2.2 Market Segmentation Strategies and Criteria

Market segmentation is a crucial strategy in consumer behavior, allowing businesses to tailor their approach to specific customer groups. By dividing markets into distinct segments, companies can better understand and serve their target audience, leading to more effective marketing efforts and improved customer satisfaction.

Segmentation strategies include demographic, geographic, psychographic, and behavioral approaches. Each method offers unique insights into consumer characteristics and behaviors, enabling businesses to create targeted campaigns and products. Effective segmentation plans involve identifying objectives, conducting research, analyzing data, and implementing tailored marketing strategies.

Market Segmentation Fundamentals

Definition of market segmentation

Top images from around the web for Definition of market segmentation

• 

  Putting It Together: Consumer Behavior | Principles of Marketing View original

  Is this image relevant?

• 

  The Purpose of Market Segmentation and Targeting | Principles of Marketing View original

  Is this image relevant?

• 

  The “Black Box” of Consumer Behavior | Principles of Marketing View original

  Is this image relevant?

• 

  Putting It Together: Consumer Behavior | Principles of Marketing View original

  Is this image relevant?

• 

  The Purpose of Market Segmentation and Targeting | Principles of Marketing View original

  Is this image relevant?

1 of 3

Top images from around the web for Definition of market segmentation

• 

  Putting It Together: Consumer Behavior | Principles of Marketing View original

  Is this image relevant?

• 

  The Purpose of Market Segmentation and Targeting | Principles of Marketing View original

  Is this image relevant?

• 

  The “Black Box” of Consumer Behavior | Principles of Marketing View original

  Is this image relevant?

• 

  Putting It Together: Consumer Behavior | Principles of Marketing View original

  Is this image relevant?

• 

  The Purpose of Market Segmentation and Targeting | Principles of Marketing View original

  Is this image relevant?

1 of 3

• Involves dividing a market into distinct groups of consumers with similar characteristics, needs, or behaviors
• Enables marketers to tailor their marketing mix (product, price, place, promotion) to specific segments, increasing the effectiveness of marketing efforts
• Allows businesses to better understand and serve their target customers by focusing on their unique needs and preferences
• Facilitates efficient allocation of resources by targeting the most profitable segments
• Leads to the development of customer-centric strategies, resulting in higher customer satisfaction and loyalty

Market Segmentation Strategies and Criteria

Strategies for market segmentation

• Demographic segmentation
  • Segments the market based on age, gender, income, education, occupation, or family size
  • Utilizes easily measurable and widely available data
  • Facilitates the creation of targeted marketing campaigns and product offerings (age-specific products, gender-based advertising)
• Geographic segmentation
  • Divides the market based on location, such as country, region, city, or neighborhood
  • Enables localized marketing efforts and adaptation to regional preferences (regional food preferences, climate-specific products)
  • Benefits businesses with location-specific products or services (local service providers, regional retailers)
• Psychographic segmentation
  • Categorizes consumers based on their personality traits, values, attitudes, interests, and lifestyles
  • Offers deeper insights into consumer motivations and decision-making processes
  • Assists in creating emotionally resonant marketing messages and brand positioning (eco-friendly products for environmentally conscious consumers, luxury brands for status-seeking individuals)
• Behavioral segmentation
  • Segments the market based on consumer behavior patterns, such as purchase occasion, usage rate, brand loyalty, or benefits sought
  • Concentrates on actual consumer actions rather than characteristics
  • Allows for targeted marketing campaigns based on specific behaviors and usage patterns (frequent flyer programs for frequent travelers, loyalty rewards for brand-loyal customers)

Effectiveness of segmentation criteria

• Measurability
  • Assesses the extent to which the size and characteristics of a segment can be measured and quantified
  • Crucial for evaluating the feasibility and potential of targeting a specific segment
• Accessibility
  • Determines the degree to which a segment can be effectively reached and served through marketing efforts
  • Takes into account factors such as media consumption habits and distribution channels (social media for younger audiences, print media for older demographics)
• Substantiality
  • Evaluates the size and profitability of a segment
  • Ensures that a segment is large enough to justify the costs of targeting and serving it
• Actionability
  • Assesses the extent to which a company can design effective marketing programs to attract and serve a segment
  • Considers the company's resources, capabilities, and strategic fit with the segment (luxury car manufacturer targeting high-income consumers, budget airline targeting price-sensitive travelers)

Development of segmentation plans

1. Identify the target market and define segmentation objectives
2. Conduct market research to gather data on consumer characteristics, needs, and behaviors
   • Employ surveys, focus groups, and other research methods to collect relevant data
3. Analyze the data to identify distinct segments based on chosen segmentation criteria
   • Utilize statistical techniques such as cluster analysis or factor analysis to group consumers
4. Evaluate the attractiveness and viability of each segment
   • Assess the size, growth potential, competition, and alignment with company goals
5. Select the target segment(s) and develop a positioning strategy
   • Choose the most attractive and profitable segments to target
   • Create a unique value proposition and brand positioning for each target segment (eco-friendly positioning for environmentally conscious consumers, premium positioning for luxury-seeking customers)
6. Design marketing mix strategies tailored to each target segment
   • Adapt product features, pricing, distribution, and promotion to meet the specific needs and preferences of each segment (customized products, targeted advertising channels)
7. Implement and monitor the segmentation plan
   • Execute the marketing mix strategies and track their effectiveness
   • Continuously gather feedback and adjust the plan as needed to optimize results