Lecture notes
Market Segmentation
- Institution
- CCEA
A look at market segmentation, geographyic segmentation, demographic segmentation, geo-demographic segmentation and market targeting.
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Mark SegmentationDefinition: A market segment is a sub-group of consumers who share, one or a number of characteristics, which
result in them having similar wants and needs.
Market segmentation, therefore, is the process of dividing a market into distinct groups or segments that share
common characteristics.
Good market segmentation will result in segment members that are homogeneous or as alike as possible and in this
way they are likely to respond similarly to a given marketing strategy.
While market segmentation is a useful strategy is cannot be used in all cases. To be effective, market segmentation
must meet the following requirements:
The market segment must be measurable both in terms of the number of potential customers and the
value of potential sales.
The market segments must be large enough to be potentially profitable.
The firm must be capable of marketing effectively to one or more of the market segments.
There are a number of different factors upon which firms can base their market segmentation. Examples include:
Geographic Segmentation:
Geographic segmentation is based on regional characteristics such as climate, terrain, language and
population density.
Geographic segmentation is particularly relevant to multi-national or global businesses, which will
typically have regional or national marketing strategies and these in turn will be altered to meet the
specific needs of the different geographic regions. The most obvious example is the use of different
languages in the labelling of goods in different countries.
Within countries or regions where there is a common language, geographic segmentation, can be used
based on factors such as city size or population density.
For example, major petrol retailers such as Shell or BP use traffic density data as a basis for deciding on
the location of their forecourts. If the traffic density in a certain area falls below a particular threshold,
that area will not be considered to be a viable market segment.
Demographic Segmentation:
Is the most commonly used approach to market segmentation, because the segments are easy to identify
and measure and there is a wealth of data available to marketers to use.
Demographic segmentation attempts to divide consumer groups into segments based upon
characteristics such as age, gender, ethnicity, income and family status:
a) Segment by age: Business consider the consumers age to be a key factor in determining the type of
good or service they will require. The holiday industry is a key example of an industry which segments
its market by age.
b) Segmenting by gender: Is a common variable for segmenting certain markets since many products,
most notably, clothes, toiletries and, magazines are gender specific. In recent years some
businesses, which have traditionally only produced products for one gender group, have begun to
develop products that are targeted at the other gender in an attempt to increase their overall level
of sales.
c) Segmenting by ethnicity: Companies have become increasingly aware of the varying wants and needs
of different ethnic groups and have begun to respond by producing products to satisfy the specific
requirements of these different ethnic groups. For example, L'Oreal has begun to produce different
hair products for Black and Asian hair types.
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