
the aft customers (existing and potential) for the product/service. All are
consumers but they differ as regards their:
ii. Needs and wants,
iii. Financial position i.e purchasing power,
iv. Willingness to buy,
v. Likes and dislikes and
vi Social and cultural background.
For effective
marketing, the total market needs to be divided into suitable segments and
exploited fully through suitable marketing mix. This is exactly what is done in
segmentation.
One marketing mix for all segments will not be effective and for introducing different
marketing mixes, segmentation is a basic requirement.
Philip Kotler has rightly pointed out that "Markets consist of
buyers and buyers differ in one or more respects. They may differ in their
wants, resources, geographical locations, buying attitudes and buying
practices. Any of these variables can be used to segment a market." This can be
made clear with the help of following figures. Let us assume that there are six
buyers the market with different characteristics as shown below:
Thus, market
segmentation means dividing the total market into different sub-markets that
have similar characteristics with reference to consumers. The individual buyers
within each segment are similar in terms of their wants, expectations and
buying power and marketing programme will be drawn for each group in order to
enhance consumer satisfaction and sales promotion. This approach of market
segmentation is better as compared to the approach of treating the entire
market for a product as one entity and use only one marketing mix for the
market (market aggregation / mass marketing approach).
Market segmentation is a new customer-oriented philosophy and is
consistent with modern marketing concept. It studies needs and expectations
of different consumer groups and provides something for everybody. This
promotes sales and also offers more satisfaction to buyers of that group. Here,
the producer employs a 'Rifle Approach' and not the 'Shotgun Approach'. This means he pinpoints the target (customers
group) and draws specific plan to meet their needs rather than fixing broad
target (all customers) and preparing one general plan to meet the needs of all
customers.
It is an accepted fact that markets are not homogeneous. Consumers differ
in their needs and also the manner in which the needs are to be satisfied. For
example, clothing is required by all consumers but all consumers do not wear
the same type of clothing. The same is the case with shoes, shampoo, soap,
cosmetics and so on. Naturally, manufacturers of each products have to produce
different varieties as per the requirements of customers of different segments.
Definitions of Market Segmentation (MS)
i.
According to Philip Kotler, market
segmentation means "the act of dividing a market into
distinct groups of buyers who might require separate products and/or marketing
mixes."
ii.
According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous
market for a good or service into several segments. Each of which tends to be
homogeneous in all significant aspects."
Advantages / Importance / Significance
of (MS)
1.
Facilitates consumer-oriented marketing: Market segmentation facilitates
formation of marketing-mix which is more specific and useful for achieving
marketing objectives. Segment-wise approach is better and effective as compared
to integrated approach for the whole market.
2.
Facilitates introduction of suitable marketing mix: Market segmentation
enables a producer to understand the needs of consumers, their behavior and
expectations as information is collected segment-wise in an accurate manner.
Such information is purposefully usable. Decisions regarding Four Ps based on
such information are always effective and beneficial to consumers and the producers.
3.
Facilitates introduction of effective product strategy: Due to market
segmentation, product development is compatible with consumer needs as there is
effective crystallisation of the specific needs of the buyers in the target
market. Market segmentation facilitates the matching of products with consumer
needs. This gives satisfaction to consumers and higher sales and profit to the
marketing firm.
4.
Facilitates the selection of promising markets: Market segmentation
facilitates the identification of those sub-markets which can be served best
with limited resources by the firm. A firm can concentrate efforts on most
productive/ profitable segments of the total market due to segmentation
technique. Thus market segmentation facilitates the selection of the most
suitable market.
5.
Facilitates exploitation of better marketing opportunities: Market
segmentation helps to identify promising market opportunities. It helps the
marketing man to distinguish one customer group from another within a given
market. This enables him to decide his target market. It also enables the
marketer to utilise the available marketing resources effectively as the exact
target group is identified at the initial stage only.
6.
Facilitates selection of proper marketing programme- Market segmentation
helps the marketing man to develop his marketing mix programme on a reliable
base as adequate information about the needs of consumers in the target market
is available. The buyers are introduced to marketing programme which is as per
their needs and expectations.
7.
Provides proper direction to marketing efforts: Market segmentation is
rightly described as the strategy of "dividing the
markets in order to conquer them". Due to segmentation, a firm can avoid the
markets which are unprofitable and irrelevant for its marketing purpose and
concentrate on certain promising segments only. Thus due to market
segmentation, marketing efforts are given one clear direction for achieving
marketing objectives.
8.
Facilitates effective advertising: Advertising media can be more
effectively used because only the media that reach the segments can be
employed. It makes advertising result oriented.
9.
Provides special benefits to small firms: Market segmentation offers
special benefits to small firms. The resources available with them are limited
as they are comparatively new in the market. Such firms can select only
suitable market segment and concentrate all efforts within that segment only
for better marketing performance. Such firms can compete even with large firms
by offering personal services to customers within the segment selected.
10.
Facilitates optimum use of resources: Market segmentation facilitates
efficient use of available resources. It enables a marketing firm to use its
marketing resources in the most efficient manner in the selected target market.
The marketing firm selects the most promising market segment and concentrates
all attention on that segment only. This offers best results to the firm in
terms of sale, profit and consumer support as compared to the results available
from spending such resources on the total market.
In conclusion, it
can be said that market segmentation offers benefits not only to marketing
firms but also to customers. The marketing job will be conducted efficiently
and the available resources will be utilised in a better mariner. These
advantages also suggest the importance of market segmentation and make a case
in its favor.
Market Segmentation In Present
Marketing System
In the present marketing system, market segmentation is a normal rule
and not an exception. It enables companies to exploit marketing opportunities fully by using
the available resources and also enables them to face market competition with
confidence. It enhances marketing efficiency of the firm in each segment
selected. No segmentation means absence of market penetration. In short, market
segmentation is an important aspect of modem marketing management. It is a must
for survival and growth in the present competitive marketing. It facilitates
the preparation of separate marketing programmes for meeting the needs of
different groups of buyers. Right markets for the right products can be
provided through market segmentation.
In brief, market
segmentation is important not only for creating consumers but also for
satisfying them. Market segmentation helps matching of market opportunities to
the resources of the corporations and enables them to face market competition
effectively. It raises marketing efficiency through proper adjustment of
marketing mix for each market segment. Market segmentation is one important
element of modem marketing management. Segmentation gives precise answer to the
question, "To whom should we sell out products
and what should we sell to them?"
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