MC - Marketing Segmentation [LESSON]

Marketing Segmentation

What is a Market?

A market is the group people who are willing and able to purchase a certain product. Many of us may be willing to buy something but unable to afford it, for example a brand new BMW X5. We also may be able to buy something but not want it, for example a Chia Pet for $16.95.

BMW X5 Chia Pet
BMW X5 Chia Pet

Suppose you’ve created a great new offering you hope will become a hot seller. Before you quit your day job to market it, you’ll need to ask yourself, “who’s going to buy my product?” and “will there be enough of these people to make it worth my while?” Certain people will be more interested in what you have to offer than others. Not everyone needs homeowners’ insurance, not everyone needs physical therapy services, and not every organization needs to purchase vertical lathes or CT scanners. Among those that do, some will buy a few, and a few will buy many. In other words, in terms of your potential buyers, not all of them are created equal. However, some customers are more equal than others. Several people might be interested in your product if its priced right. Other people might be interested if they simply know your product exists. Your goal is to figure out who these people and organizations are. To do this you will need to divide them up into different categories. The process of breaking down all consumers into groups of potential buyers with similar characteristics is called market segmentation. The key question you must ask yourself when segmenting markets is, what groups of buyers are similar enough that the same product or service will appeal to all of them? After all, your marketing budget is likely to be limited. You need to get the biggest bang for your buck by focusing on those people you truly have a shot at selling to and tailoring your offering toward them.

Market Segmentation

Segmentation categories are criteria used to classify buyers. The main types of buyer characteristics used to segment consumer markets are behavioral, demographic, geographic, and psychographic.

  • Behavioral or Product Benefits - Divides people and organization into groups according to how they behave with or toward products.
  • Geographic - Segmenting buyers based on where they live.
  • Demographics - Segmenting buyers by tangible, personal characteristics such as their age, income, ethnicity, family size, and so forth.
  • Psychographics - Seeks to differentiate buyers based on their activities, interests, opinions, attitudes, values, and lifestyle.

Common Ways of Segmenting Buyers

Behavioral Demographics Geographic Psychographics
  • Benefits sought from the product
  • How often the product is used (usage rate) Usage situation (daily use, holiday use etc.)
  • Buyers status and loyalty to product (nonuser, potential user, first-time user, regular user)
  • Age/Generation, Income
  • Gender, Family life cycle
  • Ethnicity, Family size
  • Occupation, Education level
  • Nationality, Religion
  • Social Class
  • Region (continent, country, state, neighborhood)
  • Size of city or town population density
  • Climate, suburban, rural, urban
  • Activities, Interest
  • Opinions, Values
  • Attitudes, Lifestyles

 

Target Marketing

Now that you have segmented the market, a specific group can be selected for a specific marketing campaign or plan. This is called Target Marketing. Choosing a select group of people to sell to is important because marketing strategies are directed to them. Without a target market there is no focus in a company's marketing efforts.

  • Target Marketing - The particular segment of a total population on which a business focuses its expertise to satisfy that submarket in order to accomplish its profit objectives.

Marketing Concept

The marketing concept is the idea that you must satisfy a customer's needs and wants in order to make a profit. The target market must be analyzed and studied to determine what their needs and wants are, and then marketing strategies are used to satisfy what the customers want or need to buy. If a business stays in tune to the changing markets, technology advances and customer profiles, it should be able to provide a product or service that can remain in demand, keeping the company profitable.

 

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