Any market of the world consists of buyers who posses different consumption behaviors. They have different purchasing power whose determinant is their difference in levels of disposable income. They also differ in terms of sex, psychological needs and ability to derive utility from a particular good consumed. Moreover, market will differ in terms of geographical locations of specific customers. Some are located within the same locality while others are evenly or unevenly distributed within a given area. For instance, a country may contain a majority of consumer of a particular product thus demanding good in large quantities. Similarly, another nation may contain a minority of consumer of the same good that whose demand is in bulk in the other nation.
The subdivision of the market should be into different segments that contain consumers with similar characteristics in terms their behaviors. Sellers have an obligation of to understanding the buying behaviors of the final consumers. Thus, focus on meeting the different needs of one or more of these groups (segments) according to their different consumption behaviors. A market segment to a group of buyers with synonymous needs and possesses similar consumer behaviors such as how they evaluate, select or even use the product. For sellers to satisfy their customers’ needs, they need to deal with each segment in isolation. This is possible through market segmentation alone. Marketing segmentation refers to the division of the market into unique categories of consumers, who posses’ deferent needs characteristics, thus calling for different marketing mix. (Michel et al 1998)
The optimal motive of any producer is to maximize profit. Grouping consumers as such should not be blind. Sellers segment the market into groups that are measurable thus estimate the possible gains. This is because; in any firm marketing takes the lion share of the cost. They should therefore, be able to define each segment. It should be large enough to earn them a profit due to economies of scale. These segments should be stable enough and long lasting to avoid insignificant after some time. Any significant market segment needs to be easily accessible through promotions and other distributive channels.
This allows consumers to receive what they need at the required time. There is a preference for a homogeneous segment, as it will help in cutting down the cost of distribution. This is because potential consumers are found in the same segment and demanding the same products, though in different quantities. They also respond to market stimulus in a similar way. It makes market prediction easy and possible to the producers. Good market segmentation is also externally heterogeneous in those potential consumers from distinct segment posse’s different preferences.
This help in channeling of products to the right group at the most appropriate time. The mostly used factors as the bases for market segmentation are demographic and geographical situations in a market. Gender, income levels, age and education levels determine taste and preferences of the consumers thus making them vital in making any decision about market segmentation.
Companies take various steps in the process of segmenting their market. They first define and determine the boundaries of the market they are targeting. They need to use their formal business plan to identify their competitors whether direct or indirect competitors. They will then decide on of the useful variables in segmenting the market. Some marketers make a mistake of collecting data on so many variables that are not particularly valuable thus making the process very expensive.
They should use their marketing knowledge to identify and select few relevant variables before making any decision. They will then collect data using all possible research tools. Analysis of data follows to identify market segments that might be internally homogeneous yet they are different from other segments. Selecting variables that relate to consumers behaviors helps in developing a detailed profile of all market segments. They will then choose which segment to serve. This is by looking for opportunities that will perfectly match with the organization and its resources. This is by considering whether its skills and technology will enable it meet the needs for the segment. (Hiam 1992). In general, marketing segmentation is vital for the future of any business.
Implementation of any segmentation strategy begins with carrying out of thorough market research. (Wedel 2000). This will enable the firm to be able to find out which are the market patterns of similarity among the customers. This enables the firm to develop useful marketing strategies and the usable type of basis for segmentation. The evaluation is driven by the need to identify specific consumer characteristics.
These characteristics are significant because they determine how customers in the market usually behave. Some of the bases used for segmentation are identifiable. These bases are easy to measure and relate to the geographic and demographic situation of the customers. (Wedel 2000). According to Wedel, these two are commonly used because they are easy to measure and are strong indicators of consumer needs and preferences.
Some of the demographic factors for market segmentation include; age, gender, religion, income level and family size just to mention but a few. They will largely depend on the specific market or product that it deals with. On the other hand, geographic factors include climate, region, and the existing environment.
Specifically, geographical segmentation involves subdividing the market into locations that are termed as specific markets. For example, a country or a county within a given nation can act as a market segment. During the definition for these geographical areas, many factors are put into consideration. These include such factors as the weather patterns of a given area, or the social background of the inhabitants of a given area.
Likewise, a product useful during the rainy seasons is marketed during such seasons and in such locations. This brings up the idea that market segmentation is not necessarily a permanent activity. Market segmentation is along certain base and revisions done later according to how that base is changing.
Demographic segmentation on the other hand, involves studying some customer specific characteristics such as the age or gender of that specific market. A product for the young must be in a form/manner that appeals and is acceptable to the youths. For instance, his would involve modifying the marketing mix so that it can fit that specific market. Young customers are to be particularly mobile in their likes. This calls for the company selling a specific product, to ensure constant revision of the product as frequently as possible depending on how customers are changing. This is straightforward because it involves carrying out market research.
Old customers are less mobile about product makes. This calls for the seller to target another component of the marketing mix. Their lack of mobility in product make may however, be coupled with the fact that they may be more price conscious. (Kollat et.al 1970). The seller therefore, will have to ensure that he keeps the product at a relatively constant and favorable price. It can rely on promotion so that marketing focuses on sales component.
This means that the customer is encouraged to buy more of that product so that the sales volume increases and therefore, economies of scale are achieved. The more educated are most likely have a more purchasing power than the less educated. They are also likely to be more cautious than the less educated. When pricing the product, the company can sell a given product to the educated at a relatively higher price than to the less educated. The seller must be keen therefore, on noting the specific places where to capture these customers.
Income category of customers is also a base of segmentation. A good illustration of this is the flight services. An airline offers two types of flights, similar in other characteristics, but only based on the income category of the customer travelling there is a business and the economy class flights. In the category of consumer goods, there could be products that are specifically for the high-income consumers and others for the low-income consumers. To illustrate this more clearly, this paper will look at the alcoholic beverages industry.
A tort of whisky can be extremely expensive due to its brand name, or packaging in a given form that is targeting a given class of consumers. The high-income consumers will purchase such a tort at a relatively higher price than the low-income consumer will. In fact, if that high cost product, in the same packaging is sold to the high-income consumer, he or she is likely to reject it since he perceives it as a reflection of a drop in quality. The vendor will therefore, be cautious and willingly keep the price higher so that the brand of that beverage is continuously associated with prestige.
When selecting a market segment, it is also vital that the marketer look at the social classes within the market he or she is dealing with. Social classes include strata such as those of leadership in the society. The higher the person is in the social strata, the more he may be to of use in terms of gaining profits for the marketer. For example, a suite can target the leaders in the society, more than to the subjects in the less developed countries. Specific commodities or services target specific classes of leaders in the society. In certain parts of the world, a shaving style identifies to the police constables, different to the other citizens. Uniforms for police officers or inmates are also another example of market segments.
Occupation is a strong determinant of customer behavior. The above example on the police service members is a excellent example to illustrate. In addition to this, the occupation that a customer holds determines largely how he or she is going to behave in the market. A lawyer, for example will need more paperwork than a medical practitioner will. Lab coats are useful to the medical practitioners and should therefore, be made and targeted to the medical practitioners.
Additionally, it is evident that an office holder will need entirely different attire and its specification from a house-help. This extends to the national or international level by studying the characteristics of the given region. The manufacturer will go to these practitioners and identify the specific characteristics that they demand in their products, and can even go ahead and subdivide the market into sub segments to obtain a market niche. This is a technique used to narrow down to a more specific set of characteristics that are required by a given sub segment of the market. Market niche method is crucial because the specific niche is less likely to attract competitors. (Days et.al1971)
It is of paramount importance for the manufacturer or marketer to consider the different ethnicities, which constitute the market. Ethnic groups differ a great deal, in terms of what they require for use. This is because ethnicity goes hand in hand with other aspects such as material or non-material culture aspects. A good example to illustrate this would be drawn from African countries where most of the markets consist of people of different ethnic grounds.
The bible, for example, which is a very widely read a book in the Christian, based countries. It requires publication in many different languages, each targeted to a specific ethnic group. In fact, the publisher has to do a thorough investigation of language use among the different ethnicities. This is because language used in a given manner can be acceptable in one ethnic community, but offensive to the other and this can lead to customer loss. The nationality of consumers is also another basis for fragmenting the market. The example of beef in India and the US is a outstanding example to illustrate this.
In conclusion, the demographic and geographic factors are useful in fragmenting a market. Another technique involves combining the psychology of consumers and their demography and geography. This is a psychographic segmentation. In this method, people are subdivided according to their values or lifestyles. According to Kotler, 2007 et.al, people within the same geography or demographic group can exhibit very different psychographic cadres.
The attitudes, interests and values within these profiles assist the marketer to fragment or segment his market accordingly. Finally, the behavior of the consumer is an important factor used in fragmenting the market. The marketer looks at the market and identifies the loyalties of these customers to given brands and then classify these customers according to their loyalties to these brands. Some customers are so loyal to given brands that they cannot consider changing the product use no matter the extent promotion and advertisement of the other brands.