I. Introduction
In a market, there are buyers, and these buyers are different in one way or another in most cases. These buyers can differ in needs, wants, location, buying behavior, and resources. To make the best marketing plan a marketer can come up with he must first find his niche or his target market. In order to market your product or service efficiently, it is imperative that you tailor your marketing and sales efforts to specifically reach the segment of population that will most likely buy your product or service. It is critical that before anything else; first determine or clearly identify your primary market. By doing so, the firm's energies and funds then can be spent more efficiently and in pursuit of profits for the company. If the company doesn't know who its customers are, how will it be able to assess whether it is meeting their needs? Since success depends on the firms being able to meet customers' needs and desires, it must know who its customers are, what they want, where they live and what they can afford. This is where finding the target market becomes important.
In finding the target market a company or marketer must go through 3 steps. The first and the most crucial process among the steps is market segmentation. Market segmentation by definition: "is the process of dividing the market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products or market mixes."
It is a business function wherein the marketer identifies the differences and similarities between certain groups of people, so he can divide the market into smaller groups thus coming up with smaller and better defined target market possibilities.
A marketer can segment the market by any number of single or a mix of fixed segmentation variables. Fixed Variables such as: geographic segmentation, demographic segmentation, psychographic segmentation and behavioral segmentation, are assessed, divided and mixed; the variables are analyzed together, separately, and in a number of different combinations to come up with the best mix for the most viable target group. But before going there, we must see first the importance of market segmentation.
II. Market Segmentation
It is in market segmentation where the marketer starts to choose the best way of selling their products, and the best people to sell to. This being mainly because of the fact, that not all consumers will have the same or equal appeal and interest to the organization's products and services. All buyers /consumers have their own specific needs and wants. Moreover, there are numerous consumers with various characteristics and they are scattered all across the country. Ideally organizations should cater to consumers specific wants and demands but this practice will use up too much of the company's profit for it to remain profitable. Not all companies can serve the entire market and company resources should be maximized by concentrating marketing resources on a well defined group rather than on individuals. This is especially important to small business' who can compete, and operate more profitably by serving a small defined market, rather competing with the big well funded firms on the open market. It is in cases like this, that market segmentation comes in, and plays a very important role. Aside from cases of small companies; any company, regardless of its size, must identify parts of the market where it can serve best, not have to compete directly with other companies, and use as little resources as possible. With this in mind, it is best to now take a look at the different variables of market segmentation which marketers use as a guide in segmenting possible target markets. The different variables for segmentation are the following:
III. Variables to Segmentation
Geographic Segmentation:
In geographic segmentation, the market is divided on the basis of their location. They are divided in districts, vicinities, cities, states, regions and countries. A company can choose one of these geographic locations and concentrate on them or they could work on all of them but must consider some differences between these locations. The reason why companies work on various or on all locations are because people in different places have diverse needs and wants. For example, if an American company that sells canned goods decides to distribute their products ...
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III. Variables to Segmentation
Geographic Segmentation:
In geographic segmentation, the market is divided on the basis of their location. They are divided in districts, vicinities, cities, states, regions and countries. A company can choose one of these geographic locations and concentrate on them or they could work on all of them but must consider some differences between these locations. The reason why companies work on various or on all locations are because people in different places have diverse needs and wants. For example, if an American company that sells canned goods decides to distribute their products in China, it is important that they change their packaging in that country containing instructions and labels in Chinese so that those consumer will be able to identify the product and understand the instructions. Another example is if it was a small company, it would be very difficult to compete with superior existing competitors. Superior competitors more often than not, have a big market share for a certain product in the city. What these companies do is, they enter the market where there is less competition, which is the rural areas and the provinces. They will have more chances of generating profits and gaining market share in that specific location. On top of these things geographic segmentation is considered important because people in the same place will need the same things. For example people who live in Alaska will need parkas while people in the Philippines will not. These things will have to be taken into consideration when segmenting the market. The next variable to segmentation is the demographic segment.
Demographic Segmentation:
Demographic segmentation, still proves to be the most common way marketers divide the market into certain groups. Segments here are divided based on personal characteristics such as: age and family life cycle, income and gender. Some other ways to group the market is by education, race, nationality, and generation. These are certain personal characteristics that marketers use to identify who to sell their products to. When we think of needs and wants, it is mainly related to the demographic variables making it one of the mostly used type of market segmentation. Moreover, in this type of segmentation, it is the easiest way to measure the market.
Age and Family Life-Cycle: Consumers' needs and wants change when they grow older and reach one stage in life and on to the next. Hence, companies set a line products and services for different age groups. For example, a diaper company can have products for infants, but they can also provide diapers for adults. Two different age groups are being served in this manner.
Gender: In this type of segmentation, marketers divide the market by their sex/gender. These divisions tend to be famous for clothing/ apparel and cosmetics. There are companies that concentrate on marketing and providing clothes only for men, and other companies some for women only. There are clothes companies, such as "Bench" that provide products for both genders but have specific outlets that only sell for women. This is an example how marketers segment markets by gender.
Income: Marketers divide the market by income usually when they sell luxury goods and services. Automobiles, jewelry and clothing are the most common products that companies have to use apply segmentation based on income. For example, when it comes to cars, automobile manufacturers would build certain cars for the different income earners. For example, Toyota makes automobiles from economical to semi-luxurious cars for blue-collar workers and medium-income earners. But the company also has the brand Lexus, that are much more luxurious and that are marketed to high-income earners. This is an example on how a company would use income to divide the market.
Psychographic Segmentation:
In this type of segmentation, the consumers are divided into certain groups based on their self-image. It is usually segmented according to variables which the person sees of his/herself. Variables such as personality, lifestyle, and personal values. This type of segmentation can be related to demographics; however, consumers that are part of the same demographic may have different psychographic characteristics. Thus the need for this type of segmentation.
Personality: There are marketers that use personalities as the basis for segmenting the market. This could be seen in companies that sell clothes, there are shops that sell clothes that appeal to ravers such as "Havoc". Buyers of havoc have a personality of being dark, full of rage, furious, and just very open and comfortable with expressing their personality. On the other hand, an example of a company that sells clothes is "Folded n Hung." Buyers of this shop tend to be casual, conservative, and prestige conscious. We could see two different shops that cater to two different group personalities but both have the same demographic variables.
Lifestyle: Marketers that use lifestyle as a way of segmenting the market must be very careful. Not all lifestyle segmentations do work and this can create great losses for one company. When we talk about lifestyle, it is the buyer's way of living. It concerns what the buyer does, how he does it, when he does it, etc. in a day-to-day basis. What people buy reflects the interests and the lifestyle of the buyer. An example of a business that used lifestyle segmentation is a company that makes microwavable and ready-made food products. People that are always on a hurry, too busy, and never have time to prepare a meal for themselves is a lifestyle that microwavable food manufacturers can concentrate on. These kinds of products will be very appealing to those with a very busy lifestyle.
Values: Marketers also use values segmentation. They divide the market according to their beliefs, values, and their principles. Marketers think that if they can please the people's desires, values and beliefs, it can possibly influence the buying behavior of these consumers. A good example of this is the issue now about fighting to save the sharks, not far back sharks fin soup was a delicacy and a well bought one at that. But with the increased environmental awareness, brought about by the documentation of the cruelty and wastefulness of taking a shark's fins by environmental activists; the demand for the fin has declined and even in some places around the world they pride themselves in "artificial sharks fin". The concern and awareness of the consumer in this case literally curbed the market for sharks fin to minimum.
Knowing the psychographic one moves on to behavioral segmentation.
Behavioral Segmentation:
In behavioral segmentation, the buyers are divided into groups on the basis of their attitudes and responses towards certain products. benefits and usage rates of certain products. People tend to look for incentives and bargains and more. In behavioral segmentation, marketers tend to concentrate on what the people look for and how much they use it. This is the market which is most often built upon to create the target market. Variables in the behavioral segment include:
Benefits: Benefits segmentation is a type of behavioral segmentation wherein the marketers group the market according to what people look for in a certain product. It often identifies and concentrates on what benefits that most people are interested in and using that as a way to get to the customers. For example, with cellular phones, there are benefits that people look for in a cellular phone. It could be that it should provide multimedia message services or it should have a built-in camera or it should be able to access the internets. People look for these certain benefits in a brand and this is where they base their decisions on.
Usage-rate: This is a type of behavioral segmentation that involves grouping people/buyers into light, medium, and heavy-users. Marketers would want to concentrate and focus on the heavy-users. Even though there are usually only a few in the population/ market that are heavy users of a certain product, still marketers want to concentrate on marketing to this group rather than trying to promote a product to light users. It is much more common to convince one heavy user than to convince a number of light users. An example of this is cigarettes. A cigarette company for example Marlboro would want to convince existing heavy-smokers to increase usage of the product than to attract light users and even create new users of the product.
Occasions: Consumers tend to create a need, purchase a product, and use a product, when a certain occasion comes along. This is a type of segmentation wherein the marketers use occasions as the basis of their market groupings. For example, airline companies take advantage of occasions such as Christmas and the summer season. Airline companies can offer packages and they have charter airlines to satisfy those air travel needs of consumers.
IV. BMW
There are different ways to segment a market, limited only by the marketer's creativity. In knowing this it is a common practice at present that the different fixed variables for segmentation are used merely as a guide and not so much a rule book. Nowadays it is common for marketers to try to mix and match different variables for segmentation coming up with a creative, and well defined target group. Using multiple variables gives marketers the power to further define a target market, raising the probability that the target market will be successful. To better illustrate the use of multiple variables I have chosen the case of BMW cars, specifically the case of the three series line.
As is very well known the three series line of the BMW stable is as versatile as it is defined offering 6 different body styles with a choice of four different engine displacements. For my purposes I'll take into consideration only the 325 class, which is offered as mentioned earlier in 6 different body types, targeted at different markets but here I will only discuss 3, the most specialized three. These will be the 325 sedan, the 325 station wagon, and the pride of the 3-series line the M3. The basis for BMW's segmentation of the 3 series was behavioral, as it is with most others. BMW first and foremost catered to drivers, people who love their cars and love to drive them, thus the tag line "the driver's car". The lowest of the 325 line is the 325 sedan, it was built to be a driver's car and that's what it is. on top of the behavioral aspect, the sedan BMW demographics that were targeted were: both genders in the 25-35 year old age group; had a considerable amount of income; who were either single or newly married. Pychographically speaking they were of the social class A or B; with active, busy and lavish lifestyles. These people were drivers and they used their car often if not daily. The sedan you could say was marketed as an all rounder with a touch of class, it was a status symbol of sorts; targeted mainly at the modern day yuppies, who wanted the best out of their lives and out of their car; a compact, no-frills package for those who had a love for driving. This is a good illustration of a well mixed market segment which has worked wonders for the sales of the BMW 325. Striving for more BMW didn't just stop at the 325 sedan. Realizing that their existing market of 325 drivers would go on with their lives and one day get married and have children, BMW reacted with another product with a different target market in mind. The outcome: the 325 station wagon. The wagon's target market was in some ways an offshoot of the sedans, the mix here though alike is every bit as complex as the last. The wagon was demographically targeted at the 25-40 age range, married with children. Had a social class of A, B; had a luxurious lifestyle, which was always on the go. These people were most likely previous BMW owners who just had to make more room for the kids. After launch the wagon experienced an initial disapproval from the general public, but having faith in their market segmentation BMW kept the wagon and later it paid off. The idea that previous BMW owners would be the initial market was right on the money and the 325 wagon garnered success. The wagon was another illustration of effective market segmentation on the part of BMW. As market segmentations first goal is to identify smaller and well defined target groups, BMW did it so well. The smallest and most defined target market BMW has by far come up with was the market for its super 3-series coupe the M3. The M3 was targeted at a market of a different level; these were the driving enthusiasts of the highest level. With no demographic variables to really considered for this market. BMW's creation of the M3 catered to the sports car enthusiast; social class standing being A; and a lifestyle befitting the rich and famous. This was the driver who loved to play and could afford to pay. BMW merely provided the toys for them to play with. This market segment though seemingly simple was the most delicate to come up with. But yet in the end BMW's segmentations proved effective to this BMW owes its success.
V. Conclusion
Seeing the examples mentioned above it is obvious that market segmentation is not merely done by choosing a segment and then catering to it. It involves a study, and a careful analysis of the different combinations a marketer can come up with. This delicate mixing and matching can spell the success or failure of a given target market. And only effective market segmentation can ensure a thriving target market, and later a marketing strategy catering to that market.
VI. Sources
). www.bmwcars.org
2). www.udel.edu/alex/chapt9.htm
3). P.Kotler, Marketing Management, Analysis and Control, 7th ed. Prentice Hall, NY, Englewood Cliffs, NJ, 1991
Table of contents
I. Introduction page 1
II. Market Segmentation page 2
III. Variables to Segmentation page 3
IV. BMW page 9
V. Conclusion page 11
VI. Sources page 12
Marketing
BA-334
Mr. Ochosa
Marco Ignacio Lacson Santos
0523-0600-0193