Market segmentation is the process and procedure of partitioning markets into groups of potential customers with similar needs and/or characteristics. Market segmentation is the key foundation for business marketing strategies and market planning. Studies shows that market segmentation is the key to the business market success small and medium companies.
Types of Market Segmentation
In practice, many business define and segment their market into small niche market so that they can easily meet the needs of small groups of customers. however, there are different ways and methods to segment a market depending on the market, industry, product or service etc. There are common types of market segmentation: geographic segmentation, price segmentation, demographic segmentation and psycho-graphic segmentation.
It is important to understand that companies need to consider their own product or service before choose a proper types of segmentation. Geographic segmentation is mainly to divide the market based on the geographic regions. The rationals is that the customers in the geographic regions may have special requirements and conditions. Price segmentation is to divide the market based on the product price and value as the customers may have different needs and requirements as price differs. Demographic segmentation is to divide the market based on the gender, age, income, housing type, and education level of the customers. psycho-graphic segmentation is to divide the market based on the consumer lifestyle such as attitudes, values, behaviors, emotions etc.
Benefits of Market Segmentation
Market segmentation has proven to be extremely useful for strategic market and marketing planning. A well defined market segmentation can help business improve their competitive position and better serve the needs of customers. Market segmentation can help business to find their best target market and enhance their competitive advantages over their competitors.
Market segmentation can help business understand better about their customers. In the process of segment a market, business need to have a deep understanding of their end users. A Segmented market is usually a target groups of customers, understanding their needs and requirements can help business to react quickly to the needs of customers.
Market segmentation can help business understand their competitors better. In the target market, business can evaluate their marketing strategics and market move compared with the competitors in the target market so that they can adapt their marketing strategies accordingly.
Market Segmentation Strategies
After the business have done the research, segment the market based on their standard and analysis, the next question is that how the business can adopt a strategy based on the segmentation. There are there strategies the business can follow: differentiation, concentration and atomization.
Differentiation strategies means that business will choose two or more segments of market based on various needs. As the business are serving two or more segments, business may need more resources to support the strategies.
Concentration strategies means that the business will select only one segment of market to serve. As the business is only serving one types of market, they need less resources and capital to serve the market strategies. The strategy is useful for many small business.
Atomization strategies means that the business will target the individual consumers. The strategy is developed with the help of technology especially the information technology as the cost of personalization has greatly reduced.