Why Market Segmentation Offers an Important Role in Business
In marketing, market segmentation can be defined as the method of defining a market into smaller, more targeted groups based on some kind of common characteristic, such as age, social security, income level, purchasing power, etc. Market segmentation can be an art form in which marketers take market segments into consideration and design marketing campaigns that appeal to specific groups. For example, there are baby-boomer and senior-consumer subgroups, each with their own buying power. By targeting these groups, marketers can increase their chances of gaining a larger share of the baby-boomer market while at the same time capturing a larger percentage of the senior consumer population.
Market segmentation also helps marketers decide where to put their advertising dollars. It is important to target the right market segment to get the most out of the marketing dollars. Market segmentation can be broken down into five different groups: C Class, D Class, E Class, F Class, and SME Class. Marketing programs based on these classifications help marketers determine where to advertise their products. A five-tier market segmentation system makes it easier to assess the market as to whether it is reachable or not.
A market segmentation system can be implemented by using data provided by surveys of the target market or company’s current sales patterns. Based on the answers to questions about the product and target audience, the profile of the market is calculated. The results of this research are used to formulate a statistical analysis that predicts how likely customers in a certain segment will be to buy a particular product. There are several common characteristics that lead marketers to categorize a segment, such as age, gender, education, income level, purchasing power, and other factors.
If the market segmentation determined that most of the customers in a certain segment buy similar products from different companies, then the marketers would likely group similar products in similar packages, which have similar features and attributes. If for instance, most customers in a particular segment would likely buy computers from Dell, then they might put together a computer package from several Dell computers that all come with the same features. They might even put together a Dell laptop along with a Microsoft Windows operating system so that the customer is more likely to buy a Dell rather than a Microsoft product.
Using market segmentation can also help businesses in the marketing and sales industries. When a market segmentation analysis is conducted on a large scale, businesses could use the resulting information to decide where to concentrate their marketing efforts. For instance, if most of the customers in a particular segment do not buy computers but do buy music CDs, then it might make sense to focus on music CD sales. This way, it is possible to increase the distribution of the music CDs, which would then lead to more sales. Other companies could then use the data to find out where they should increase their marketing activities. It also helps businesses in figuring out where there are loopholes that they can exploit in order to get more sales.
However, in conducting market segmentation analysis, no one can provide quantitative data without having qualitative data as well. That is because the data can be used to draw conclusions based on the observed behaviors of customers. For instance, if most customers in a certain group are male, then it might make sense to market more to this group. On the other hand, if most customers in the same group are female, then it would make sense to target female customers more effectively.