What makes it easy for marketers and businesses to determine what people would buy considering the fact that our needs vary on our age, culture and buying power? The answer is not magic or coincidence, but rather market segmentation.
Definition of market segmentation
Market segmentation is the division of the market into different groups that have different needs, classes and demography. This division is under the criteria of homogeneity and distinctiveness. It is an effective tool that marketers use in market positioning of their brands or products.
Purpose of market segmentation
The purpose of market segmentation is to understand what the customers need so to focus on those needs. This allows the marketers to provide better service or create better products that would put them in a more favorable position than their rivals or competitor. This is a form of market intelligence that allows them to create better marketing strategies and techniques.
The market is divided into the consumer market and the business market. The consumer market uses and consumes the end product, while the business market uses the other company’s product to produce a product that they will offer to the market. These two markets are still divided into subgroups. The analysis of this consumer segmentation is based on the following factors:
- Geographic factor. The location is very important in the determination of product creation. Some products may not be marketable in some areas or countries.
- Demographic segmentation. Variables such as the educational level, age and income bracket are useful determinants of what the market needs.
- Price. The fact that consumers have different levels of income allows the marketers to offer their product at the price most affordable to their market.
- Psychographic analysis. The buying attitude and taste preference of consumers relies on their lifestyle, emotions and beliefs. Understanding how the market thinks and lives would allow businesses to provide services and products that would fit the market’s taste.
Providing for a business market is trickier as compared to that of a consumer market. Here are some of the factors that provide clues and ideas to the marketers:
- Location. Like the consumer market, location plays an important role in subdividing a business market to allow marketers to adjust their services.
- Company profile. A marketer should know the size, industry, decision making unit and buying requirements of the company to be able to provide them the most appropriate services.
- Behavioral pattern. The determination of buying pattern is important when dealing with the business market because it can provide ideas and clues on how they will offer their product. These include buying intervals, company status and procedure.
Aside from what is mentioned here, there are still other factors and theories that marketers should look into to avoid mistakes that cause inefficient market segmentation. Consideration of time, media type and channel of distribution, as well as methods of market analysis can be a big help in avoiding mistakes. Examples of these mistakes are resegmentation of an existing segment, too many segments, providing for all the segments, overlooking what is necessary, running after the sales rather than the market, etc.