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What is Market Segmentation? Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, tastes, and preferences. The purpose is to design a marketing mix strategy that more precisely matches the needs of individuals in a selected market segment(s). Market segmentation is the technique used to enable a business to better target its products at the right customers. It is about identifying the specific needs and wants of customer groups and then using those insights into providing products and services which meet customer needs. Market Segmentation Definition Market Segmentation is the sub-dividing of a market into homogeneous subsets of customers, where any subset may conceivably be selected on a market target to be reached with a distinct marketing mix Philip Kotle Market Segmentation consists of taking the total heterogeneous market for a product and dividing into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects. William J. Stanton 1. Designing Products that are More Responsive to Market Needs: The company puts the customer in the first place, and adjusts products to satisfy them and achieve customer satisfaction at a profit. 2. Analyze Market: Segmentation market is helping executives to detect anyone who attacked its product market. 3. Assess Opportunities: After analyzing the market, companies that master the concept of segmentation will be on the lookout for the idea to find opportunities. This opportunity is not always something that big, but in its time would be great. 4. Mastering the Position of Superior and Competitive: A company that controls segments well is generally well aware of their customers. Companies understand the shifts that occurred in the segment. 5. Determining Effective Communication Strategies: After learning about the targeted segment, the company will determine how to communicate effectively with the targeted segments. ________________________________________ Types of Market Segmentation There are 4 different types of market segmentation and those are discussed below: 1. Geographic Segmentation 2. Demographic Segmentation 3. Psychographic Segmentation 4. Behavioural Segmentation Types of Market Segmentation 1. Geographic Segmentation Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities.Theorganisation can choose to operate in one or more area and pay special attention to local variation. In that way, it can tailor marketing programs to the needs and wants of the local customer. The geographic segmentation is furthermore useful when there are differences in a location where a product is marketed. The differences can be caused by cultural factors, traditions, politics etc. 2.Demographic Segmentation In demographic segmentation, the market is divided on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class. One reason demographic variables are so popular with marketers is that they’re often associated with consumer needs and wants. Variables are easy to identify and measure. 3.Psychographic Segmentation In psychographic segmentation, buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles. Psychological profiles are often used as a supplement to geographic and demographics when these do not provide a sufficient view of customer behaviour. 4.Behavioural Segmentation In behavioural segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. It considers variables like brand loyalty and the usage rate of the consumer.What is an EntrepreneurshipBases of Market Segmentation Bases of market segmentation are the factors that are used to divide the market into a small homogeneous market. 1. Geographic Segmentation: It includes the following variables: A. Region: Continent, Country, State B. Size of metropolitan area: Segmented according to population size C. Population Density D. Climate 2. Demographic Segmentation: It includes the following variables: A. Age B. Gender C. Family Size D. Family Life Cycle E. Income F. Occupation G. Education H. Generation I. Ethnicity J. Nationality K. Religion L. Social Class 3. Psychographic Segmentation: It includes the following variables: A. Interests B. Activities C. Opinions D. Values E. Attitudes 4. Behavioural Segmentation: Behavioural Segmentation is based on actual customer behaviour towards products. Some behavioural variables include: A. Benefits Sought B. Usage Rate C. Brand Loyalty D. User Status E. Readiness to buy F. Occasions ________________________________________ Market Segmentation Process Market segmentation itself is a process of grouping and sub-grouping a large heterogeneous market of the audience into similar qualities and attributes. This helps the companies concentrate on a specified group of customers they want to target which will help them gain a competitive advantage over their competitors in the market and ultimately help them gain profit. Using market segmentation the marketers can easily customize their marketing strategies. It narrows the risk of ineffective marketing strategies and chooses the right type of market segment that would suit their marketing strategies. Importance of Market Segmentation One of the most importance of market segmentation is that it allows an organization to precisely reach a consumer with specific needs and wants. Other importance of market segmentation is discussed below: 1. Adjustment of product and marketing appeals Market segmentation presents an opportunity to understand the nature of the market. The seller can adjust his thrust to attract the maximum number of customers by various publicity media and appeals. 2. Better position to spot marketing opportunities The producer can make a fair estimate of the volume of his sale and the possibilities of furthering his sales. In the regions where response of the customers is poor, the strategy of approach can be readjusted accordingly to push the sale. 3. Allocation of marketing budget It is based on market segmentation that marketing budget is adjusted for a particular region or locality. In the place where the sales are limited, it is no use allocating a huge budget. 4. Effective competition with rivals It helps the producer compete with his rivals effectively. The producer can adopt different strategies for different markets taking into account the rivals strategies. 5.Effective marketing programme It also helps the producer to adopt an effective marketing programme and serve the consumer better at comparatively low cost. Different marketing programmes can be used for different segments. 6.Evaluation of marketing activities Market segmentation helps the manufacturer to find out and compare the marketing potentialities of the products. It helps to adjust production and using resources in the most profitable manner. As soon as the product becomes obsolete, the product line could be diversified or discontinued. ________________________________________ Examples of market segmentation Example of geographic segmentation McDonald is an example of geographic segmentation. It customizes its menu that varies from country to country. McDonald’s has introduced burgers with no beef or no pork in it for India. And likewise in Mexico, more chilli sauce is used. KFC in India concentrates on veg products in south India and on chicken products in North India. Example of demographic segmentation Ferrero SpA an Italian manufacturer of branded chocolate is an example of demographic segmentation. Its sub-brand kinder manufacture chocolate specially for children and has also separate colours and toys for girls and boys. Example of psychographic segmentation Rolls Royce is an example of psychographic segmentation, it targets the consumer having the potential of buying luxury cars and having a rich lifestyle. It concentrates on the variable of the lifestyle of the consumer. Example of behavioural segmentation Airlines, hotel and such industry are the example of behavioural segmentation. Emirates airlines are the best example for it, it offers excellent services to the passengers which helps them retain the customer. It creates brand loyalty and make the customer loyal to their airlines and fly with them frequently.4Ps of Marketing Mix ________________________________________ What is the Target Market? Target market is a group of audience within which the company is planning to sell its products. It is a process after market segmentation is done, a marketer has to select one or more segments in which a marketer has to implement his marketing strategies. The target market consists of consumers who have similar characteristics who are more likely to buy the products which will be more profitable for the company. After the selection of one or more market segments, the marketer has to implement its marketing strategies. It has to modify the marketing mix (4Ps) as per the needs to reach to the customer. After a target market is selected marketer needs to position its product to the selected segment of the customers. ________________________________________
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: MARKETING MIX The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix – Price, Product, Promotion and Place. However, nowadays, the marketing mix increasingly includes several other Ps like Packaging, Positioning, People and even Politics as vital mix elements. Price: refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the market to pay, supply – demand and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied in with an overall business plan. Pricing can also be used a demarcation, to differentiate and enhance the image of a product. Product: refers to the item actually being sold. The product must deliver a minimum level of performance; otherwise even the best work on the other elements of the marketing mix won’t do any good. Place: refers to the point of sale. In every industry, catching the eye of the consumer and making it easy for her to buy it is the main aim of a good distribution or ‘place’ strategy. Retailers pay a premium for the right location. In fact, the mantra of a successful retail business is ‘location, location, location’. Promotion: this refers to all the activities undertaken to make the product or service known to the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, direct marketing, contests and prize. All the elements of the marketing mix influence each other. They make up the business plan for a company and handled right, can give it great success. But handled wrong and the business could take years to recover. The marketing mix needs a lot of understanding, market research and consultation with several people, from users to trade to manufacturing and several others. Marketing Mix – A mixture of several ideas and plans followed by a marketing representative to promote a particular product or brand is called marketing mix. Several concepts and ideas combined together to formulate final strategies helpful in making a brand popular amongst the masses form marketing mix. Elements of Marketing Mix The elements of marketing mix are often called the four P’s of marketing. 1. Product Goods manufactured by organizations for the end-users are called products. Products can be of two types – Tangible Product and Intangible Product (Services) An individual can see, touch and feel tangible products as compared to intangible products. A product in a market place is something which a seller sells to the buyers in exchange of money. 2. Price The money which a buyer pays for a product is called as price of the product. The price of a product is indirectly proportional to its availability in the market. Lesser its availability, more would be its price and vice a versa. Retail stores which stock unique products (not available at any other store) quote a higher price from the buyers. 3. Place Place refers to the location where the products are available and can be sold or purchased. Buyers can purchase products either from physical markets or from virtual markets. In a physical market, buyers and sellers can physically meet and interact with each other whereas in a virtual market buyers and sellers meet through internet. 4. Promotion Promotion refers to the various strategies and ideas implemented by the marketers to make the end – users aware of their brand. Promotion includes various techniques employed to promote and make a brand popular amongst the masses. Promotion can be through any of the following ways: Advertising Print media, Television, radio are effective ways to entice customers and make them aware of the brand’s existence. Billboards, hoardings, banners installed intelligently at strategic locations like heavy traffic areas, crossings, railway stations, bus stands attract the passing individuals towards a particular brand. Taglines also increase the recall value of the brand amongst the customers. Word of mouth One satisfied customer brings ten more customers along with him whereas one dis-satisfied customer takes away ten more customers. That’s the importance of word of mouth. Positive word of mouth goes a long way in promoting brands amongst the customers. Lately three more P’s have been added to the marketing mix. They are as follows: People – The individuals involved in the sale and purchase of products or services come under people. Process – Process includes the various mechanisms and procedures which help the product to finally reach its target market Physical Evidence – With the help of physical evidence, a marketer tries to communicate the USP’s and benefits of a product to the end users Four C’s of Marketing Mix Now days, organizations treat their customers like kings. In the current scenario, the four C’s has thus replaced the four P’s of marketing making it a more customer oriented model. Koichi Shimizu in the year 1973 proposed a four C’s classification. Commodity – (Replaces Products) Cost – (Replaces Price) involves manufacturing cost, buying cost and selling cost Channel – The various channels which help the product reach the target market. Communication – (Replaces Promotion) Robert F. Lauterborn gave a modernized version of the four C’s model in the year 1993. According to him the four C’s of marketing are: Consumer Cost Convenience Communication Conclusion of the Marketing Mix: The Art of Blending the Elements: In short, a marketing manager uses four marketing tools — decision areas — that ineract with one another. These are product, promotion, distribution and price. The blending of these four tools is referred to as the marketing mix. A manager’s selection of an marketing mix is very important. Different combinations of ingredi-ents may be used. In marketing, there is no standard formula for a successful combination of marketing elements. Marketing mixes will vary from company to company, depending upon the kinds of markets Benefits of Marketing Mix An analytical study and interpretation has some benefits that are made available to the business firms. These are: 1. It provides a valuable guide for resource allocation: Every marketing effort warrants the judicious allocation of resources both human and financial. As one is aware, these resources are limited and precious and should be used in an effective manner. These needed resources depend on the nature of marketing mix that maximizes not only consumer satisfaction or delight on one hand and profit to the firm. 2. It helps to allocate the responsibilities: The creative and challenging job of marketing is a team work and part of marketing process entails the allocation of responsibilities to members of this marketing team. By virtue of specialization some are accountable for product management, others for selling and still others for physical distribution. As the marketing manager has the perfect mix on his hand and in mind, it is realty easy and logical to allocate the individual and group responsibilities; it is because, before arriving at ‘perfect mix’ good deal of house-work or punch practice is done based on logic and empirical findings. 3. It provides an opportunity to analyze cost benefit elasticity’s: Resources which are limited having alternative uses are to be judiciously allocated to the requirements of the mix input make that are designed to pay out. On illustrative basis, it can be said that one can increase the number of sales-personal in order to increase sales; or by increasing the ad budget. One must be aware of behavior of costs and revenues with the change in situation. Coming to real life situation, one has to consider the cumulative effect of these multiple tools on one another. These alternative tools are known for varying degree of elasticity’s and it is the accepted marketing-mix concept that assists to analyze such a proposition. As a “perfect-mix” is based on total recognition of relationship between the cost and revenue. This helps to determine that you can go on increasing the expenditure so long as it brings in positive revenue or results. Such an exercise is possible only when there is a marketing program that has identified the components and tents of that mix guaranteeing encouraging market response. 4. It facilitates communication process: Each business unit has its internal organization which is the framework of relations from top to bottom whether flat and slim or high-rise and tapering. Coming to each department, division, section; different units use differing terminologies for the marketing positions and sub-positions. This leads to confusion and conflict so far as meaning of each position is concerned. The titles given are so confusing that they fail to convey the contents of job titles. Thus, there can be “Marketing and promotion manager” along with “Brand managers” or “Promotion and publicity manager” side by side with “Sales and contract-manager”. If, this is the story of one company, another company speaks of “Market-research and promotion manager”.
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