Marketing segmentation

Marketing targets key people that help their business grow. Marketing segmentation is just one of the steps a business must take when they are working to define their specific target markets. Marketing segmentation is the process of dividing a market into a group of key buyers that require different products. Instead of using the same marketing strategy for all the consumers, it is dividing into different categories and tailored to fit the needs of the consumers. The goal of market segmentation is to target the correct audience with the correct product and obtain the highest rate of return for a product.

The first aspect of marketing segmentation is to find the "category of need" that the company, service, or product will fulfill. There are three fundamental characteristics that define the "category of need", they include the following:

• Strategic - this category must define the product the company is offering and why it is important to the mission, objectives, or operations of the consumer.
• Operations - this category must fulfill the general operating procedures of a company and align with its procedures.
• Functional - the final approach is to define the function need a customer has for a product. The product or service must deal with a specific process such as accounting, maintenance, etc. There are several domains for the functional aspect of market segmentation, but it must be defined with the prospective audience in min

The second aspect in marketing segmentation is to define what the need is and who will experience this need. For example, some of the needs a business may have include the following: reduction in operating expenses, increased cash flow, improved productivity, etc. Once the need is defined and prospects are defined, a company must then consider the 4 bases of consumer market segmentation.

The 4 bases of consumer market segmentation include:

• Geographical bases are based on states, regions, countries, climate, population density, and population growth rate.
• Demographical bases include variables such as age, family size, gender, education, life cycle, occupation, income, ethnicity, and family status.
• Behavior bases include product knowledge, attitude, responses, usage, and brand loyalty, price sensitivity, and benefits sought.
• Psychographic bases include lifestyle, personality, and values.

Market segmentation will vary with current economic conditions and trends. Market research is a large factor in marketing segmentation and will help companies determine how to create a campaign and use managerial judgment to implement the campaign. Other factors businesses must include with marketing segmentation are the accessibility the target market has to the business. Some questions a business must ask include: "is the product accessible online? Can consumers find the location easily? Is the product they are seeking easy to find?" Every group that is segmented must be able to provide a large customer base that will provide solid revenue for the company. Marketing segmentation requires the marketing team to create separate marketing plans for each segmented group as well. A larger company usually has funding for market research and they are able to define their segmented groups using this market research. Since a smaller business doesn't have the funding to conduct market research, they need to implement other strategies. Here are a few tips for smaller companies that are looking to segment their market:

First, always look for secondary resources that can provide you with data. Some secondary resources include expert's advice in the particular field, research publications, and trade publications. Second, watch competitors marketing efforts and copy certain aspects of them. Trade buyers generally have a lot of key information that can also help a small business segment the market. A needs analysis is another great way to obtain research from individuals and segmented groups. Once the market is dividing into smaller segments, companies can begin measuring the differences between groups. Marketing efforts are much easier for companies that have implemented marketing segmentation because they are able to discover niche markets.

Marketing segmentation allows a company to find a new approach for businesses and customers. When a company implements marketing segmentation, they are able to determine the needs and wants of customers and it is easier for them to satisfy a variety of people. Targeting customer groups versus product groups allows a company to offer additional services to customers and bundle different packages that normally would not be offered together. Increasing profits is a large goal for most businesses, implementing marketing segmentation will allow a company to develop strategies for price increases and having the customers accept the higher price. Price segmentation will occur for regions. Typically large cities have higher prices than rural areas. For example, Wal-Mart will charge higher prices for the same product at different stores because of the economic situation of the city the store is in.

Marketing segmentation will allow companies the opportunity to develop new products that are based on the needs of the target market. When a company has niche groups, they tend to develop niche products for these groups. Several companies will create marketing segmentation strategies that focus on customer loyalty. When a customer continues to purchase products from the same company, the company will be able to reward them with premium products and promotional materials.

Over time customers will change their buying behavior. Companies that participate in marketing segmentation will recognize the customer changes and will find ways to produce products that are geared toward a certain lifestyle or toward particular customer needs. For example, several people began purchasing cars with navigation systems built-in to help them with directions. Electronic companies produced individual GPS systems for cars that customers could purchase without having to purchase a new car. Since the sale of these units increased, cell phone companies began including GPS services with the cell phone for their customers. By offering the same device to customers and changing it with different stages, GPS manufacturers were able to capitalize on the particular needs of the consumers.

Creating brand identity is one of the main goals of marketing segmentation. Since targeted marketing efforts stress the importance of a product or company to a specific group of consumers, they are able to create brand identity in several market segments. Some customers may be targeted in two different groups of market segments. For example, a cell phone manufacturer may place business professionals in a particular segment and place family consumers in another segment. A customer that is a business professional may also be in the segment for a family group. The individual will immediately associate the company with business-related cell phones and will also be able to identify them as individual cell phone services.

One of the main reasons companies implement marketing segmentation is because it allows a company to identify needs of customers and improve products to meet their needs. A customer typically is willing to pay a higher price for a product if it meets their needs. Marketing segmentation also allows companies the opportunity to become a market leader. When a company becomes a market leader, they can develop stronger relationships with suppliers, partners, and customers. A company that is seen as a market leader will have the opportunity to strengthen its brand and ensure profitability to the business.

Since most companies compete on price, market strategy will allow a company the opportunity to find the demand for products that are closely related and determine the key differences between the products. Having the ability to keep a product in the lowest price density is another marketing segmentation strategy. Companies have the ability to sustain a higher price level and higher margins if their product provides value to customers. Since market competition is continually increasing for consumers, business customers are used to multiple choices for products. Marketing segmentation provides customers with the ability to be more effective with pricing products and provide a greater density to their service.

Several companies offer marketing segmentation services. Since numbers alone don't allow companies the opportunity to understand the markets, outside companies have identified different strategies and analyze data and find ways to companies to improve their services. One of the services offered by market segmentation companies is the ability to determine the emotional reasons behind purchasing products. They will discuss different reasons why customers buy and the emotional need versus traditional research. It is common for companies to create marketing segmentation strategies that are based on rational reasons for purchasing a product versus emotional reasons for purchasing a product. Hiring an outside market research company will help determine the different reasons and they will help a company understand what their primary motivations are behind the price, quality, and service of consumer buying. Outside companies will conduct surveys of customers and determine the hidden desires and motivations behind purchasing a product. Since human behavior is complex, it is difficult for companies to understand the attitudes and beliefs consumers have about products. Using a company that specializes in marketing segmentation will allow your company to understand those abilities and provide more detail about your target customers such as loyal customers, brand switchers, and the customers of competitors.