Segmenting the Market
Market SegmentationWhat Does it Mean?
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the world becomes your market … but the cost to market to the world would be prohibitive
Market SegmentationWhat Does it Mean?
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That is why marketers will segment the market – or in other words, divide the market in smaller groups (segments)
Market Segmentation ExampleOpening a retail operation in the Far West End
to sell bird feeders
We have just made a “geographic” segmentation by dividing the consumer market into a geographical area
Market Segmentation ExampleBut the market is still too big to pick up a good ROI
So let’s divide the market again by age
We are going to make the assumption that consumers over the age of 30 are more apt to buy birdfeeders. So
we will segment the Far West End market by age.
Market Segmentation ExampleSo let’s look at what we have …
We have segmented the consumer market by geographical location and by age. That narrowed our market down from
a global market to more defined market.
Market Segmentation ExampleBut we can probably do another segmentation to really
find our buyer … this time by economic life cycle
This segmentation will be those consumers who own a home and who are over the age of 30 and reside in the Far
West End.
Market Segmentation ExampleLet’s try another segmentation …
We are going to segment our market further by home owners who are empty nesters or couples without children.
This is a family-life segmentation
Market Segmentation ExampleSo let’s look at what we have … we have segmented
the consumer market into these aggregate segments …
• living in Richmond Far West End (geographic) consumers who are over the age of 30 (age) consumers who are homeowners (economic life-cycle) consumers who are empty-nesters or with no kids
This becomes the market that you will target your product offering – bird feeders and other bird-loving supplies
Why Market Segmentation
To divide the market into smaller segments where marketers can test new products, price discounts, promotional media, and
distribution outlets.
Types of Market Segmentation
The most common method of segmentation is the use of “physical descriptors” as illustrated below:
Geographic location
Age
Gender
Race/Ethnic Origin
Education
Occupation
Economic position
Family life cycle
Income
And more
Business-to-Business Segmentation
In B-to-B, marketers and sales managers will segment the business market using similar descriptors:
Geographic location
Company Size
SIC Category
Application of Product
Organization Structure
And More
These segmentation descriptors (for both consumer and business) can be easily purchased or obtained from census
data and other data collection agencies.
Segmenting the Market
In summary, segmentation allows business owners to narrow their market to maximize overall sales by developing new
products, pricing, media promotion and distribution outlets.