Market Segmentation

To reach different markets or to promote your products to different locations or people one has to use a method called market segmentation. "Market segmentation describes the division of a market into homogenous groups which will respond differently to promotions, communications, advertising and other marketing mix variable" (Cumming). Market segmentation is extremely important for companies around the world. If a company doesn't research the area in which they are going to market or they put a product that is either to expensive or to elaborate in an area that can't afford that then they will fail as a company. In my paper I will discussion why market segmentation is used in around the world, the types of segmentation, some techniques used to make segmentation work the best.

Market segmentation is to divide the market into smaller segments. The reason for dividing the market is to make it easier to address the needs of smaller groups of customers, particularly if they have many characteristics in common (Breen). It is easier if you find things in common that are the same such age, gender, benefits, lifestyles, etc. We also use market segmentation to find niches or to identify under-served or un-served markets. "Using niche marketing, segmentation can allow a new company or new product to target less contested buyers and help a mature product seek new buyers" (Cumming). Niche marketing can also take a normally large, identifiable group within a market, break it into sub groups so marketing can become easier. Niching offers smaller companies an opportunity to compete by forcing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors (Mariotti). In many markets today, niches are normal, as agency executive observed, "There will be no market for products that everybody likes a little, and only for products that somebody likes a lot (Mariotti). Market segmentation is also used to be efficient. "More efficient use of marketing resources by focusing on the best segments for your offering - product, price, promotion, and place (distribution). Segmentation can help you avoid sending the wrong message or sending your message to the wrong people" (Klein). The question is when do we use market segmentation. The answer is, anytime you suspect there are significant, measurable differences in your market, you should consider market segmentation.

There are things you should consider to see if a market must be segmented. The markets must be large enough to be segmented, if you try to split an already small market it won't work. Differences must exist between members of the market and these differences must be measurable through traditional data collection methods (McElligott). Once the market is segmented, you must be able to design marketing communications that address the needs of the specific segments. If you can't develop promotions and advertising are specific to each segment, there is little value in having those segments. Each segment must be reachable through one or more media. You must be able to get your message in front of the right market segments for it to be effective. If your were marketing to one-eyed, green aliens then you should invented a market to reach these aliens. Segments must not only be differing on demographic and psychographics characteristics, they must differ on the benefits sough from the product (Mariotti). If everyone wants the same things from your product, there is no reason to segment buyers. The expected profits from expanding your markets and more effectively reaching buyer segments must exceed the costs of developing multiple marketing programs, re-designing existing product and/or creating new products to reach those segments (Cumming).

Consumer Markets can be segmented into many different parts in order to sell the product the most effectively. Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cites, or neighborhoods (Breen). This dividing makes marketing easier because a specific people or place of population is singled out and a product is geared to that place. Markets can also be divided by using demographic information such as age, gender, family size, family life cycle, income, occupation, education, religion, race, and nationality. This segmentation is the most popular among customer group because of the precise audience you can reach. The different elements of demographic segmentation are important and must be discussed in detail.

Age and life cycle segmentation is dividing a market into different are and life-cycle groups. This segmentation can e used in conjunction with McDonalds in how they use toys to bring in children, which in turn brings their parents and there fore McDonalds makes money off the child and the parent. Marketers also must be careful the guard against stereotypes when using age and life cycle segmentation. "Although some 70-year-old require wheelchairs, others play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families (Klein). Companies must recognizes these rarities and market their product extremely carefully.

Gender segmentation is dividing a market into different groups based on sex. This type of segmentation can be found when dealing with clothing, cosmetics, toiletries, and magazines. In the 90's though gender segmentation is used in other parts of the market including automobiles. "Woman buys half of all new cars sold in the United States and influence 80 percent of all new-car purchasing decisions. By the year 2000, women will purchase an estimated 60 percent of all new cars (Mariotti). These drastic changes have been noticed by companies around the world and the advertising and promoting departs have geared their add to women, not just men.

Income segmentation is dividing a market into different income groups. This type of market has been common to items such as automobiles, boats, clothing, cosmetics, financial services, and travel. Income segmentation can be seen in where specific stores are located, what items are in what magazines, and the price that items are set at depending on the general income of the area. For example ...Greyhound Lines, with its expensive nationwide bus network, also targets lower-income consumers. Almost half of its revenues come form people with annual incomes under $15,000 (Mariotti).

Psycho graphic segmentation is dividing a market into different groups based on social class, lifestyle, or personality characteristics. People in different segmentations can have very different psychological makeup. Successful markets based on personalities have been on product such as cosmetics, cigarettes,