A market is the collection of people or organizations with (a) needs to satisfy (b) money to spend, and (c) the willingness to spend it. You should however understand that, within a total market, there is usually some differences among the buyers. For instance, not all consumers who own cars want to buy Peugeot brands, and not everyone who wears skirt suits wants to pay the same price or purchase them from boutiques. While some Consumers visit the beach in order to rest and relax, others do so for adventure and excitement.
The illustrations above show that within the same general market, there are groups of customers with different needs, buying preferences or product use behaviour. We may discover that in some markets, these differences are relatively minor. Here, the primary benefit sought by consumers can be satisfied with a single marketing mix. In other markets, however, customers' interests may not be completely satisfied by a single marketing mix.
Consequently, alternative marketing mixes are required to cover the entire market. Whatever its size, the group of customers for whom the seller designs a particular marketing mix is a target market.
Generally, there are two alternative target-market strategies. The first alternative is to treat the total market as a single unit, that is, as one mass, aggregate market. This strategy is premised on the assumption that, in spite of their differences, everyone in the market can be adequately satisfied with one marketing mix. Hence in mass marketing, the seller engages in mass production, mass distribution, and mass promotion of one product for all buyers. Thus, the argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. This strategy employs a "short run" approach (i.e. are programme, broad target) in marketing activities.
In the second alternative, the total market is seen to consist of several small er segments with differences significant enough to the extent that one marketing mix will not satisfy everyone or even a majority of the market. In situation like this, since the firm typical y cannot meet the needs of all these submarkets, one or more are often selected as target markets. This is sometimes described as a" rifle" approach (i.e. separate programmes, pinpointed targets).
The truth is that the notion of an aggregate market is relatively uncommon. For instance, the proliferation of advertising media and distribution channels is making it difficult to practice "one size -fits all" marketing. It has even been claimed that mass marketing is dying. It is not surprising therefore, that many firms are turning to micromarketing at one of four levels: segments, niches, local areas, and individuals. We shall be looking at these levels of market segmentation under the section that follows.
MARKET SEGMENTATION
What we have been stressing up to this point is that, markets consist of buyers, and these buyers differ in one or more respects. For instance they may differ in their wants, resources, geographical locations, buying attitudes, and buying practices.
Customer-oriented firms take these differences unto consideration. However, you should note that these firms usual y cannot afford to tailor-make a different marketing mix for every customer in this regard, most marketing mix are for all and a different one for each customer. This usual y involves market segmentation, which is a process of dividing the total market for a good or service into several smaller groups, such that the members of each group are similar with respect to the factors that influence demand. It has been found that a major element in a firm's success is the ability to segment its market effectively.
BENEFITS OF MARKET SEGMENTATION
Since market segmentation is customer-oriented, it can be said to be consistent with the marketing concept. For instance, when segmenting the needs of customers within a submarket are first identified, before deciding if it is practical to develop a marketing mix to satisfy those needs.
In general, market segmentation has been found to be a valuable technique for a number of reasons:
(i) Efficient use of Marketing Resources
By matching marketing programmes with individual market segments, management can do a better marketing job thereby making more efficient use of its marketing resources. For instance, small firm with limited resources might compete very efficiently in one or two small market segments, whereas, the same firm would be overpowered by the competition if it aimed for a major segment. Even the largest firms are also constrained in one way or the other: they don't have enough marketing personnel, advertising money, new products and other resources to reach the entire world. Thus, by using market segmentation, they can deploy resources efficiently to create variations of the marketing mix that fit only the most attractive market subsets. The result is more efficient marketing, which saves money and increases sales.
(ii) Better understanding of customer needs
There is no doubt that, it is pretty difficult to attempt to understand customer needs in a large and diffuse market. However, through market segmentation, it is possible to split or divide the market into segments whose needs are easier to define. Efforts can then be geared toward satisfying these needs.
(iii) Better understanding of the competition situation
Firms who target individual marketing segments can see more clearly who their competitors are, and the tactics each uses in that segment.
(iv) Accurate measurement of goals and performance
Market segmentation also allows accurate measurement of goals and performance. For instance, a recording company might set sales goals and measure performance by the number of records, tapes, or compact discs it sells, but won’t know how it is doing in comparison with competitors. If, however, the company specializes in the reggae music market, it can define its goals more specifically. One objective might be to sell enough of a single album to break into the listing of top 100 best selling albums.
The company might also want to measure how many of its records make the bestseller chart in a given year. Because the company has defined its segment as reggae music, rather than as music in general, the company has an objective way of setting standards and measuring achievement. This can be likened to the popular saying of Jack of all trades, master of none".
In a nutshell, the benefit of marketing segmentation is that it leads to more satisfying marketing results. For instance, once you have analysed a market and analysed its natural division, you can pick out the segments that are most likely to lead to marketing success. Though segmentation may take a little longer time than just rushing to the market, its rewards are worth the extra time.
CONDITIONS FOR EFFECTIVE SEGMENTATION
Market segmentation involves more than just thinking of a segment to target. As you should now understand, the purpose of using market segmentation is to end up with segments in which marketing can be conducted more efficiently and effectively. Three conditions help marketers move toward this goal:
(i) The basis for segmenting, i.e. the characteristics used to describe what segment customers fall into must be measurable. The data describing these characteristics must also be obtainable. For example, the age of customers is both measurable and obtainable. Though another variable such as the "desire for ecological y compatible products" may be useful in segmenting the market for disposal drapers that are biodegradable. It is neither easily measurable nor data easily obtainable.
(ii) A segment is meaningful only if it can be reached with a marketing programme. Hence, the market segment should be accessible through existing marketing institution (such as middlemen, advertising media, company salesforce) with a minimum of cost and wasted effort.
(iii) Each segment should be large enough to be profitable. The point here is that organization should always consider operating in profitable segments.
Viewed from a customer-oriented perspective, the ideal method for segmenting a market should be on the basis of customers' desired benefits. This position is consistent with the idea that a firm should be marketing benefits and not just the physical characteristics of a product. However, in many cases, the benefits desired by customers do not meet the first condition described above (i.e. measurability and obtainability of the characteristics used in describing segments). This is because customers are not willing or unable to reveal them. For example, what benefits do people derive from taking beer? Put in another way, why do others refuse to take beer?
At times when benefits are identified, as in focus-group studies, it is often difficult to determine how widely they exist in the market.
Consequently, a variety of indirect indicators of benefits are often used to describe segments. These indicators, such as age, are not the reason customers buy, but they are easily measured characteristics that people seeking the same benefit frequently have in common. For example, middle-aged people are more likely to read financial standard than teenagers, not because they are middle-aged but because the content of the paper is more directly relevant to their lives. Hence, marketers of financial standards will find it easier to measure age than relevance, so age becomes a segment at its variable. In the sections that fol ow, we shall be discussing many of these commonly used, indirect bases for segmentation.
ULTIMATE CONSUMERS AND INDUSTRIAL MARKETS
A company can segment its market in many different ways. Usually, the bases for segmentation vary from one product to another. The broadest market division is that which separates a potential market into two categories: ultimate consumers and industrial users. The sole criterion of this segmentation is the customer’s reason for buying
Ultimate consumers buy goods or services for their own personal or household use, and are satisfied strictly non-business wants. They constitute what is known as the "consumer market"
Industrial users on the other hand, are business, industrial, or institutional organizations that buy goods or services to use in their own organizations, to resel , or to make other products.
DIFFERENCE BETWEEN ULTIMATE CONSUMERS AND INDUSTRIAL USERS AND INDUSTRIAL USERS
There are important differences between ultimate consumers and industrial users, their ways and means of purchasing differs considerably. Only a few of the many difference will be considered here:
Ultimate consumers buy in much smaller quantities and generally for consumption over much shorter time periods than do industrial buyers. More importantly, ultimate consumers are not usual y as systematic in their buying as are industrial users. Some industrial users are business enterprises which exist to make points, thus encouraging them to adopt systematic purchasing procedures.
Though other industrial users are non-profit institutions (e.g. government agencies, schools, hospitals, clubs, societies, etc), their operations are audited and reviewed by outside authorities. These also make them adopt systematic purchasing procedures. In addition, ultimate consumers spend only part of their time buying, whereas the industrial user employs professionals who devote all of their time and effort to purchasing. Furthermore, the ultimate consumer spread all his buying skill over a wide range of goods and services, whereas the professional tends to specialize and, therefore, has more opportunities to perfect his purchasing skills.
These few differences clearly illustrate the point that marketers must use significantly different approaches in marketing goods and services to each of the two broad classifications of markets.
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