A market includes large number of buyers with different interests, tastes, age, sex, habits etc. In case of a movie, some people like action movies, others may like romantic or horror etc. Segmenting a market is a kind of dividing and rue principle. This dividing is done through grouping of customers according to their preferences, tastes, habits etc. Philip Kotler explains market segmentation is subdividing the heterogeneous market into homogeneous subsection of market. Factors influencing market segmentation are:
Resource of the organization is the first factor comes under discussion. Segmentation is a costly process. It involves expenditure for conducting surveys, designing and implementing different market mix etc. If the organization has sufficient fund, it can go for a good segmentation. Otherwise undifferentiated strategy is desirable. The competition existing in the market plays yet another role in deciding the market segmentation. A marketer while taking any decision must look at the competitor’s policy. If the marketer enjoys monopoly, then there is no need of segmentation. But in a competitive market, marketer should understand competitor’s policy.
Product life cycle is another factor that determines the market segmentation. A product has different stages in its life such as introduction, growth, maturity, saturation and decline. During introduction segmentation cannot carry on as the market cannot collect required information. During growth and maturity segmentation is possible. But during decline there is no segmentation. Also, the nature of product is a determinant of segmentation. In the case of homogeneous product, no segmentation is essential. It will be consumed by all classes of consumers. But for heterogeneous products, segmentation is necessary. The example of heterogeneous products is the clothing industry has segmentation such as kids, men, women, wedding etc. The nature of market is another factor too. If the market is sufficiently large and consumers have different taste and preferences, market should be segmented. In the case of small scale market undifferentiated policy will be successful.
Market Segmentation is the first step of a marketing strategies and can help in marketing decision making as well. It involves segmenting the market based on various factors such as demographic, geographic, psycho graphic etc.
Target the right customer depends entirely on the market segmentation which you have finalised. For example, you have decided that your market segmentation will include only A class customers. Thus, in this case your target customers are likely to be in the urban city and that too in cream areas only. Thus, targeting the customer becomes easier after market segmentation.
Positioning is only possible after market segmentation and targeting has been completed. For example. Your products are a Kids product which has a geographic segmentation and needs to be targeted to the masses. Thus, your positioning will be by advertising pricing and benefits of the product. In case you were targeting the A grade segment, your positioning will be by advertising class and status.
Give more offer to the customers
A brand like Big Bazaar is existing in the market because it gives all Products in one place. On the other hand, pantaloons exist in the market because it has all other brands under one roof. This is what the customer wants. They can choose low cost or higher cost brands. Thus, segmentation can give a clear picture of all the different offers that a customer might be interested in.
Opportunities for growth
This segment can be the one which drives your business in future for you. Thus it is an advice to do segmentation while making an annual business plan to see whether new segments have arrived in the market for your products or if an existing segment shows a growth in the near future for whatever reasons.
Understanding the market
The bottom line is that you need to carry out market segmentation from time to time to have a better understanding of the market, to target your customers better, position your product better in the mind of customers, notice any opportunities of growth and notice any growth opportunities.