Marketing_Segmentation

QUESTION 1 ‘The rifle approach to targeting customers is an effective way for a business to segment the market’. Discuss. ANSWER The segmentation concept was first developed by W.R. Smith in 1957, and is concerned with the grouping of consumers according to their needs (Blythe 1998). Morden (1991) defines market segmentation as: “The analysis of a particular total demand in terms of its constituent parts, so that sets of buyers can be determined.” (Cartwright, 2002). The main purpose of segmentation is to enable the business to concentrate its efforts on the buyers who have greater purchase interest - the “rifle” approach. CRITERIA FOR VIABLE MARKET SEGMENTATION Before segmenting a market, many characteristics of buyers have to be considered, namely: a) Measurability The segment must be clearly identifiable and measurable in terms of the variables chosen as the basis of segmentation. For instance, banks obtain information pertaining to buyers’ income quite easily. b) Accessibility An identified market segment can be exploited commercially only if it can be reached. It must be easily accessible to one or other elements of the marketing mix. In other words, the organization must be capable of concentrating on the chosen segment with the mix chosen. c) Potentiality The segment should be of sufficient potential size to ensure that enough return can be derived from any marketing investment made in it. d) Relevance The basis of segmentation (age or social status) must be relevant to the purchase or use of the product. Market segmentation can be described using two different approaches: 1. By analyzing the characteristics of the buyers in terms of the three variables –demographic, geographic and psychographic. 2. By focusing on how customers behave, and the benefits they seek from a product or service, in terms of behavioural segmentation and benefits segmentation. DEMOGRAPHIC SEGMENTATION This is the most widely used method of classification of market segments. Demographics can be thought of as consisting of gender, age, marital status, sex, social grade, and socio-economic occupation. Other descriptions like family type and size, income levels, ethnic origin, religion, education levels and families life cycle can also be considered. The reasons for the popularity of demographic factors being used for segmenting markets are that consumer needs, wants and usage rates vary closely with these demographic variables and these demographic variables are relatively easy to measure, through data gathered in a census. More and more companies are using age and life-cycle segmentation whereby they offer different product or use different marketing approaches for different age and life-cycle groups. McDonalds targets children, teens, adults and seniors with different ads and media. Gender segmentation is the process of dividing a market into different group based on sex and it is more widely used in clothing, hairdressing, cosmetics and magazine. Recently marketers have noticed that there are new vistas for gender segmentation like deodorants brands used by both sexes. Income segmentation is the division of the market into different income groups. It is most common in products such as cars, boats, clothing, cosmetics and travel. Brands like Louis Vuitton luggage, Moet & Chandon champagne and Henessy cognac are focused on affluent consumers. Less affluent market segments are also usually being targeted by retailers like ALDI and LIDL. GEOGRAPHIC SEGMENTATION This is the process of dividing a market into different geographical units such as local, regional, national, and virtual. A company may decide to operate in one or a few geographical areas or to operate in all areas, but it must pay special attention to the needs of consumers in these differing areas. Geographic segments are easy to define and measure. In an article in 1993, Douglas and Craig emphasised the dangers of being too geographically focused and making assumptions about what customers in a region might have in common (cited in Brassington and Petitt, 2000). Even in a small geographic area, consumer needs are vast and geographic segmentation does not provide any guidance to marketers. Segmenting purely on geographic grounds is too risky and the dangers might come from competitors using more customer-focused segmentation strategies. Geographic segmentation, if applied on its own can have limited scope. The late 20th Century saw a dramatic growth of the so-called dot com organisation linked to the internet. Book retailing and home banking has been successful in this virtual market. PSYCHOGRAPHIC SEGMENTATION Psychographics aim at classifying people according to their personality traits, social class or lifestyle. Social Class Many organizations design products or services for specific social classes. For example, in the UK, Butlin’s holiday camps cater for the working-class families. The club Med can be considered up-market as it concentrates on its ski and sea resorts. Lifestyle People lifestyles are reflected by the goods they buy. Marketers are continually segmenting their markets by consumer lifestyles. The succeeders are a successful group of people who like to feel in control. An example would be these customers who would like to customize their Mercedes car. There are also the mainstreams who need security. They buy well-known, safe major brands and avoid risk. Highly educated reformers would buy according to their own judgement and ideas. Personality Some wise marketers also give personalities to their products that correspond to some consumer personalities. The market for product like cosmetics, cigarettes, insurance and alcohol are usually segmented on this basis. Honda used personality segmentation to break through the US market. BEHAVIOURAL SEGMENTATION This is the process of dividing buyers into segment based on their knowledge, attitudes, uses or responses to a product. Occasion segmentation occurs when the market is divided into groups according to occasions when buyers get idea to buy, actually buy or make use of the bought product. For example, Mother’s day and Father’s day are promoted to boost up the sale of flowers, cards and other gifts. Some markets segment into light, medium, occasional, non-users and heavy-users groups. Heavy users are usually a small proportion of the market but they account for a high percentage of the total sales. British Airways for instance, aims at heavy users where the B.A Executive Club blue card members are offered free Air Miles and other benefits each time they travel. Attitude looks at how potential customer feels about the product. People can be enthusiastic, positive, indifferent, negative or hostile about a product. Attitude-based segments may be important in marketing charities or courses or even in health education. Benefit segmentation Benefit segmentation was popularized 25 years ago by Russel Haley, who studied the toothpaste market in the USA. This is the idea of dividing the market into group according to the different benefits that consumers seek from the product. One of marketing’s basic principles is that customers don’t buy products, they buy benefits and not all customers’ requirements are the same in terms of benefits sought. Therefore, we can see that the physical features or characteristics of what is purchased do not really motivate buyers. What does motivate buyers is what the product will actually do for them. Marketers should be extremely careful not to fall into the trap of talking about what their product or service is or does for the customer (features). But instead they should emphasise on what the customer will get out of it (benefits). A car bought as the only one for a family will give a different type of benefit compared to a company car supplied to a single employee. The benefits received are different. CONCLUSION The various alternative approaches to marketing segmentation have been discussed in isolation. It is a fact that they are interdependent. Effective segmentation can only be achieved if marketers use a combination of more than one type. By segmenting a market, not only the organization gains but also customer benefits from higher standard service and better tailored products are offered to them. REFERENCES KOTLER P & Marketing, An Introduction, 5th Ed. ARMSTRONG G 2000 Prentice-Hall, US, pp177-203 LANCASTER G & Introduction to Marketing, 1st Ed REYNOLDS P, 1999 Biddles Ltd, UK, pp198-211 UNIVERSITY OF Strategic Marketing, Module 1(2602) LEICESTER, 2002 . ----------------------- 1