The most important aim of marketing is to understand and satisfy an organisations customers and their needs better than that of its competitors. As no two individuals are same, they have different requirements and should be treated differently.
An organisation achieves this by implementing target marketing strategies. Identifying different market segments is the first step in target marketing. Thus, market segmentation is the process of dividing the market into a number of groups that are mutually exclusive, while individuals exhibiting similar traits fall under one group. With the help of segmentation firms can anticipate the requirements of its potential customers to a greater extent, by determining the group of people best suited for a particular product or service offering. Markets can be segmented on the basis of following characteristics.
Geographic segmentation is based on variables such as:
- Region: This kind of segmentation involves division of customer base by continent, country or state etc.
- Customer groups can also be formed on the basis of size of population of a particular region.
- Population density: urban, suburban, or rural
This type of segmentation is mostly used by multi-national corporations or transnational businesses. Such firms operating across the boundaries alter their marketing mix based on the different requirements of consumers with in each geographic segment they operate in.
Demographic Segmentation includes: Age, Gender, Family lifecycle, Generation, Income, Occupation, and Education
Psychographic segmentation is based on customer’s lifestyle, activities, interests, and opinions etc.
Behavioral segmentation is based on actual consumer buying behavior for particular products. Customers are segmented on the basis of their attitude towards brand loyalty, or user status indicating the first time buyers, potential buyers, benefits sought etc.
Since segmentation segregates the market into a number of heterogeneous groups, it helps the organisations to target specific groups by developing advertising programs for each segment or develop new products to attract one or more segments. Growingly, with the increase in competition target marketing is a more method as opposed to the mass marketing as it helps the organisations to reach greater customer needs.
Market segmentation can be implemented in three ways:
Differentiation: In this process the central focus is each segment’s individual needs wherein based on different market segments companies market and develop products or services.
Concentration: This method involves targeting a specific segment or niche which the main competitors of the organization are not able to reach.
Atomization This method involves dividing the market into very small segments, as small as one person segment in a few cases. This method is mainly adopted by companies offering expensive and highly customized products or services.