A number of companies across the world use market segmentation to determine the marketing opportunities in various markets. The market segmentation definition varies for every market but the core concept remains the same. These companies divide markets into several smaller sub-segments depending on the criteria used in identifying the market segmentation.
The market segmentation definition may include both the company’s products and services, after which the next step is to define the sub-segments within that market. In this step, the characteristics of each sub-segment are identified, including the key attributes that are common to all sub-segments.
For example, all banking sub-segments target customers who are banking. All health sub-segments target consumers with health problems, all the sub-segments are focused on consumers with common characteristics like age, income, and other related factors.
The next step is to segment the market segments into groups. The grouping can be based on common characteristics like age, sex, geographical location, or any other attribute used in identifying the segment. However, some attributes are used in identifying market segments even before these characteristics are identified. Examples of these common features include product families, brands, or types of customers. In addition, some attributes are used to segment the market segments based on their relatedness to a common goal like the achievement of financial targets.
Based on the market segmentation criteria, the companies create target lists of customers, identify the sub-segments according to the criteria identified, and then develop marketing programs for targeting these specific customers. The marketing programs are targeted at identifying customers who will have high probability of buying the company’s products or services. This means that the segments should have a high purchasing potential and have similar characteristics as the original market segment. However, this is not the only criteria for choosing the sub-segments.
Another way of categorizing the market segments is by considering their relationship with one another. For instance, there are interactive television games, game consoles, and computer game players. There are also video game stores, computer game players, and the other forms of segments. It would be much easier to target products based on these relationships because the product categories would be much clearer. The targeting of marketing resources, therefore, should be based on this relationship.
Demographics, on the other hand, are used for market segmentation primarily for two reasons. First, targeting a certain segment based on demographics can help make sure that only the intended target market will be contacted by a given marketing campaign. This helps prevent wasting marketing resources on targeted customers. Second, targeting a certain demographic can provide a quick way of ensuring that the target market is indeed appropriate for a given marketing effort.
Psychographic segmentation can be further divided into two major types: individual psychographics (based on demographics) and product psychographics (based on characteristics of products). Individual psychographics include age, gender, education, and interests; products include brands, styles, and types. Product psychographics include the way consumers use products, how customers perceive the quality or usefulness of products, and how they price products. While all three may appear to be related to each other, each can still be divided further. For instance, age and gender might relate to product psychographics more so than how customers use a product, but the way customers perceive the quality or usefulness of a product can also be associated with an age category.
Market segmentation can be used as part of an integrated marketing communications strategy. This strategy would combine elements of each of the two main types of market segmentation for maximum effectiveness. However, integrated strategies typically start with one type of analysis. If you own or manage a marketing firm, it makes sense to begin with market segmentation. If you are just a part of the team that designs your firm’s strategy, it makes sense to integrate behavioral segmentation as well. The more you understand your customers, the more effective your strategy will be.
What is market segmentation in business?
Market segmentation basically refers to the separation of a given market into smaller sub-segments. For example, if you sell shoes in New York and in Chicago, you can segment the New York market into men’s, women’s, children’s, senior’s, and so on.
There are many ways to analyze market segmentation, and one of the simplest methods is to determine the customer segments. You do this by identifying the products that customers can purchase according to their preferences. The simplest form of segmentation is price. You divide the product’s price by its intended market segment and calculate its average sale cost per item. Another simple method of market segmentation is to divide the product’s gross sales by its gross profit margin to arrive at its sales per quarter.
One of the most interesting concepts in what is market segmentation in business is product segmentation. In this process, you group products according to their main categories. You can further group them based on their individual qualities such as design, style, performance, quality, utility, appeal, and so on. Products in the same category may also belong to the same segment.
Another interesting concept in what is market segmentation in business is brand segmentation. In this process, you group similar brands under the same umbrella. For example, you can group all products that are manufactured by the same company under the category of “electronics.” You can further classify similar brands under subcategories such as” Appliances,” “Appliances and Tools,” ” Clothing,” “Furniture,” “Medical,” “Performance,” ” gadgets,” “Performance Parts,” and so on. You can further break down what is market segmentation in business by identifying business segments into three basic groups: product/product category, business niche or segment, and business service/repair category.
Now consider what is happening when you group computers under what is notebook in your business. You have a niche. Notebooks are not in any way a subset of what is notebooks. On the other hand, there are many categories in which notebook products clearly fall. These include backup/recovery devices, webcams, laptops/tablets, tablet PCs, media players/portables, wireless phones, digital cameras, and so on.
If we group all portable electronic products under what is mobile segmentation in business, we have a much more narrow view of what is market segmentation in business. There are clearly segments here, including netbook products, laptops, other portable devices, other netbooks, tablet PCs, other tablets, cameras, mobility devices, software, and so on. We may wish to group all handheld computers under one category, for example, PDAs. But even here, some of the subcategories might still exist.
How to think about what is market segmentation in business? In the first place, think about your own habits. Do you shop on-site or do you shop off-site? By shopping off-site, do you mean going into a store, or using the computer and the Internet, or are you buying something from a catalog? Do you buy your brand of the product from a wholesaler? Think about what habits you have, and group the things that you do routinely under what is market segmentation in business.