Market Segmentation (Types, variables and concept)

If after asking yourself the question, Who am I trying to sell my product to? The answer is to everyone, it is likely that you end up not selling to anyone. Considering the market as a unit and trying to satisfy all the members of the market with the same product offer, is usually a serious mistake.

The market is very broad and is made up of customers with different needs, tastes and purchasing expectations. Market segmentation allows its division into groups with similar characteristics and needs, which allow offering a differentiated and adapted offer to each target group, in order to optimize resources and also effectively use the efforts of marketing.

We will get to know the subject better by establishing concepts, variables and examples so that there is no doubt about its importance in the business world.

Market Segmentation Concept

It is defined as the strategy used to divide the market into different groups of buyers, which are thinks and estimates demand different products, in order to achieve higher sales and increase the cost effectiveness.

Through market segmentation, the company acquires the possibility of adapting its advertising, promotion, dissemination campaigns and its marketing strategies specifically to the identified segments adding efforts in a single direction that will allow you to be more effective in sales.

Market segmentation variables:

it's possible segment the market According to dimensions such as: Geographical, demographic, psychographic segmentation, by behavioral criteria about the product and by customer condition.

Each company will use one or a combination of several to establish the segmentation that provides the most benefits.

• Geographic: Continents, countries, regions, cities, towns or postal codes.
• Demographic: Gender, age, education, income, profession, religion, nationality.
• Psychographic: Lifestyle, social class, personality and tastes.
• Behavioral: Product use custom, search for a specific benefit, brand loyalty, attitude towards the product.

Types of segmentation

In market segmentation there are the following types:

Differentiated:

It allows the development of a different marketing-mix for each target segment detected in order to offer a product adapted to the needs of each one of them.

Undifferentiated:

It considers satisfying different needs of each segment, with a single commercial offer, based on the characteristics in common between the segments.

Concentrated Strategy:

It is the specialist's strategy, concentrating efforts on targeting one or a few segments in which they are known to have a comparative advantage.

Benefits of market segmentation

Currently companies find it unprofitable to do mass marketing or based on the variety of the product. Markets are breaking up into micro-markets. Where, for example, you will find groups with different personalities, or lifestyles that look for certain products in different distribution channels and that they are also exposed to multiple media.

For this reason, companies are increasingly focusing on the concept of distinguishing target markets, analyzing the profiles of the market segments and choosing the most relevant ones to develop products and marketing schemes tailored to each segment.

Segmentation is the basis for selecting target markets, then according to the target market, the company must establish a marketing strategy to adequately address the target market.

The benefits of efficient segmentation include:

• The company is in a better position to locate the opportunities that are presented to it in the market.
• It allows you a better vision to make modifications and adjustments to your products when the market requires it.
• You have better information to prepare a marketing program, based on the characteristics defined for each specific segment.

Negative of market segmentation

Despite improving the efficiency of marketing work, segmentation involves risks, the most frequent are:

• Setting the wrong goal, targeting an unprofitable segment, or segmenting an audience that doesn't find the product attractive can lead to the wrong marketing strategy.
• Establishing a segment that is too narrow or too wide also limits potential income. Sometimes he creates groups too small to be profitable targets. For example, The company targets a very small group to ensure income, may earn income insufficient, the business will not be financially successful, no matter how successful the marketing.
• Segmentation requires specific knowledge, so it is important to do market research, which represents additional expenses.
• Sometimes it is difficult to decide which characteristic is more significant to make an adequate segmentation generating a bad segmentation. Focusing on the most relevant factor can be the difference between success and failure.
• If the product dominates the market, segmentation offers no advantage.

Market Segmentation Process.

Study:

A careful examination of the market is carried out to determine the specific needs met by current offerings, as well as those that are not and those that could be recognized.

It is carried out through interviews, surveys that explore and organize group meetings to better deduce the motivations, behaviors and attitudes of consumers.

It collects important data on the particularities of the product and the importance given to them, for example, brand awareness and brand qualification, standards of use, attitudes towards the product category, demographic, psychographic, and other data.

Analysis:

All data collected is interpreted to eliminate variables and build the segment by grouping consumers who share a particular requirement that at the same time distinguishes them from the others market segments with quite different needs and characteristics.

Profile Development:

A profile is prepared for each group, in terms of distinctive attitudes, behaviors, location, sex, age, tastes, etc. And each segment is named based on its salient characteristic.

Segments change over time, so the segmentation must be repeated periodically, the hierarchy of attributes must also be known and clear that consumers consider when choosing a certain brand, this step is called market partitioning and can sometimes reveal new segments of market.

With this process it is clear that the unique requirements for good segmentation are: Heterogeneity between segments, homogeneity in the chosen segment and segment stability.

It might interest you:

• 4 Examples of Market Segmentation