Market Segmentation- Bikram Adhikari

New   marketing   concept   is   totally   based   on   customer-oriented   philosophy.   Fundamental   principles of the customer-oriented philosophy are:

 i.    Target market focus,  

ii.   Customer orientation,  

iii.  Integrated marketing and,  

iv.  Profitability.  

If  our  objective  is  to  satisfy  the  customer  profitably,  we  must  first  identify  the  needs  of  the  customer  and  we  cannot  satisfy  the  need  of  the  customer  by  producing  a  single  product.   Thus,   we   should   adopt   market   segmentation approach properly.

Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics. The segments created are composed of consumers who  will  respond  similarly  to  marketing  strategies  and  who  share  traits  such  as  similar  interests, needs, or locations. In another words, market segmentation is the process of dividing heterogeneous  markets  into  distinct  homogeneous  subsets/segments  that  behave  in  the  same  way  or  have  similar  needs.  Because  each  segment  is  fairly  homogeneous  in  their  needs  and  attitudes,  they  are  likely  to  respond  similarly  to  a  given  marketing  strategy.  That  is,  they  are  likely to have similar feeling and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way. Small segments are often termed niche markets or specialty markets.

The  process  of  segmentation  is  distinct  from  targeting  (choosing  which  segments  to  address)  and positioning (designing an appropriate marketing mix for each segment). The overall intent is  to  identify  groups  of  similar  customers  and  potential  customers;  to  priorities  the  groups  to  address;  to  understand  their  behaviour;  and  to  respond  with  appropriate  marketing  strategies  that satisfy the different preferences of each chosen segment.

The  concept  of  market  segmentation  was  coined  by  Wendell  R.  Smith  in  his  article  “Product Differentiation  and  Market  Segmentation  as  Alternative  Marketing  Strategies”  observed  “many examples of segmentation” in 1956. Present day market segmentation exists basically to solve one major   problem   of   marketers;   more   conversions.   More   conversion   is   possible   through   personalized marketing campaigns which require marketers to segment market and draft better product and communication strategies according to needs of the segment. 

Market  segmentation  is  one  of  the  most  efficient  tools  for  marketers  to  cater  to  their  target  group.  It  makes  it  easier  for  them  to  personalize  their  campaigns,  focus  on  what’s  necessary,  and to group similar consumers to target a specific audience in a cost-effective manner. Market segmentation is being used by marketers since late 1900’s. Simple though it may be, it is of vital use while forming any marketing plan 

According   to   Philip   Kotler,   “Market   segmentation   is   the   subdividing   of   a   market   into   homogeneous  subsets  of  customers,  where  any  subset  may  conceivable  be  selected  as  a  market target to be reached with a distinct marketing mix.” 

According  to  Stanton,  “Market  segmentation  is  the  process  of  taking  the  total  heterogeneous  market for a product and dividing it into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects.”

Market segmentation is of interest to marketers because not all customers are alike. Treat them like they are alike, and most will be less than well satisfied. That's the theory popular today. In the  past,  marketers  were  raving  about  mass  marketing.  The  rationale  behind  mass  marketing  included  the  economies  of  scale  they  achieve  in  both  manufacturing  and  communication  by  reaching  a  large  group  of  people  with  the  same  product  and  message.  Over  time,  however,  marketers  discovered  that  if  the  mass  market  was  divided  into  smaller,  more  homogeneous  groups (segments) these smaller segments could be better satisfied. If we put customers into groups based on the similarity of the benefits that meet their needs, we will  have  relatively  homogeneous  groups.  Each  group  will  be  unique  in  some  important  benefit-related way. So finally, we get back to the rationale of market segmentation: It is easier to  satisfy  a  smaller  group  than  a  larger  group.  In  another  word,  smaller,  more  homogeneous  groups are easier to satisfy than larger, less homogeneous groups. And, we will recall, that we achieve  our  organization's  objectives  by  satisfying  customers.  Anything  we  can  do,  then,  to  satisfy customers better is of direct benefit to our organization. 

The  smaller  the  group  the  easier  it  is  to  satisfy  customer  in  the  group.  That  makes  intuitive  sense  because  a  group  of  ten  is  generally  more  homogeneous  than  a  group  of  1,000.  Enter  the  concept  of  viable  segments.  A  viable  segment  is  one  that  the  organization  can  satisfy  and  is  large  enough  to  be  worthwhile  for  the  organization  to  attempt  to  do  so.  Let’s  look  at  some  examples Think of a garment, a piece of clothing. First,  assume  no  segmentation  whatsoever.  The  result  would  be  that  we  would  have  one  garment  for  everyone  in  the  world  without  regard  to  size,  gender,  colour,  style,  etc.  We  know  immediately  that  the  price  would  be  low  because  of  economies  of  scale  in  production  and  distribution. But we also know that satisfaction would be horrible (it would be too big for most people, some wouldn't like the colour or style, etc.). Thus, customer satisfaction is impossible in that situation. 

Now, assume the ultimate in segmentation: products designed for each individual. We pick the style, colour, size, fabric, etc. We know immediately that we would love it - after all, it would be designed for each of us individually so why wouldn't we like it? But we also know that it would be  so  expensive  that  we  couldn't  possibly  afford  it.  Reality  is  somewhere  between  these  two  extremes.

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