The market segmentation can be defined as the division of market into the different categories on the basis of various characteristics and features. All the customers are not similar, infect they vary in their relative buying attitudes, wants, locations and resources, and it’s almost impossible to cover all of them in best possible manners. The business organizations divide the whole market into different groups and then target one or two (or even more) groups with the different sets of marketing strategies. This process of dividing the market into different sub categories, and then implementing strategies for all of them is known as market segmentation. In simple word in market segmentation, we divide the market into different sub parts and then make strategies for all of them. Segmentation and targeting allow organizations to cover the wants and demand of relative groups in great manners.
Other than the reason of customer differences, organizations also differ in their strengths. This means that an organization has certain strengths and weaknesses. So it is quite beneficial for that organization to utilize its strengths and avoid its weak sides in the operations of the business activities. For example, it may have limited resources that may not be used to fulfill the demands of the whole mass markets. Or it may have certain technology that can be used to manufacture products or services for a certain group of the market effectively. This would in turn make them successful in the long run as these organizations better fulfill the wants of their customers and get the competitive advantage over there.
Types of Market Targeting
Market targeting is divided into the following three parts.
01- Market segmentation
02- Market targeting
03- Market Positioning
Now each of these is discussed one by one.
- Market Segmentation:
In this first step the whole market is divided into different groups of customers. Each group contains the similar wants, characteristics and behaviors of customers, and thus requires a different set of Marketing Mix and Marketing Strategies. The business organizations use different sources to point out different segments of the market, and prepare their relatives profiles to ascertain relative opportunities.
- Market Targeting:
In this step the segments are evaluated on certain criteria in order to check their relative attractiveness and feasibility against the organization’s strengths and weaknesses. After this analysis, the final one or two segments are selected to be targeted by the organization.
- Market Positioning:
The third step of targeting markets in which the marketing strategies and marketing mix are prepared to create a specific position of the product in the minds of the customers.
Types of Market Segmentation
Due to the large number and the difference in the customers, there is a strong need of segmentation in the market. For this purpose business organizations segment the market into different groups and then target either all or one or two groups with a different set of marketing programs. Following are the four main levels of market segmentation.
- Mass Marketing
- Segment Marketing
- Niche Marketing
- Micro Marketing
Each of these is now discussed in detail.
- Mass marketing:
In this category, the whole market is targeted by the business organization instead of targeting certain segment. This is the old Concepts of Marketing in which similar product or service is produced in abundance and is offered to the whole market without any differentiated marketing programs. The main reason for this mass marketing effort is that it can cover the large marketing potential at the large scale. Products are manufactured in bulk and distributed to the whole market large proportions to all the customers. In this way the cost is reduced and the profit margin is enhanced by the businesses. An example of such mass marketing is the offering of only single product by the Coca Cola Company to the whole market of the world a few years back.
In the modern age, it is quite difficult for any business organization to adopt this mass marketing strategy. As there are a lot of alternative options for customers and the advertising media has created different demands and attitudes in customers, so it is not feasible for an organization to adopt this marketing strategy.
- Segment Marketing:
In segment marketing, the whole market is divided into different groups of customers having similar wants, needs and behaviors. In this way the company selects one or two groups and offers its products and services for only those targeted segments in order to effectively satisfy the needs and requirement of customers. This segmentation helps the company greatly as it can effectively produce the different packages of its products or services for the varying requirements of the targeted customers. The distribution of its products is done effectively and at a proper time along with the effective advertising campaign. In this way the efforts of business are exerted towards selected customers and this would increase the efficiency of its operations. Example include the Lever Brothers Corporation prepares a set of its daily usage products for more than one target segments.
If fewer competitors are focusing these targeted segments, then the business faces low competition and this would in turn increase its market share and profitability. Moreover, the company can also fine tune its existing products or services according to the changing needs and wants of the targeted customers in an efficient and effective way.
- Niche Marketing:
Generally, business organizations target larger groups or segments of the market which are composed of distinct customers. If we take the example of customers of cars, then there are luxury car segment, utility car segment, performance car segment, etc. In niche marketing in the business organization divides these larger segments into sub segment and targets any of feasible smaller sub segments.
Most organizations focus on larger segments of the market and only one or few take an interest in smaller groups of customers. These smaller segments or groups are called niches which have special needs and requirement that are completely understood and fulfilled by specific organization in an effective manner.
- Micro Marketing:
Niche marketing and mass marketing are two extreme poles of marketing that cover smaller groups and overall market respectively. Micro Marketing is more detailed market segmentation in which the individual customers are focused separately and also according to location. Certain products or services are prepared and offered keeping in view the individual taste differences. In this way loyal customers are developed by the organizations as they are treated individually. Micro marketing is further divided into two types which are
01– Local marketing in which local customers are targeted.
02– Individual marketing in which individual customers are focused separately.