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Market segmentation is the process of dividing a market into smaller groups of consumers with
similar needs, wants, or characteristics. This allows businesses to better understand their target
market and tailor their marketing and product offerings accordingly.
The benefits of market segmentation include:
Better matching of customer needs: By understanding the different segments of their
market, businesses can develop products and services that more closely meet the needs of
each segment. This can lead to increased customer satisfaction and loyalty.
Enhanced profits: By targeting their marketing efforts to specific segments, businesses can
reach the customers who are most likely to be interested in their products and services. This
can lead to increased sales and profits.
Better opportunities for growth: Market segmentation can help businesses identify new
market opportunities. For example, by understanding the needs of underserved
segments, businesses can develop new products and services to meet those needs. This can
lead to business growth and expansion.
Retain more customers: By understanding the needs and preferences of their different
customer segments, businesses can develop marketing and loyalty programs that are more
likely to keep customers coming back.
Target marketing communications: Market segmentation allows businesses to create more
targeted marketing messages that are more likely to resonate with their target
customers. This can lead to increased marketing effectiveness and ROI.
Gain share of market segment: By focusing their efforts on specific market
segments, businesses can gain a greater share of those segments. This can lead to increased
market share and competitive advantage.
In addition to the benefits listed above, market segmentation can also help businesses to:
Develop more effective marketing strategies: By understanding their target
market, businesses can develop marketing strategies that are more likely to be successful.
Use their resources more efficiently: By focusing their marketing and sales efforts on the
most lucrative market segments, businesses can make better use of their resources.
Improve customer service: By understanding the needs of their different customer
segments, businesses can provide better customer service.
Overall, market segmentation is a powerful tool that can help businesses to improve their
profitability, growth, and customer satisfaction.
Describe the Bases for Segmenting The Industrial Markets
Clustered demand patterns refer to a situation where consumers can be grouped into
distinct clusters based on their similar preferences and behaviors. This is the most common
demand pattern, and it is the one that businesses are most likely to target with their
marketing efforts.
Diffused demand patterns occur when consumers have diverse and varied preferences. This
makes it difficult for businesses to target their marketing efforts, and it often leads to higher
costs and lower profits.
Homogeneous demand patterns are very rare, and they occur when all consumers have the
same preferences. This is most likely to happen in markets for staple goods, such as food
and water.
Here is an example of each demand pattern:
Clustered demand pattern: The market for smartphones is a clustered demand
market. There are distinct clusters of smartphone buyers based on their preferences
for features, price, and brand.
Diffused demand pattern: The market for fashion clothing is a diffused demand
market. Consumer preferences for fashion clothing vary widely, and there is no clear
clustering of buyers.
Homogeneous demand pattern: The market for salt is a homogeneous demand
market. All consumers have the same basic needs for salt, and there is little variation
in preferences.
To select target markets through segmentation, businesses can follow these steps:
1. Identify the relevant market segments. Businesses can use a variety of data to
identify the different segments in their market, such as demographic
data, psychographic data, and behavioral data.
2. Evaluate the market segments. Once the segments have been identified, businesses
need to evaluate them to determine which ones are most attractive. Factors to
consider include the size of the segment, the growth potential of the segment, and
the level of competition in the segment.
3. Select the target markets. Based on the evaluation, businesses can select the target
markets that they want to focus on.
Here is an example of how a business can select target markets through segmentation:
A clothing retailer could segment its market by age, gender, and style preferences. The
retailer could then evaluate the different segments to determine which ones are most
attractive. For example, the retailer might decide that the segment of young women who
prefer trendy clothing is the most attractive segment. The retailer could then select this
segment as its target market.
Once the target markets have been selected, businesses can develop marketing strategies
that are tailored to the specific needs and wants of each segment. This will help businesses
to reach their target customers more effectively and efficiently.
Here are some tips for selecting effective target markets:
Focus on segments that are large enough to be profitable.
Target segments that are growing.
Target segments that are not too competitive.
Target segments that are well-defined and easy to reach.
Target segments that are aligned with the business's goals and values.