Defining market segmentation
The process in which the market is divided into different groups (segmenting) of the customers who are having similar type of needs or requirements from the product or of the services.The business marketers first perform the market segmentation and then decide upon which segment to target for maximum share in revenue generation. There are different benefits which come as a result of market segmentation technique which are as follows : –
- Market segmentation helps the marketer to perform the in depth study of the market
- Because of market segmentation the smaller firms would be able to survive and also succeed as they would know which segment to target.
- The resources of the firm would be effectively allocated and would not be wasted.
Apart from the above benefits offered by the market segmentation method there are some limitations to it as well. The limitations of market segmentation are discussed below : –
- Since there would be a smaller market to target and also only few customers this can be a drawback for the firm.
- Since all the segments need to be targeted separately therefore it would demand more marketing efforts as well as the cost.
For an effective Segmentation the marketers need to know about the segment and there should be certain characteristics possessed by each segment which are : –
The segment should be :
There are certain steps involved in the segmentation and targeting in the business market. These steps are :-
- Conducting a market research program
- Identifying the macro segment variables
- Performing the micro-segmentation
- Selecting the target segments
- Customer/ industry type
- Company size
- Customer’s usage rate
- Location of the customer
- Features and benefits of the product
- Customers buying situations
- Capability of the customer’s firm
- Criteria for purchase
- Characteristics of the buying centre
After deciding the target market, the marketer need to know which strategy to adopt for it. There are different type of target market strategies which are :-
- Concentrated marketing – single strategy is selected for a different segments in a particular area.
- Differentiated marketing- different strategy for different segments
- Undifferentiated marketing – single strategy for all the segments.
- Niche marketing- unique strategy for a particular segment.
In business market the positioning technique should be able to answer the question that “ why would the target customer would purchase a product from a company instead of from the competitor “?
- “Why the target customer should buy the company’s product/service instead of competitors’ ”