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Ever wondered why marketers only target certain markets or how these markets are identied? Think about universities for a moment: how do they identify which students to communicate with about degree schemes? What criteria do they use? Do they base it on where you live, your age, your gender, or is it just about your entrance scores? Do they market to postgraduate and undergraduate audiences differently, what about international and domestic student groupsis this difference important for the effective marketing of higher education services to prospective students? we consider the way organizations determine the markets in which they need to concentrate their commercial efforts. This process is referred to as market segmentation and is an integral part of marketing strategy. Consideration is also given to the techniques and issues concerning market segmentation within consumer and business-to-business markets. The method by which whole markets are subdivided into different segments is referred to as the STP process. STP refers to the three activities that should be undertaken, usually sequentially, if segmentation is to be successful. These are segmentation, targeting, and positioning, and this chapter is structured around these key elements.
Defination
As per Philip Kotlers definition Market Segmentation is subdividing of market into homogeneous sub-set of customers, where any subset may conceivably be selected as marketing target with to be reached with distinct Marketing Mix" According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects."
Segmentation Bases
There is a large array of possible segmentation bases. Some of these are briefly described below.
Demographics
Consumers can be grouped on the basis of characteristics such as age or household composition. This is easy to do and it is easy to reach such segments with media. But age and other demographics are only loosely related to behaviour.
Socioeconomic Characteristics
Similarly, characteristics such as income, occupation and education can be used to derive segments that are easy to reach. Such segments are indicators (although not perfect) of behaviour such as lifestyle, price sensitivity, and brand preference.
Psychographics
Personality, attitudes, opinions, and life styles are often used a segmentation bases. These characteristics have some relationship to behaviour and provide insight into how to communicate with chosen segments. Reaching the chosen segments is then the issue, as discussed under product usage, above. Generation, or cohort, refers to people born in the same period of time. For example, the Baby Boomer generation can be defined as those people born between 1946 and 1955. Such cohorts share much in common. Not only are they of a similar age, but they experienced similar economic, cultural, and political influences in formative years. Thus generation is probably a better segmentation basis than age and just as easy to reach.
Geography
There are two reasons why people who live in the same area may share similar characteristics. First, some areas have more expensive properties than others and so people with similar socioeconomic characteristics may cluster together. Second, they have similar transport and shopping options. It is easy to reach particular areas by using local newspapers, cinema, outdoor, and selective direct mail but mass media is less effective.
Facilitates exploitation of better marketing opportunities: Market segmentation helps to identify promising market opportunities. It
helps the marketing man to distinguish one customer group from another within a given market. This enables him to decide his target market. It also enables the marketer to utilise the available marketing resources effectively as the exact target group is identified at the initial stage only.
Facilitates selection of proper marketing programmeMarket segmentation helps the marketing man to develop his marketing mix programme on a reliable base as adequate information about the needs of consumers in the target market is available. The buyers are introduced to marketing programme which is as per their needs and expectations.
Some Limitations
While market segmentation is a useful process in allowing an organization to aggregate customer needs into distinct groups, it is not a perfect process. Market segmentation has been criticized for the following reasons: Because the process involves approximating product/service offerings to the needs of customer groups, rather than providing an individual customized offering, there is a chance that our customers needs are not being fully met. Customer relationship marketing processes, and software, are increasingly allowing companies to develop customized approaches to individual customers. There is insufcient consideration of how market segmentation is linked to competitive advantage (see Hunt and Arnett, 2004). Whilst the product differentiation concept is clearly linked to the need to develop competing offerings, market segmentation has not tended to stress the need to segment on the basis of differentiating the offering from competitors. It is unclear how valuable segmentation is to the manager. Suitable processes and models to indicate how to measure the effectiveness of market segmentation processes are not yet available. The processes involved in the target marketing process are not as precise as many authors imply. Dibb et al. (2001) suggest segmentation plans in business to business markets often fail because businesses fail to overcome barriers encountered when implementing their plans. These include infrastructure barriers, process issues, and implementation barriers.