Market Segmentation

Market segmentation is all about deciding what products to make and sell by finding out who the likely customers are going to be (e.g. aiming at young or old people.) By knowing this businesses are most likely to be making bigger profits rather than businesses that don’t know the market network inside out.

In order to target certain customers, businesses break down the market for certain products into different groups. This is known as Market Segmentation. Businesses can segment their market in different groups such as AGE, GENDER, INCOME, and AREA.

There are other ways of segmenting such as:

Repeat Customers

Impulse Buying

Planned Buying

Brand Loyalty

There are numerous reasons why businesses should attempt to segment their markets carefully. Firstly, it’s to match the customers’ needs. Another big reason is to make enhanced profits for the business itself. Also, there are better opportunities for growth. Lastly, it is to retain more customers.

Gain share of the market segment

Unless a business has a strong or leading share of a market, it is unlikely to expand its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones

Market Segmentation - Demographic Segmentation

A method of dividing markets based on ...

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Gain share of the market segment

Market Segmentation - Demographic Segmentation

A method of dividing markets based on variables, such as age, ethnic background, gender and income.

As you might expect, demographic segmentation variables are amongst the most popular bases for segmenting customer groups.

This is partly because customer wants are closely linked to variables such as income and age. Also, for practical reasons, there is often much more data available to help with the demographic segmentation process.

The main demographic segmentation variables are summarized below:

Age

Age is always needed and wanted with customers, so Marketers design, package and promote products differently to meet the wants of different age groups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-based segments).

Life-cycle stage

A consumer stage in the life cycle is an important variable - particularly in markets such as leisure and tourism. For example, contrast the product and promotional approach of Club 18-30 holidays with the slightly more refined and sedate approach adopted by Saga Holidays.

Gender

Gender segmentation is widely used in consumer marketing because of the different sexes. The best examples include clothing, hairdressing, magazines, toiletries and cosmetics.

Income

This is another major popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Coutts bank; Moet & Chandon champagne and Elegant Resorts - an up-market travel company. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Examples include Aldi (a discount food retailer), Airtours holidays, and discount clothing retailers such as TK Maxx.

Socio-Economic Groupings

Another method and probably the most common method of segmenting a market are through socio- economic grouping. This method divides the population up according to their occupation (i.e. Job) or the occupation of the head of the household (such as the mother or father in the family). The table below illustrates this method.

Peer Reviews

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groat

10th of Feb 2012

Quality of writing

The essay is written well, but at times it is a bit colloquial. Phrases such as "knowing inside out" shouldn't be used in a piece of coursework - trying to cut out these phrases may help you find a technical term which is a useful alternative, increasing the level of analysis. I'm not quite sure why "Marketers" is capitalised in the middle of a sentence, or why "AGE, GENDER" is in block capitals. Although this doesn't affect the content, marks are always given for quality of written communication so it is key to give a good impression.

Level of analysis

This piece of coursework is able to identify how a business may segment their market. It was nice to see an example, showing how toothpaste is marketed differently depending on the age. Although this point is strong, the sentence introducing the paragraph makes no sense: "Age is always needed and wanted with customers". In my experience, essays can be penalised for such poor grammar as it doesn't display full understanding. Make sure you proof read any pieces of coursework! Whenever talking about market segmentation, and in particular age, I always mention price-discrimination. Bus services are able to charge different prices to different age groups to maximise their profits due to the different elasticities of demand. Analysis such as this will gain high marks. Although this essay ably notes how markets can be segmented, it doesn't really explain how a business can benefit from identifying their segments. For example, when saying that gender can be targeted, the essay could add that females are more likely to read magazines, so advertising can be allocated there.

Response to question

This essay explains market segmentation in a concise way, offering an insight into how it can aid a business. At times, they assert their knowledge when I would have personally explained further. For example in the introduction, I would've made reference that businesses who don't segment their market can't target marketing, thus affecting their profitability.

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