What is Market Segmentation
Market Segmentation is the division of markets into different groups of customers with similar needs and requirements. Market Segmentation was first defined as “a condition of growth where core markets have already been developed on a generalized basis to the point where additional promotional expenditures are yielding diminishing returns” (Smith 1956).
The purpose of Market Segmentation is to ensure that the various elements of marketing mix such as price, distribution, demand, supply and promotion are well equipped to meet the needs of different customer needs. The market segmentation is related to Product Differentiation, you aim at different market segments you can adapt different variations to satisfy those segment groups.
This concept was first taken as an alternate market development technique, which is for markets were there are fewer competitors selling similar products. There are two main approaches to Market Segmentation. The first view considers market to consist of customers who are same; this is referred to as The Breakdown Method. The second one considers a market to consist of customers who all are different, so that they have to find similarities. This approach is called the Build – Up approach.
Now let understand why there is a need for Market Segmentation. As we know that understanding customers and satisfying there needs better then the competition is the priority of the organization. But different customers have different needs and so it is rarely possible to satisfy all the customers, thus there is a need for Market Segmentation.
Target Marketing is a new thing that has very recently picked up. It recognizes the diversity of customers and does not try to satisfy all of them with the same products. The primary step is to identify the segments and their needs. Market segmentation also depends on the type of marketing the organization wants. When we are trying to understand market segmentation there is necessity to understand certain variables that are required:
Age: customers needs and wants change with their age, so the marketers design, package and promote differently to different age groups. A good example being toothpaste for adults and kids of various age groups.Gender: this factor is very important. Example being cosmetics for different gender groups, clothing range.Income: this takes into account various income groups, dividing the goods as luxury and convenient goods to suit different income groups. For example tour packages, which provide air travel, train travel and bus travel to the needs of various income groups.Lifestyle: last but not the least marketers are interested in the kind of life style that the consumers are living to the segment the market towards their needs.
Hence Market Segmentation is a very important concept in today’s business for it to survive hardcore competition.