Could this be another way of In a sense it also marginalized marketing as a discipline that selecting a market segment? Based on the complexity of man- should add value to executives who are looking for solutions aging the relationship borne out of the many interrelationships to the problems they face in a fast changing market space.
From research that was based on segmentation practices from Yet another technique used to segment business markets was dis- apparel retail managers in the United Kingdom, Quinn cussed by Barry and Weinstein when they contemplated asserts that there is little practical advice in marketing literature business psychographics as a possible market segmentation for marketers on how to choose variables, identify segments, strategy. While psychographic segmentation is well known in controlling performance in segments or how to follow a process the consumer market context refer to the U-LSM segmentation in doing all this.
There gests that market segmentation is a determinant of marketing are usually a number of individuals involved in the business-to- success, it is not clear to what extent marketing decision makers business buying process, which restricts the influence of one share this sentiment. Their research was partly In light of the research problem stated and the areas of concern supported by researchers and authors such as McDonald and mentioned above, it is proposed that the following research Dunbar who suggested that marketers should use psycho- objectives be stated to achieve the research objectives: graphics as contributing to a successful segmentation process.
The primary objective is to determine how marketing decision Their research indicated that psychographic segmentation can makers execute market segmentation in practice in a B2B con- assist sales management to devote the optimal amount of re- text.
From this brief literature overview, it can market segmentation theory to guide their market seg- be seen that market segmentation techniques in the business-to- mentation decisions.
Marketing decision makers could business context vary from complex mathematical calculations include marketing managers, other managers, consultants to complex psychological insights in order to demarcate a large and service suppliers such as advertising agencies. The choice of an inductive research tation decision making. The research problem statement indicates the need for an in- Case study research is often used when the concepts and vari- depth understanding of the segmentation inquiries that emerged ables are difficult to quantify and difficult to detach from their over years from several authors.
The need to attempt to get a social context. It is a description of a management situation if a deeper understanding of the market segmentation phenomena, combination of what, when, how and why questions needs to be positions the proposed research in a constructivism interpre- answered Saunders et al. While several approaches and techniques were Very in depth. Case study research is done in a real-life context and few attempts were made to analyze the problem from a demand it is an ideal way to look at research questions which are closely side how is segmentation done by marketing practitioners?
This ties in with the research and eventual conclusions from In-depth interviews will be used to do the research. When using Harrison and Kjellberg The word as they come up Lee, This approach is knowledge by providing answers to the research question. This adopted in research situations where a problem has to be better will also be done in the South African context, which will shed understood and when interview data are collected and analyzed more light on the research question in a specific context.
An introduction. Essex, UK: Pearson. Barry, J. Business psychographics revisited: From segmentation theory to successful marketing practice. Journal of Marketing Management, 25 , Cravens, D. Strategic marketing. Dibb, S. Farquhar, J. Case study research for business. Foedermayr, E. Market segmentation in practice: Review of empirical studies, methodological assessment, and agenda for future research.
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Hong, C. Using the Taguchi method for effective market segmentation. Expert Systems with Applications, 39 5 , Hooley, G. Marketing strategy and competitive positioning. Lee, T. External validity of market segmentation methods A study of buyers of prestige cosmetic brands.
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Qualitative research in counseling psychology: A primer on research paradigms and philosophy of science. Journal of Counseling Psychology, 52 2 , Quinn, L. Market segmentation in managerial practice: A qualitative examination. Reibstein, D. Guest editorial: is marketing academia losing its way?. Journal of Marketing, 73 4 , No Title. Retrieved from www. Research methods for business students Vol.
Smith, W. Product differentiation and market segmentation as alternative marketing strategies. Journal of Marketing, 21 4 , Ungerer, L. The use of personal values in living standards measures. Southern African Business Review, 15 2 , Wedel, M. Introduction to the special issue on market segmentation. International Journal of Research in Marketing, 19 3 , Wind, Y. Issues and advances in segmentation research.
Journal of Marketing Research, 15 3 , Wortley, B. Transformation of advertising and marketing industry. Segmentation in South African marketing and advertising industries. Related Papers. By Peet Venter. Keywords: Market segmentation, basis of segmentation, marketing 1. Introduction Today where the world is being recognized as global village marketing has become vital ingredient for every business success.
It is almost become difficult to every competitor to survive in market for a prolonged period because competition is cut to throat. Change or die is the core faith of marketing. That is why development of right marketing strategy over time is required.
Right marketing Strategy is something that helps companies achieves marketing objectives. Marketing objectives help achieve corporate objectives and corporate objectives aim to achieve a competitive advantage over rival organizations.
Effective marketing strategies or marketing campaigns often consist of a combination of several marketing tactics that work together in a synergistic way to establish your brand, reduce sales resistance, and create interest and desire for your product or service. Today marketing is every where, formally or informally, people and organization engage in vast number of activity that we call as marketing.
But still there is one constraint before all companies that they can not connect to all customers in large, broad or diverse market Every company want to focus on customers within there capacity and with customers intimacy. For this market is to divide into groups of consumers or segments with distinct needs and wants. This strategy of dividing the market in homogenous group is known as segmentation. The purpose of segmentation is the concentration of marketing energy and force on subdividing to gain a competitive advantage within the segment.
Concentration of marketing energy is the essence of all marketing strategies and market segmentation is the conceptual tool to help in achieving this focus. Need can be described as basic human requirements. People need food, air, water, clothing, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need.
An American needs food but wants hamburger, French fries and a soft drink. Cartwright is of the opinion that need is something that people cannot do without; a want is the method by which people would like the need to be satisfied. Demands are wants for specific products backed by an ability to pay Kotler, Market segmentation was first put forward in the middle of s by Wendell.
Smith, an American professor of marketing. Lamb Segmentation is the process of dividing the market into groups of customers or consumers with similar needs. The more closely the needs match up, the smaller the segment tends to be, 45 P a g e www. Segmentation allows marketers to identify distinct groups of customers whose behaviours significantly differ from others.
This allows firms to adjust their marketing mix, to cater to particular needs of different market segments. Segment congruence analysis usually progresses in the following manner: 1. Traditional dimension-reducing techniques such as factor and cluster analysis are used to identify a number of segmentation bases batteries of variables.
These segmentation bases can then serve as categorical variables and a multidimensional, contingency table is formed. Various categorical data analysis tests are carried out on the multi-way table to assess the nature and extent of associations among its dimensions. A segmentation base is identified as the distinguished base and a model is developed for predicting this base from other possibly external variables.
The present paper highlights the definition and major basis of market segmentation. This research paper is broadly divided in to four parts. First part deals with the steps of market segmentation and its basis. Second part deals with the benefits of market segmentation. Third part includes the theoretical and empirical evidences in favor of market segmentation. Fourth and the last part discuss about the conclusion.
Steps in Market segmentation According to Charles W. It may be a market in which the firm has already occupied a new but related market or product category, or a totally new one. This step requires managerial insight, creativity and market knowledge. There are no scientific procedures for selecting segmentation variables. After choosing one or more bases, the marketer must select the segmentation descriptors. Descriptors identify the specific segmentation variables to use.
This information can then be used to rank potential market segments by profit opportunity, risk, consistency with organizational task and objectives, and other factors which are important to the company. This step is not a part of the segmentation process but a natural result of it. The marketing mix has been described as product, distribution, promotion and price strategies which are used to bring about mutually satisfying relationships with target markets.
Roger Best proposes a framework for implementing a market segmentation strategy. He suggests a set of sequential steps to be taken in a needs-based segmentation process the primary benefit of needs- based segmentation is that segments are created around specific customer needs.
The goal is to determine what observable demographics and behaviors differentiate one segment from another in order to make need-based market segmentation actionable.
Steps in Segmentation Process Description Group customers into segments based on similar 1 Needs-Based Segmentation needs and benefits sought by customer in solving a particular consumption problem. For each needs-based segment, determine which 2 Segment Identification demographics, lifestyles, and usage behaviors make the segment distinct and identifiable. Using predetermined segment attractiveness criteria, 3 Assess Segment Attractiveness determine the overall attractiveness of each segment.
Determine segment profitability net marketing 4 Evaluate Segment Profitability contribution. For each segment, create a "value proposition" and 5 Segment Positioning product-price positioning strategy based on that segment's unique customer needs and characteristics. Test the attractiveness of each segment's positioning 6 Segment "Acid Test" strategy. Expand segment positioning strategy to include all 7 Marketing-Mix Strategy aspects of the marketing mix: product, price, promotion, place, and people.
Market segmentation strategy is an adaptive strategy. It consists of the operation of the market with the purpose of selecting one or more market segments which the organisation can target through the development of specific marketing mixes that adapt to particular market need. Thus marketers who successfully segment the overall market and adapt their products to the needs of one or more smaller segments stand to gain in terms of increased profit margins and reduced competitive pressures.
Small businesses, in particular, may find market segmentation to be a key in enabling them to compete with larger firms. Many management consulting firms offer assistance with market segmentation to small businesses.
But the potential gains offered by market segmentation must be measured against the costs, which—in addition to the market research required to segment a market may include increased production and marketing expenses. Markets and the customers who make up those markets are not homogeneous Claycamp and Massy, ; Smith, Wendell Smith suggested that segmentation, the division of a market into groups of customers who share certain characteristics or propensities toward a product or service, might be an effective way for an organization to manage diversity within a market.
Since that time, a rich literature has developed suggesting techniques and bases upon which a single domestic market might be effectively broken into actionable customer segments.
While there is a large literature which focuses on the criteria that can be used for segmenting a market, far less attention appears to have been paid to the accompanying requirements for what Kotler terms effective segmentation.
Thomas argued that any proposed segmentation should pass four tests, namely with reference to measurability, accessibility, stability and substantiality. However, there are differences in the number and types of tests. Kotler et al omits stability and uniqueness but includes action ability. Each test is variously described as a requirement or condition for establishing segment viability. The rationale for each test is re-examined and substantiality is shown to be unique, requiring a more precise definition The formula - segmentation, targeting, positioning STP - is the essence of strategic marketing.
Market segmentation is an adaptive strategy. It consists of the partition of the market with the purpose of selecting one or more market segments which the organization can target through the development of specific marketing mixes that adapt to particular market needs.
But market segmentation need not be a purely adaptive strategy: The process of market segmentation can also consist of the selection of those segments for which a firm might be particularly well suited to serve by having competitive advantages relative to competitors in the segment, reducing the cost of adaptation in order to gain a niche. This application of market segmentation serves the purpose of developing competitive scope, which can have a "powerful effect on competitive advantage because it shapes the configuration of the value chain.
According to Porter, the fact that segments differs widely in structural attractiveness and their requirements for competitive advantage brings about two crucial strategic questions: the determination of a where in an industry to compete and b in which segments would focus strategies be sustainable by building barriers between segments Porter, Through market segmentation the firm can provide higher value to customers by developing a market mix that addresses the specific needs and concerns of the selected segment.
Stated in economic terms, the firm creates monopolistic or oligopolistic market conditions through the utilization of various curves of demand for a specific product Category Ferstman C.
This is an expanded application of the Microeconomic theory of price discrimination, where the firm seeks to realize the highest price that each segment is willing to pay.
In this case the theory's reliance on price is Segmentation as a process consists of segment identification, segment selection and the creation of marketing mixes for target segments. The outcome of the segmentation process should yield "true market segments" which meet three criteria: a Group identity: true segments must be groupings that are homogeneous within segments and heterogeneous across groups.
In addition, Gunter recommends considering the stability of market segments over time and different market conditions. Most techniques of market segmentation rely only on descriptive factors pertaining to purchasers and are not efficient predictors of future buyer behavior. The author proposes an approach whereby market segments are delineated first on the basis of factors with a causal relationship to future purchase behavior.
The belief underlying this segmentation strategy is that the benefits which people are seeking in consuming a given product are the basic reasons for the existence of true market segments. Despite the well-documented benefits which segmentation offers, businesses continue to encounter implementation difficulties. This raises important concerns about the cause of these problems and how they might be overcome.
This paper states that When planning the approach, it is important to think about segmentation in three stages: before, during and after. This highlights the questions which should be addressed at each stage. In particular, it is helpful to maintain an awareness of segmentation success factors. This research paper tries to the answers of the above stated questions with the help of available literature related to the segmentation.
Benefits of market segmentation: 3. Increasing competition makes it difficult for a mass marketing strategy to succeed. Customers are becoming more diversified and firms are constantly differentiating their products relative to competitors.
When the focus is on segmented markets, the company's marketing can better match the needs of that group. Market segmentation allows firms to focus their resources more effectively, and with a greater chance of success. Marketing, product and brand managers are continuously being asked to increase their return on investment.
They are constantly searching for new information about their markets, and new ways to approach them. This is where market segmentation comes in. Companies who segment their markets match their strengths and offerings to the groups of customers most likely to respond to them.
Finding, understanding and focusing on the needs of your best customers can make you a market leader. Market segmentation is a proven way of improving profitability. By focusing on individualized sub groups, you're better able to meet their needs and gain higher market share and profits.
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