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P5 Introduction to Marketing: What is Market Segmentation?

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Introduction

P4 Introduction to Marketing What is market segmentation? Segmentation in consumer markets Market segmentation is a very valuable technique used by companies when planning strategic marketing. It enables businesses to target products at the right customers more effectively. In essence, it is about identifying the specific needs and wants of the customer groups and then using the intelligence into providing products and services which meets customer?s needs. After all, a business cannot satisfy all the needs and wants of all consumers. Each market segment is unique and is comprised of a number of individuals who share common thoughts and characteristics. Segmentation can also be applied within Business to Business markets, although this has large number of similarities to consumer marketing, many differences also exist and this is explored later on. Market segmentation can be defined as ?The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment? Each segment has its own profile made up of criteria commonly known as bases. A segment consists of; 1. A large identifiable group within the market 2. Similar wants and needs 3. Purchasing power 4. Geographical location 5. Buying attitudes/ habits and trends Segmentation allows businesses to identify different groups within the market and apply different marketing and promotional techniques to each segment. It is not however necessary for a company to target every segment; they may wish to target specific segments as part of their strategic marketing plan. Example: Motor vehicle companies such as Volvo develop a large number of models which are all aimed at different market segments in terms of lifestyle, gender, income and age. In addition to this, they also have services and products specifically aimed which caters for a large number of commercial businesses.. ...read more.

Middle

In addition, young people are more likely to purchase the products as they have more disposable income as they probably will not have the responsibility of a child and most likely living at home. The market is very accessible as young adults generally have access to all forms of media channels including the internet such as social networking, YouTube and email. Social networking is very effective in reaching out to the younger target markets as a result of the widespread use of this technology. In addition, the market is generally very mobile and more likely to have opportunities to see marketing campaigns through billboards, vehicles and shops. A wide range of marketing communications is therefore very effective in reaching this target market. Apple will have to consider the current and future prospects of this target group. Overall it is perceived that this group will create a good return currently and in the future. In order to ensure that the market will continue purchasing Apple products in the future, they need to carry on developing their products and staying ahead of competitors. It is envisaged that this market will be highly profitable as the segment is large and is growing in size. It has the capacity to gain loyal customers as technology advances. Apple Mission Statement ?Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.? The mission statement fits in well with the target market because this target group always want the latest technology. Apple?s mission statement implies that they are leading innovation in technology and revolutionising the way we use technology. This appeals to young adults as Apple fulfil the needs and wants of the segment; who are wanting the most up to date technologies. ...read more.

Conclusion

Profitability of this segment is high and customers are prepared to pay high amounts for the service. Current and future demand levels will likely to remain stable and have the potential to increase. Age is often a strong determinant of product choice in the health industry Health club/gym example... Aged 18-34 Goal is to ?look good? Aged 35-54 To help ?deal with stress? Aged 55 and over For ?medical-physical therapy? Business markets (Corporate memberships) Corporate gym memberships are becoming more and more popular among businesses and LA fitness is meeting the needs of businesses by providing corporate memberships at highly discounted rates. This appeals to businesses for a variety of reasons such as; healthy employees are more productive, a healthy workforce results in reduce healthcare costs and the non-financial benefits include having an engaged team and positive brand. Why is segmentation so important? There are a number of reasons why a business needs to segment a market which is explained below; More effective in meeting customer needs Different types of customers require different needs. Creating bespoke offers for each segment makes sense and provides customers with a personal solution. Increased profits for business Customers have different demographic properties. Therefore they are different in how sensitive they are to price. Segmenting markets will enable businesses to raise average prices and subsequently further increase profits Increase customer loyalty Circumstances change regularly in customers? lives. For example people grow older, create families, change jobs or get promoted, change their buying patterns. Through effective marketing that markets products that appeal to customers at different stages of their life, a business can retain customers who might otherwise have the tendency to switch to competitors? products and brands. Target marketing communications It is necessary for a business to consider the needs of all audiences. If the target market is too vague, the potential for customers to be missed out and the cost of communicating to customers becomes unprofitable. By segmenting markets, the target customer can be targeted more cost effectively. ...read more.

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