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Home » Market Segmentation

Market Segmentation

By Richard Daniels Reading Time: 4 mins
Updated August 8, 2022

Market Segmentation

Market segmentation can be defined as the division of the market into different categories on the basis of various characteristics and features. All the customers are not similar, they vary in their relative buying attitudes, wants, locations and resources.

Therefore it’s almost impossible to cover all of them in the best possible manner. Business organizations divide the whole market into different groups. Later then target one or two (or even more) groups with the different sets of marketing strategies. This process of dividing the market into different subcategories. Thus then implementing strategies for all of them is known as market segmentation.

In simple words 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 demands of relative groups in great manners. Other than the reason for 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 market. Or it may have certain techniques 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 a competitive advantage over there.

Types of Market Targeting

The market targeting is divided into the following three parts.

  • Segmentation of market
  • Targeting of market
  • Positioning of market

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 similar wants, characteristics, and behaviors of customers. This requires a different set of Marketing Mix and Marketing Strategies. Business organizations use different sources to point out different segments of the market. Moreover prepare their relative’s profiles to ascertain relative opportunities.

Market Targeting

In this step, the segments are evaluated on certain criteria in order to check their relative attractiveness. Along with 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. Basically to create a specific position of the product in the minds of the customers.

Types of Market Segmentation

Owing to the large number and the difference in the customers, there is a strong need for segmentation in the market. For this purpose, business organizations segment the market into different groups. 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 a certain segment. This is the old Concept of Marketing in which similar products or services are produced in abundance. Thus are 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 a large scale. Products are manufactured in bulk and distributed to the whole market in 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 a single product by the Coca-Cola Company. Actually 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. So in order to effectively satisfy the needs and requirements of customers.

This segmentation helps the company greatly as it can effectively produce the different packages of its products. Along with services for the varying requirements of the targeted customers.

The distribution of its products is done effectively and at a proper time along with an effective advertising campaign. In this way, the efforts of the business are exerted toward selected customers and this would increase the efficiency of its operations. Examples include the Lever Brothers Corporation preparing a set of its daily usage products for more than one target segment.

If fewer competitors are focusing on these targeted segments, then the business faces low competition. Therefore 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. Also wants 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 segments, utility car segments, performance car segments, etc. In niche marketing, the business organization divides these larger segments into sub-segments and targets any 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 that have special needs and requirements. In fact, that is completely understood and fulfilled by specific organizations in an effective manner.

Micro Marketing

Niche marketing and mass marketing are two extreme poles of marketing that cover smaller groups and the overall market respectively. Micro Marketing is a 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 to keep 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:

  • Local marketing in which local customers are targeted.
  • Individual marketing in which individual customers are focused separately.
Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.

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Filed Under: Marketing, Principle of Marketing Tagged With: definition of marketing segmentation, Level of Market Segmentation, Market Segmentation Level, types of marketing segmentation

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