Market Segmentation: definition and principles

The market segmentation can be defined as a separation of the market into parts (segments) according to different characteristics. The method of segmentation consists of defining groups of customers on the market, who have analogous purchasing needs and characteristics.

There are three main variants of segmentation approaches to the market.

Mass marketing (undifferentiated) is a concept in which a company ignores differences in segmentation of consumers in the market or when the market is more or less homogeneous.

Applying this strategy a company assumes that its marketing efforts can be used most effectively by increasing focus on the entire population, by using the same communications system, distribution and promotion of sales. Mass marketing is also used in cases when an entrepreneur can overlook differences in the segments and address the entire market at once. The focus is concentrated on the general needs of all consumers and increase in sales of fundamental products. Marketing costs are relatively low.

The next option to market approach is so-called product-differentiated marketing. This strategy is characterized by focusing on more segments. It is mostly used because of difficulties in carrying out simultaneous marketing to each segment. This approach is usually chosen when a company either deals with the whole market or significant part of its segments. It leads to an increase in the diversity of produced goods. The marketing costs are rather high.

A specific option within the product-differentiated marketing known as multiple segmentation is characterized by dealing with the whole market while considering differences of segments.

The third approach known as concentrated marketing can be described by deliberate choose of a single segment of the market. It is the most simple strategy when a entrepreneur focuses on one segment and firm position of product within this segment. This approach is usually used by companies with limited resources for marketing purposes (SMEs) and is often described as a „niches“ marketing, in particular when the target segment represents only a small part of the whole market.

 

The major marketing concepts

NEEDS

The core concept of marketing is to understand or feel the “human needs” that denotes the state of felt deprivation. The needs are in-built in human nature itself and thus naturally existed in the composition of human biology and human condition. When the needs are not satisfied, a person will try to either reduce the need or look for a substitute object that has the ability to satisfy the need.

The need for food, clothing, shelter and safety are the basic physical needs and the needs of belongingness and affection are the social needs. The individual needs include the need for knowledge and self-expression.

WANTS

Human wants are desires for specific satisfaction of deeper needs that means the needs become wants when they are directed to specific object that might satisfy the need. Human needs may be few, but their wants are numerous. These wants are continually shaped and re-shaped by social forces and institutions such as families, collogues. Marketers need not to create needs because these needs pre-exist in the market. But they can influence the wants and suggest and inform the consumers about certain products and persuade them to purchase these by stressing the benefits of such products.

DEMANDS

People may have almost unlimited wants. But resources are limited in compare to the wants they have. Therefore they have to choose the products that are likely to provide the most value and satisfaction for their money. When backed by purchasing power, wants become demand. Thus, demands are basically wants for specific products that are linked /associated with the ability and willingness to pay for these products. For example, many desire a car such as Mercedes Benz, Toyota, BMW, Honda etc. but only a few are really willing and able to buy one. Therefore being a marketing executive you must measure how many people would actually be willing and able to buy your company’s products than how many of them want the products.

PRODUCTS

To satisfy the wants and needs of people the company must offer their products in the market. That means people purchase the products to satisfy their needs and wants. Specifically, a product can be defined as an object, service, activity, person, place, organization or idea. For example a lipstick is bought to supply service (beautify); toothpaste for whiter teeth – prevent germs or give fresh breath etc. Therefore it is the job of marketer to sell the service packages associated with the physical products. If you give a thought, you will realize that the importance of a product does not lay not so much in owning them than to use them to satisfy our wants. For example, we do not buy a bed just to admire it, but because it aids resting better.

EXCHANGE

We have already got that marketing takes place only when people decide to satisfy needs and wants through exchange. So in the process of marketing there is exchange value between the two party’s i.e. buyer and seller. The value for buyer is to obtain the desired object to satisfy its needs and wants while the value for the seller is generally the profit or the money. Kotler (1984) states that for exchange to take place, it must satisfy five conditions, namely:

There are at least two parties.

Each party has something that might be of value to the other party.

Each party is capable of communication and delivery.

Each party is free to accept or reject the offer.

Each party believes it is appropriate or desirable to deal with the other party.