MS1U2L2

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 5

MS1U2L2

(Benefits of Segmentation, Segmentation of Consumer & Industrial Markets, Demand


Patterns(clustered, diffused & homogeneous), Selection of Target Market Through Segmentation)

Benefits/Purpose of Market Segmentation

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

(A) Size of customer


 Key account selling: This involves focusing on the largest and most profitable
customers.
 Category customers: These are customers that purchase a specific category of
products or services.
 Non-category customers: These are customers that purchase a variety of products or
services, but do not specialize in any one category.
 Small buyers: These are customers that purchase small quantities of products or
services.
(B) Geographical location
 Domestic: Customers located within the same country.
 International: Customers located outside of the country.
 Regional: Customers located in a specific region within a country.
 Local: Customers located in a specific geographic area, such as a city or town.
(C) End use
 Manufacturing: Customers that purchase products or services for use in
manufacturing their own products.
 Reselling: Customers that purchase products or services for resale to other
customers.
 Consumption: Customers that purchase products or services for their own
consumption.
(D) Buying criteria or behavior/motivation of buyer
 Price-sensitive customers: These customers are primarily motivated by price.
 Quality-conscious customers: These customers are primarily motivated by quality.
 Technology-driven customers: These customers are primarily motivated by the latest
technology.
 Relationship-oriented customers: These customers place a high value on
relationships with their suppliers.
(E) Nature of customer
 Public sector: Customers that are government agencies or other public sector
organizations.
 Private sector: Customers that are privately owned businesses.
 Non-profit organizations: Customers that are non-profit organizations, such as
charities or foundations.
(F) Frequency of use
 Heavy users: Customers that purchase large quantities of products or services on a
regular basis.
 Light users: Customers that purchase small quantities of products or services on an
occasional basis.
(I) Buying process
 Centralized: Customers that have a centralized purchasing process.
 Decentralized: Customers that have a decentralized purchasing process.
(J) Situational factors
 Urgency of need: Customers that have an urgent need for products or services.
 Budget constraints: Customers that have budget constraints.
 Level of risk tolerance: Customers that have a high risk tolerance or a low risk
tolerance.
Businesses can use one or more of these bases to segment their industrial markets. The best
approach will vary depending on the specific industry and the business's goals.
Examples:
 A manufacturer of industrial robots could segment its market by size of customer
(key account selling, category customers, non-category customers, small
buyers), geographical location (domestic, international, regional, local), and end use
(manufacturing, reselling, consumption).
 A distributor of medical supplies could segment its market by type of customer
(public sector, private sector, non-profit organizations), frequency of use (heavy
users, light users), and buying process (centralized, decentralized).
 A software company that develops customer relationship management (CRM)
software could segment its market by size of customer (enterprise, mid-
market, small business), industry (manufacturing, retail, healthcare), and buying
criteria (price-sensitive, quality-conscious, technology-driven, relationship-oriented).

Clustered , Diffused and Homogeneous Demand Patterns

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.

Describe the Criteria for Effective Market Segmentation

The criteria for effective segmentation are:


 Measurable: The segments must be measurable, so that businesses can track their
performance and make adjustments as needed.
 Accessible: Businesses must be able to reach the segments through marketing and
sales channels.
 Substantial: The segments must be large enough to be profitable.
 Differential: The segments must be different from each other, so that businesses
can develop targeted marketing strategies for each segment.
 Actionable: Businesses must be able to take action based on the
segmentation, such as developing targeted marketing campaigns or products.
Explanation:
Measurable: Businesses can use a variety of data to measure the segments, such as
demographic data, purchase history data, and website analytics data.
Accessible: Businesses can reach the segments through a variety of channels, such as direct
mail, email marketing, social media marketing, and paid advertising.
Substantial: The size of the segment will vary depending on the industry and the business's
goals. However, the segment should be large enough to be profitable.
Differential: The segments should be different from each other in terms of their needs,
wants, or preferences. This will allow businesses to develop targeted marketing strategies
for each segment.
Actionable: Businesses should be able to take action based on the segmentation. For
example, businesses can develop targeted marketing campaigns, products, or pricing
strategies for each segment.
By meeting these criteria, businesses can ensure that their segmentation is effective and
that they are able to reach their target customers with the right message.
Here is an example of how a business can use the criteria for effective segmentation:
A clothing retailer could segment its market by age, gender, and style preferences. This
segmentation would be measurable because the retailer could use data such as customer
demographics and purchase history to identify the different segments. The segments would
also be accessible because the retailer could reach them through a variety of channels, such
as direct mail, email marketing, and social media marketing. The segments would be
substantial because the retailer sells a wide variety of clothing to a large customer base. The
segments would be differential because the retailer's customers have different style
preferences. And the segments would be actionable because the retailer could develop
targeted marketing campaigns for each segment, such as a campaign for young women who
prefer trendy clothing or a campaign for older men who prefer classic clothing.

Selection of Target Markets through Segmentation

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.

You might also like