digplanet beta 1: Athena
Share digplanet:

Agriculture

Applied sciences

Arts

Belief

Business

Chronology

Culture

Education

Environment

Geography

Health

History

Humanities

Language

Law

Life

Mathematics

Nature

People

Politics

Science

Society

Technology


Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and priorities, and then designing and implementing strategies to target them. Market segmentation strategies may be used to identify the target customers, and provide supporting data for positioning to achieve a marketing plan objective. Businesses may develop product differentiation strategies, or an undifferentiated approach, involving specific products or product lines depending on the specific demand and attributes of the target segment.

Criteria for segmenting[edit]

An ideal market segment meets all of the following criteria:

  • It is possible to measure.
  • It must be large enough to earn profit.
  • It must be stable enough that it does not vanish after some time.
  • It is possible to reach potential customers via the organization's promotion and distribution channel.
  • It is internally homogeneous (potential customers in the same segment prefer the same product qualities).
  • It is externally heterogeneous,( potential customers from different segments have different quality preferences).
  • It responds consistently to a given market stimulus.
  • It can be reached by market intervention in a cost-effective manner.
  • It is useful in deciding on the marketing mix.
  • It identifies the target customer(s) (surrogate(s))
  • It provides supporting data for a market positioning or sales approach.

Methods for segmenting consumer markets[edit]

Geographic Segmentation[edit]

Marketers can segment according to geographic criteria—nations, states, regions, countries, languages, cities, neighborhoods, or postal codes. The geo-cluster approach combines demographic data with geographic data to create a more accurate or specific profile.[1] With respect to region, in rainy regions merchants can sell things like raincoats, umbrellas and gumboots. In hot regions, one can sell summer clothing. A small business commodity store may target only customers from the local neighborhood, while a larger department store can target its marketing towards several neighborhoods in a larger city or area, while ignoring customers in other continents. Geographic Segmentation is important and may be considered the first step to international marketing, followed by demographic and psychographic segmentation. The use of national boarders is the institutional use of geographic segmentation, although geographic segments may be classified by identified geological regions.

Demographic Segmentation[edit]

Demographic segmentation is dividing markets into different groups according to their age, gender, the amount of income, the ethnicity or religion of the market and the family life cycle.[2] The U.S. Census uses demographic segmentation to document and segment the people living in the U.S.

Behavioral Segmentation[edit]

Behavioral segmentation divides consumers into groups according to their knowledge of, attitude towards, usage rate or response to a product[3]

Lifestyle Segmentation[edit]

Lifestyle segmentation, which is sometimes called psychographics. This is measured by studying the activities, interests, and opinions (AIOs) of customers. It considers how people spend their leisure,[4] and which external influences they are most responsive to and influenced by. Lifestyle is highly important to segmentation, because it identifies the personal activities and targeted lifestyle the target subject endures, or the image they are attempting to project. Mass Media has a predominant influence and effect on lifestyle segmentation. Lifestyle products may pertain to high involvement products and purchase decisions, to speciality or luxury products and purchase decisions. Lifestyle segmentation reflects on how the target subject identifies themselves, or how they desire to identify themselves in society. By identifying and understanding consumer lifestyle, businesses can develop promotional mixes and product lines, which tailor to their needs.


Segmentation according to occasions relies on the special needs and desires of consumers on various occasions - for example, for products for use in relation with a certain holiday. Products such as decorations or lamps are marketed almost exclusively in the time leading up to the related event, and will not generally be available all year round. Another type of occasional market segments are people preparing for a wedding or a funeral, occasions which only occur a few times in a person's lifetime, but which happen so often in a large population that ongoing general demand makes for a worthwhile market segment.

Segmentation by benefits[edit]

Segmentation can take place according to benefits sought by the consumer[5] or according to perceived benefits which a product/service may provide.

Multi-Variable Account Segmentation[edit]

In Sales Territory Management, using more than one criterion to characterize the organization’s accounts,[6] such as segmenting sales accounts by government, business, customer, etc. and account size/duration, in effort to increase time efficiency and sales volume.

Using segmentation in customer retention[edit]

The basic approach to retention-based segmentation is that a company tags each of its active customers with three values:

Is this customer at high risk of canceling the company's service?

One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his or her card.

Is this customer worth retaining?

This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer.[7][8]

What retention tactics should be used to retain this customer?

For customers who are deemed worthy of saving, it is essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing special customer discounts to sending customers communications that reinforce the value proposition of the given service.

Price discrimination[edit]

Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantican be increased further if the market can be segmented with different prices charged to different segments charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behavior is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned. Areas in which this price discrimination is seen range from transportation to pharmaceuticals.[9] Price discrimination may be considered price-fixing under the control of an oligopoly or consortium in certain circumstances of deregulation and leisure.

Algorithms and approaches[edit]

Any existing discrete variable is a segmentation - this is called "a priori" segmentation, as opposed to "post-hoc" segmentation resulting from a research project commissioned to collect data on many customer attributes. Customers can be segmented by gender ('Male' or 'Female') or attitudes ('progressive' or 'conservative'), but also by discretized numeric variables, such as by age ("<30" or ">=30") or income ("The 99% (AGI<US $300,000)" vs "The 1% (AGI >= US $300,000)").

Common statistical techniques for segmentation analysis include:

Divide and Rule Political Concept[edit]

In politics and sociology, divide and rule (or divide and conquer) is gaining and maintaining power by breaking up larger concentrations of power into pieces that individually have less power than the one implementing the strategy. The concept refers to a strategy that breaks up existing power structures and prevents smaller power groups from linking up.[10]

See also[edit]

References[edit]

  1. ^ 'What is geographic segmentation' Kotler, Philip, and Kevin Lane Keller. Marketing Management. Prentice Hall, 2006. ISBN 978-0-13-145757-7
  2. ^ http://www.tutor2u.net/business/marketing/segmentation_bases_demographic.asp
  3. ^ Fripp, Geoff.“Market Segmentation Bases” Market Segmentation Study Guide
  4. ^ http://academic.brooklyn.cuny.edu/economic/friedman/mmmarketsegmentation.htm
  5. ^

    Segmentation by Demography[edit]

    Segmentation according to demography is based on variables such as age, gender, occupation and education level.

    Reid, Robert D.; Bojanic, David C. (2009). Hospitality Marketing Management (5 ed.). John Wiley and Sons. p. 139. ISBN 9780470088586. Retrieved 2013-06-08. "[...] market segmentation can be based on the benefits that consumers are seeking when they purchase a product." 

  6. ^ http://people.tamu.edu/~c-futrell/abc10thedoutlines/Chapter%2014%20Outline.htm
  7. ^ Gupta, Sunil. Lehmann, Donald R. Managing Customers as Investments: The Strategic Value of Customers in the Long Run, pages 70-77 (“Customer Retention” section). Upper Saddle River, NJ: Pearson Education/Wharton School Publishing, 2005. ISBN 0-13-142895-0
  8. ^ Goldstein, Doug. “What is Customer Segmentation?” MindofMarketing.net, May 2007. New York, NY.
  9. ^ http://www.hcs.harvard.edu/hghr/online/price-discrimination-method/
  10. ^ Divide and rule

Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Market_segmentation — Please support Wikipedia.
A portion of the proceeds from advertising on Digplanet goes to supporting Wikipedia.
66392 videos foundNext > 

Episode 101: How to Use Market Segmentation: Developing a Target Market

View additional videos from Alanis Business Academy and interact with us on our social media pages: YouTube Channel: http://bit.ly/1kkvZoO Website: http://bi...

Segmentation, Targeting, and Positioning - McDonald's

For bachelors of business administration students or related degree, these videos will guide you!

What is Market Segmentation?

For more information on Market Segmentation visit OpenView Labs: http://labs.openviewpartners.com/?s=%22market+segmentation%22&btnSubmit= OpenView takes a de...

Market Segmentation Introduction

Briefly outlines the main steps involved in segmenting a market and selecting segments to target. Includes samples from the automotive industry.

How do you do market segmentation properly

Market segmentation is were many inexperienced (and sometimes experienced) marketers fail. Demographics, Location, Income Bracket (for example) are only seco...

Market Analysis - Market Segmentation

Market Analysis - Market Segmentation.

Market segmentation: a case study

Learn more @ http://www.oxlearn.com An example of how knowing your market segments will help you to avoid th price commodity trap. For the Digital Marketing ...

Episode 50: Market Segmentation

To view additional video lectures as well as other materials access the following links: YouTube Channel: http://bit.ly/1kkvZoO Website: http://bit.ly/1ccT2Q...

How to Segment your Market

Now that you understand why segmentation is important it's time to explore the options to begin your segmentation strategy. At the core, segmentation is abou...

Mod-03 Lec-05 Market Segmentation and Positioning

Consumer Behaviour by Dr. Sangeeta Sahney, Department of Management, IIT Kharagpur. For more details on NPTEL visit http://nptel.iitm.ac.in.

66392 videos foundNext > 

3176 news items

 
DigitalJournal.com
Wed, 23 Apr 2014 10:23:18 -0700

In vitro fertilization is one of the major treatments for fertility among couples which involves fertilization of women egg by sperm outside the body. IVF involves removing ovum from the woman's ovaries followed fertilization through sperms in a fluid ...
 
PR Newswire (press release)
Tue, 15 Apr 2014 19:00:58 -0700

Market Segmentation and projections of the consumer M-wallet by retail merchant payments, money transfer and utility bill payment. Market Segmentation and projections of the enterprise M-wallet by government and SMEs. Market Segmentation of India bill ...
 
PR Newswire (press release)
Thu, 24 Apr 2014 05:56:15 -0700

Five key consumer groups were created from the research, redefining traditional market segmentation. Two of the five groups - #Young4Ever and Chief Health Officers - have the most potential for marketers and companies targeting the natural products ...
 
MarketWatch
Tue, 25 Mar 2014 09:51:33 -0700

Market Segmentation by Application07.1 Global Graphene Market by Application 2012-201607.2 Global Graphene Market by Semiconductors, Electronics, and Optoelectronics07.2.1 Market Size and Forecast07.3 Global Graphene ...
 
The Herald | HeraldOnline.com (press release)
Thu, 24 Apr 2014 04:37:30 -0700

The US E-learning Market Segmentation by Content and Technology, 2007-2012. 5. The US E-learning Market Trends and Developments. 6. Competitive Landscape of Major Players in the US E-learning Industry. 7. The US E-learning Market Future Outlook ...
 
PR Web (press release)
Thu, 27 Mar 2014 05:13:47 -0700

Precision Farming Market Segmentation by Technology & Components worth $3,721.27 Million by 2018 at a CAGR 13.36% – Report by MarketsandMarkets. Precision Farming market research report provides in-depth analysis and categorizes global market ...

Intellectual Property Watch

Intellectual Property Watch
Thu, 24 Apr 2014 03:30:00 -0700

So we are now experimenting with new approaches such as differentiated royalties according to a country's income and public/private market segmentation. These approaches were used in our recent licence with ViiV to expand the geographical scope of our ...
 
PR Newswire (press release)
Tue, 15 Apr 2014 20:00:00 -0700

The report titled -Europe Car Rental Industry Analysis to 2017- Latvia, Belgium and Ukraine to Stimulate the Market Growth- presents a comprehensive analysis of the industry covering aspects including market size by revenue and market segmentation by ...
Loading

Oops, we seem to be having trouble contacting Twitter

Talk About Market segmentation

You can talk about Market segmentation with people all over the world in our discussions.

Support Wikipedia

A portion of the proceeds from advertising on Digplanet goes to supporting Wikipedia. Please add your support for Wikipedia!