Write a report advising Livelong how the understanding of market segmentation might help him improve his business prospects. Your report should include a discussion of appropriate segmentation criteria and provide an example of how they might be used in t

University Degree Business and Administrative studies

Question 2: Write a report advising Livelong how the understanding of market segmentation might help him improve his business prospects. Your report should include a discussion of appropriate segmentation criteria and provide an example of how they might be used in the health food market.

Definition: “A marketing technique that targets a group of customers with specific characteristics.’”

Explanation: To market products effectively to consumers, market segmentation, gives a company the understanding of groups of customers having the same interests and needs: what are their priorities when selecting the same product? What are they primarily looking for in a product? This profiling of consumer groups helps the company to decide which set of customers it has the best opportunity to sell to most cost effectively, easily and competitively, so as to gain the biggest market share by positioning the same product in different ways to different consumer groups.

How knowledge of market segmentation can help Mr. Livelong improve his business:

If the market for health-food products is studied, we can identify several groups of people who buy cereal based health foods and snacks for different reasons. Some groups of consumers are more interested in health foods than others. If we can identify the people who are more prone to buy health foods, we could spend our resources on targeting only those people with our marketing messages and therefore increase our profitability. If we just try to sell to a mass market and scatter our promotional resources everywhere, it would just be a waste of time, effort and money. The revenue from this scattered marketing is likely to be much less than that which can be achieved from targeting segments of market which would actually buy the products. Thus, the understanding of market segmentation can help Rufedge’s profitability.

Segmentation Variables: There are several ways of segmenting the market. The most common segmentation variables are briefly explained below:

Geographic Segmentation – deals with areas or physical locations where a product is most popular amongst residents.
Demographic Segmentation – investigates the age group or the gender of consumers who are most likely to buy the product.
Psychographic Segmentation – looks into the groups of people whose lifestyle fits better with the nature of the product.
Socio-Economic Segmentation – this variable gives insight into the segments of population who can actually afford the product.

Segmentation Criteria: In conjunction with ...

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Segmentation Variables: There are several ways of segmenting the market. The most common segmentation variables are briefly explained below:

Geographic Segmentation – deals with areas or physical locations where a product is most popular amongst residents.
Demographic Segmentation – investigates the age group or the gender of consumers who are most likely to buy the product.
Psychographic Segmentation – looks into the groups of people whose lifestyle fits better with the nature of the product.
Socio-Economic Segmentation – this variable gives insight into the segments of population who can actually afford the product.

Segmentation Criteria: In conjunction with identifying the segments in the market, consideration has to be given to the actual practicality of acquiring the knowledge of different segments. Certain criteria have to be met to help target the right market segments & sell to them successfully, such as:

Viability of the segment: is the segmented consumer group presenting a good enough opportunity to actually be a profitable venture? This means that the identified segment should be large enough so that the kind of product they are most interested in can be produced cost-effectively to be sold at a good profit. If the segment is too small, the production cost of their preferred product will be too high; the sale prices will be higher and even if the consumer group likes the product, because of the fact that it has become out of their economic reach, they might not be so eager to buy it. This may not allow the producer to compete with other sellers of the same product, resulting in possible loss of market share.
Accessibility of the segment: can the segment be easily approached? How easy and financially viable is it to promote products to them? It is easier to get into a segment in the local market than access globally based segments.
Measurability of the segment: Can we actually identify the segment clearly based on apparent characteristics? Emotions cannot be measured but segment size and its power to purchase can.

Application of segmentation to the health food market and examples of using it for Cereal based health foods and snacks:

Rufedge’s products can be targeted towards the following segments:

Geographic Segmentation:

We know that Rufedge stock their products in health-food shops as well as with other retailers. Health foods are still a fancy concept and although products in this category are growing in popularity, yet processed health food products are expensive, and we see that health food shops are basically speciality shops mainly located in more affluent neighbourhoods. Therefore geographically, the segment for Rufedge’s products should be wealthier post code areas.

Demographic Segmentation:

Age: health foods are likely to be particularly attractive to 20-40 years olds because they want to look good and take care of themselves. It is already know that Rufedge are targeting their products towards adults. Therefore they should continue promotion in the same segmentation.

Gender: Women are very conscious of their weight and want to find new and easier ways to diet. Dieting and healthy eating are commonly taken in the same context. Therefore women could be a better segment than men to promote cereal based health foods like Good4U bars as a popular and preferred way to keep fit.

Socio-economic segmentation:

It can be can assume that since the company is situated in the southern part of the country, where the economic conditions are better than the rest of the country, and the spending power of consumers is higher, Rufedge could target the high income level segment. Also, we have to acknowledge that people with low income level are not generally going to spend money on a posh thing like cereal bars, especially because being in the category of ‘health foods’ they are perceived to be expensive and people with low income would rather cook their breakfast at home from scratch. Their social class segmentation should be C2 and above.

Psychographic Segmentation: Since psychographic segmentation is related to interests and lifestyle, people with busy lifestyles and health related interests should be targeted because busy people like working mothers and people who actively participate in sports should be considered as a segment for Rufedge’s products.

References:

Websites accessed on 20th January 2008

http://www.investorwords.com/2988/market_segmentation.html

http://www.marketingteacher.com/Lessons/lesson_segmentation.htm

http://www.sykronix.com/tsoc/courses/prin/pr_seg.htm

http://www.ingentaconnect.com/content/bsc/jhnd/2001/00000014/00000002/art00278