Market Segmentation is the process breaking down an entire heterogeneous market into small markets or segments of customers that are identical in terms of some characteristics like needs wants and buying behavior. Retail markets like any other sort of business, may enjoy the benefits of segmenting the markets. Due to increased competition, mass marketing approach is not feasible all the time.
Consumers have various retail formats to shop and distance is not an obstacle these days. A consumer can buy any consumer electronic item form a nearby shop or from a super bazaar; he may also visit to electronic Gallery to buy the same. Therefore, in order to attract customers and sustain them requires market segmentation where a retailer divides his customers into smaller groups and approaches them with different set of promotional programmes.
Significance of Retail Market Segmentation:
Retailers segment the market to identify particular groups of Customers in their trading areas so that selling and promotional efforts may be concentrated. The purpose of such exercise is to make the retailer the most attractive destination.
- Deciding Store Location:
Market segmentation helps a retailer in deciding locations for its new outlets in case of expansion. The retail stores may be set up as per the concentration of target population. A location which is attractive and has good traffic flow but serves no target market is of new use to a retailer.
- Understanding Consumer Behavior:
Market segmentation helps a retailer to understand why consumers behave differently in a same set of marketing and promotional efforts. Once a heterogeneous market is divided into few homogeneous groups, it becomes easy for a retailer to develop an effective marketing & promotional strategy.
- Deciding Retail Marketing mix:
Marketing segmentation helps a retailers in deciding 7ps (Product, Price, Place, promotion, People, Procedure and presentation) depending upon the target market to serviced.
- Deciding Merchandise assortments:
A retailer is always bothered about which item of inventory should be bought and displayed on the store’s shelves. Once the market is segmented, retailer can decide which item will go on the shelves. For a merchandise decision to be made successful, a perfect understanding of particular target market is essential.
- Deciding Promotional campaigns:
Segmentation helps a retailer in deciding and developing accurate promotional campaigns that hit target at right time and at right place.
Segmentation helps a retailer in positioning itself in a particular target market. For Instance, Ebony and Shopper’s stop have positioned themselves for higher income level while Vishal Mega Mart and Big Bazaar have targeted the Indian middle class.
Adjustments in marketing appeals:
Sellers can make best possible adjustments of their product and marketing appeals. Instead of one marketing programme aimed to draw in all potential buyers, sellers can create separate marketing programmes designed to satisfy the needs of different customers. Proper advertising and sales promotional appeals can be made depending on the target audience.
Determining Market opportunities:
Market segmentation enables to identify market opportunities. The marketer can study the needs of each segment in the light of current offerings by the competitors. From such study, the marketer can find out the current satisfaction of customers.
Designing a Product:
Market segmentation helps in designing products that really match the demands of the target audience. Products with high market potential can be designed and directed to meet the satisfaction of the target market.
Developing marketing programmes:
Companies can develop marketing programmes and budgets based on a clearer idea of the response characteristics of specific market segments. They can budget funds to different segments depending on their buying response.
It helps in selection of advertising media more intelligently and in allocating funds to various media. The funds are allocated to various media depending on the target audience, impact of the media, competitor advertising, and so on.
Efficient use of Resources:
By tailoring marketing programme to individual market segments, management can do a better marketing job and make more efficient use of the marketing resources. For example, a small firm can effectively use its limited resources money, sales force, etc. in one or two segmented markets rather than unsuccessfully aiming at a wider market.
Helps in fixing prices:
The marketing segmentation also enables to fix prices of the goods and services. Since different market segments have different price perceptions, it is necessary to adopt different pricing strategies for the markets. For instance, the prices for lower-income groups have to be lower and the product and promotional efforts are adjusted accordingly.
Better service to customers:
Market segmentation enables a company to concentrate its marketing efforts in a particular market area, thereby, providing a better service to the target customers. Proper marketing segmentation can facilitate customer satisfaction.
Kinds of Retail markets
A specialty store concentrates on a narrow product line or a specialized product line; for example, footwear and jewellery.
A departmental store offers several product lines such as clothing, home furnishing and household goods under one roof. Each line operates as a separate department. For example, Akbarallys.
A supermarket provides relatively large low-cost, low-margin, high-volume, self-service operation; for example. Big Bazar.
A discount store offers standard merchandise at low price with low margin and high volume.
A convenience store is conveniently located in suburban areas and charges a slightly higher price and provides groceries and non-food items.
Shopping malls are the new format of retail outlets. They provide several products under one roof. They also provide means of entertainment such as mini theatre and food courts.
A factory outlet is opened and operated by manufacturers, and sells surplus or discounted goods.