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What is the meaning of Market segmentation? Concept, Definition of Market segmentation

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Concepts and meanings of market segmentation

Meaning of market segmentation

Market segmentation is the process of dividing, as his word says of segmenting a market into smaller uniform groups that have similar needs and characteristics. The following types of segments we can see acontinuación: these segments are homogenous groups (e.g., persons in a segment are similar in their attitudes about certain variables). Due to this similarity within each group, it is likely to respond similarly to certain marketing strategies. That is, they will probably have the same reactions about the marketing mix for a given product, sold at a certain price, distributed in a way determined and promoted in a given way.

Features

1 Measurability: that can measure purchasing power, the amount of people, and the profile of those who compose each segment.
2. Accessibility: we must take into account a portion of the market that can serve and reach effectively.
3 Sustanciabilidad: the segments of the market should be plenty large and profitable.
4. Operation: effective programs must be designed to attract those consumers.

Types

1 Geographic: Divided by countries, regions, cities or neighborhoods.
2. Demographic: They are divided by age and stage in the life cycle. By gender.
3 Psychographic: Divided according to social class, life style, personality and tastes.
4 Behavioral: It is divided according to the ducts, purported benefits, loyalty to the brand and attitude to the product.

Requirements for a good segmentation

The requirements for a good segmentation are:
• Homogeneity in the segment
• Heterogeneity between segments
• Stability of segments


What is market segmentation

The market, consisting of buyers and sellers and which implies the institution from which the transaction of goods is carried out and services is neither uniform nor much less, but is composed of a diversity of people, companies, which differ in different issues such as: age, culture, socioeconomic status, style, personality, preferences and purchasing power, among others.
By this same is that from the marketing discipline that deals with the study of the behavior of consumers and markets, faced with the impossibility of developing a plan comprising all the heterogeneity that implies a market, we decided segmenting, dividing it into groups based on characteristics that share, and then, in relation to these conditionsIt will outline an effective plan.
The aforementioned partition of the market it is called marketing market segmentation and is one of the most precious tools of this specialty when it comes to the promotion of products and services.
The basic and primordial objective proposed market segmentation is the ability to reach each segment from concrete and special activities that report benefits and of course an advantage in the competition.
Should be noted that to make segments resulting from fragmentation functional objectives proposed company must meet the following requirements: be measurable (that feasible to measure situations such as: profiles and be able to purchase), be accessible (that you can easily reach the segment), substantial (the segment must be more representative and large) and be differential (segments must be very different each other). Such requirements are the key segmentation and of them depends on the success or failure of the plan at a hundred percent.


Meaning of market segmentation

The action and effect of segmenting is known as segmentation. It is the division of something into segments, fragments or portions.
A market, on the other hand, is a social institution that fosters the exchange of goods and services. The market arises with the union of vendors (suppliers) and buyers (plaintiffs), who established a commercial relationship to realize transactions or agreements.
The notion of market segmentation, therefore, refers to the division of the market into smaller uniform groups whose members share certain characteristics and needs. Such groups are not imposed in an arbitrary manner, but rather it arises after a market research that identifies different segments.
Market segmentation reveals the existence of groups homogeneous in terms of its members (with people as part of similar trends and respond in ways similar to marketing strategies), but heterogeneous among themselves (a group is not similar to another).
To develop segmentation, segments must be identifiable, measurable, accessible, and manageable. Logic indicates that each segment must be sufficiently broad as to which it is profitable; otherwise, a businessman would have no grounds for direct marketing strategies to that group or investing in innovation for the development of new products aimed at the segment.
The deep segmentation occurs when many variables that provide a broad knowledge of each segment are taken. This allows trace a buyer profile and anticipate with relative accuracy how consumers will react.


Definition of market segmentation

Market segmentation

The segmentation of markets is a process whereby is identified or a group of buyers is taken with similar characteristics, i.e., the market is divided into several segments, according to the different wishes of purchase and customer requirements.
Below you will find three cases where different marketing strategies, depending on what looks for the company and the characteristics of the consumers are implemented.
• Mass marketing. In it, entrepreneurs produce, distribute and promote, en masse, one product among all clients. For example, there was a time in which the refresqueras bottled a unique product for the entire market, with the hope that captured the preference of the public. This type of marketing is based on the assumption that minimizes costs and price, thus creating the maximum market potential.
• Differentiated by product marketing. In this case, employers made two or more products that show features, styles, qualities, sizes and other different aspects for each. For example, at present, the bottlers produce several drinks in different sizes and containers. Thus they intend to offer variety, rather than capture the interest of the various segments of the market.
• Marketing of selection of market segments. Here, entrepreneurs distinguish market segments, choose one or more, create products and perform promotions intended, exclusively, to each segment. For example, some bottlers created light refreshments to satisfy the needs of consumers concerned about their diet.



Market segmentation concept

A market is not a homogenous whole. It is composed of hundreds, thousands and even millions of individuals, companies, or organizations that are different from the other depending on its location, socioeconomic status, culture, preferences, purchase, style, personality, ability to purchase, etc.
All this 'diversity', makes it almost impossible the implementation of an effort of marketing to the entire market, for two fundamental reasons: first, the high costs that this would entail, and second, because he would not obtain the desired result as to make it profitable.
For these reasons, emerges the urgent need of dividing the market into groups whose members have certain characteristics that look like them and enable the company to design and implement a marketing mix for the entire group, but at one much lower cost and with more satisfactory results than if did so for the entire market.
The task of dividing the market into groups with homogeneous characteristics, is known under the name of "market segmentation"; which becomes a strategic tool of marketing to lead efforts, in addition to optimize resources and achieve better results with greater accuracy.

Definition of market segmentation:

• The "marketing terms dictionary" of the American Marketing Association, defines the segmentation of the market as "the process of subdividing a market into subassemblies other than clients who behave in the same way or who have similar needs. Each subset can be conceived as an objective to be achieved with a different marketing strategy".
• On the other hand, Charles W. L. Hill and Gareth Jones defined the segmentation of the market as "the way in which a company decides to bring together customers, based on important differences in their needs or preferences, in order to achieve a competitive advantage".
• For Patrico Bonta and Mario Farber, the market segmentation is defined as "the process by which the market is divided into smaller according to a certain portions features, that you will be useful to the company to comply with its plans. By segmenting the market efforts of marketing in the chosen segment can maximize and provides his knowledge".
In synthesis, the segmentation of the market can be defined as "the process through which a company subdivides a market in subsets of clients according to certain characteristics that are useful." "The purpose of market segmentation is the reach to every subset with specific marketing activities to achieve a competitive advantage".

Benefits of market segmentation:

According to Stanton, Walker and Etzel, the segmentation of the market offers the following benefits to companies that engaged in it:
• Show a congruence with the concept of marketing to orient their products, pricing, promotion, and channels of distribution to customers.
• Better leverage their marketing resources by focusing them towards segments really potential for the company.
• They compete most effectively in specific segments where you can deploy their strengths.
• Your marketing efforts are not diluted in segments without potential, in this way, they may be better employed in those segments that have a greater potential.
• Helping your customers find products or services best suited to your needs or desires.

Requirements for an optimal segmentation of the market

According to Kotler and Armstrong, market segments to be useful to the purposes of a business, they must meet the following requirements:
• Be measurable: i.e. that cannot be determined (in a manner precise or approximate) aspects such as size, buying power and profiles of the components of each segment.
• Be accessible: you can reach them effectively with all the marketing mix.
• Be substantial: i.e. which are the sufficiently large or profitable to serve them. A segment must be the possible largest homogenous group that worth go with a marketing program to measure.
• Be differential: A segment must be clearly distinct from another, in such a way to respond in a particular way to the different marketing activities.
There is no doubt, that the segmentation of the market is one of the main strategic tools of marketing, which aims to identify and determine those groups with homogeneous characteristics (segments) toward which the company can direct their efforts and resources (marketing) for profitable results.
It is therefore of vital importance that companies and organizations carried out a good market segmentation, choosing those segments that meet the basic requirements (be measurable, accessible, substantial and differential). In this way, enterprises and organizations shall enjoy the benefits of a good market segmentation ranging from improving its image to show congruence with the concept of marketing to

Definition of market segmentation

It is defined as the strategy used to divide the market into distinct groups of buyers who are estimated to require different products or marketing mix different. In this way the company increases their profitability, you can segment markets according to various dimensions: geographic segmentation, psychographic, demographic, based on criteria of behaviour of the product and by customer category.
Geographic segmentation: The markets are divided into different geographical units such as countries, regions, departments, municipalities, cities, communes and neighbourhoods. It must be taken into account that some products are sensitive to the culture of a nation, town or region.
Psychographic segmentation: The market is divided into different groups based on characteristics of buyers such as social class, lifestyle, personality types, attitudes of the same person to himself, towards their work, family, beliefs and values. The segmentation by attitudes is known as behavioral segmentation and is considered by some mercadeologos as the best choice to start a market segmentation.
Demographic segmentation: The market is divided into groups according to variables such as sex, age, income, education, ethnicity, religion and nationality. The most common is to segment a market by combining two or more demographic variables.
Segmentation based on product performance criteria: refers to the way in which buyers use product and the way in which it fits in their processes of perception of their needs and desires.
Segmentation by customer category: markets can be divided according to the size of the accounts and these according to governmental, private sector or non-profit. In each classification the buying decision process has different characteristics and is determined by different rules, standards and assessment systems, and also different levels of specialization in the purchase.
The previous segmentation variables are oriented towards consumer markets. However, industrial markets can segment is also using these variables but also another very important as it is the segmentation approach of nest.

Segmentation by approach of nest

It is called nest because it is a structure of criteria will be built outside inward. These criteria are demographic factors, operational variables such as size of the account, need for services and technology; approaches of purchase of the customer such as the structures of power in the company, criteria and procurement policies; situational factors such as urgency, the requested size and the specific application of the product. At the core of the nest will be personal buyer characteristics such as their attitude toward risk, loyalty to the provider and similarities between seller and buyer.
The main objective of the market segmentation is to analyze a customer's operations to determine whether they are or are not suspected. The detection system of operations through market segmentation is based on the following principles:
• Each segment or group of operations should correspond to a group of clients that have common characteristics.
• Customers who normally perform operations on a given segment, have no financial justification to carry out operations in certain segments (upper segments).
• If a customer switches to a different segment, this necessarily is due to a change in their economic activity.
• Certain changes in segment, for example when decreases the volume of operations (lower segments), are not unusual.

Requirements for effective segmentation

Obviously, there are many other ways to segment a market. However, not all segmentations are effective. For example, buyers of table salt could be divided into consumers blond and mulattos. But the color of the hair is of no importance for the purchase of salt. In addition, if all buyers salt acquire the same amount every month, if they believe that all salt is equal and if they want to pay the same price, this market would be minimally segmentable from the point of view of marketing.
To be useful, the market segments must display the following characteristics:
• Measurability, the degree in which the size and purchasing power of the segments can be measured. Close segmentation variables are difficult to measure. An illustration would be the size of the segments of adolescent smokers, who smoke mainly to rebel against their parents.
• Accessibility, the degree to which can reach and serve effectively to segments. Suppose that a perfume company discovers that large users of your brand are single women that come out at night and frequenting bars. Unless this group live or shop at certain places and it is exposed to certain means of communication, it will be difficult to locate it.
• Sustanciabilidad, the degree in which the segments are sufficiently large or lucrative. A segment should be the homogeneous group more large possible it worthwhile to find a program specific marketing. For example, an automobile manufacturer not should you develop cars for people whose height was less than 1.22 metres.
• Drive, the degree in which it is possible to formulate programs to attract and serve the segments. For example, a small airline identified seven market segments, but his staff was too small to develop different programs of marketing for each segment.

Profiles of market segments

Once you have divided the market into segments and has determined that use of segmentation variables, you need to assess the extent to which possible products or services of your company may meet the needs of potential customers. With this purpose you develops profiles of pre-selected market segments, where you will describe the similarities between potential clients of each segment and the differences between people of different segments.
Remember that in segments, people should be very similar with respect to several characteristics or needs of a product or service and differ considerably from those persons who are in other segments of the market.
Through the development of profiles of market segments you may have a better view of how your company can use its capabilities to serve groups of potential customers.

Evaluation of the relevant segments of the market

Once we analyzed the profiles of market segments, you may find one or several relevant market segments which will require further analysis, as well as also segments that will decide to delete to make estimates sales, competition and costs to access each segment. Here you will make simulations on the computer with different marketing mixes, to evaluate profitability and see if your company is able to develop and maintain a marketing mix that meets the wishes and needs of the specific segment.

Target market selection

Today, enterprises are increasingly less profitable to do mass marketing or do so based on the variety of the product. Mass markets are fractious in hundreds of micromercados where groups will meet with different lifestyles looking for different products in different distribution channels and who are exposed to multiple communication channels. This is why companies adopt increasingly the concept of selecting target markets. Here you will analyse the profiles of market segments, will choose the most relevant and shall be fixed as target one or more of these segments and develop products and marketing programs tailored to each selected segment. Making marketing goals means that we are moving towards the micromercadeo where marketing programmes are designed and implemented to meet the needs and desires of specific groups of clients at a base of local marketing (by geographical area, by chain of stores, store).

Advantages of market segmentation

The most direct benefits of an efficient segmentation, is that the company or organization is in a better position to locate and compare the opportunities posed by the medium. This allows a better position to make modifications and adjustments to your products or goods, when required by the market and, finally, the company or organization can prepare a marketing program or commercial mix, having clearly defined the characteristics of each specific segment.
Market segmentation is the basis for the choice of target markets. Depending on the target market, the organisation or company must choose between an undifferentiated marketing strategy, differentiated or concentrated to address better the market target or segment

Market segmentation process.

Study: Examines the market to determine the specific needs met by current offerings, which aren't and which could be recognized. They are conducted interviews of scan and organize group sessions to better understand the motivations, attitudes and behaviors of consumers. It collects data on attributes and the importance given to them, awareness of brand and scores of brands, usage patterns and attitudes toward the category of products; as well as, demographics, psychographic, etc.
Analysis: the data are interpreted to eliminate variables and grouping or build the segment with consumers who share a requirement in particular and what distinguishes them from the other segments of the market with different needs.

Preparation of profiles: is preparing a profile of each group in terms of distinctive attitudes, behaviour, demographics, etc. Each segment is named based on its dominant feature. Segmentation should be repeated periodically because the segments change. Also investigates the hierarchy of attributes that consumers consider when choosing a brand, this process is called partition of markets. This may reveal new market segments.

Methods for segmentation of the market

• Undifferentiated marketing: the company not directs its efforts toward a single market segment does not acknowledge the different segments of the market but considers them a common whole with similar needs and designed a product and program marketing for a large number of buyers, by helping advertising media.
• Differentiated marketing this method is characterized by treating every customer as if the only person in the market. The company passes through two or more market segments and designs products and programs of marketing separately for each of these segments.
• Concentrated marketing this method tries to get a good market position in few areas that is seeking a greater share in a market rather minor portion in a large market.

Segmentation strategies

• Make a classification of clients by statistics which record the purchase of a specific product by ages and periods.
• Make a market study using most of the variables (bases) within any system.
• Production of market does not offer a single product on the market is considered to be several products that consumers go to buy.
Market segmentation is a way to look for new opportunities in the total market through the real knowledge of consumers. Takes place through a process that consists of 3 stages: study, analysis and preparation of profiles.
The market segment must be homogeneous to its interior, heterogeneous abroad, with one sufficient number of consumers to make it profitable; and operational, i.e., to include demographic dimensions in order to work properly in the plaza and product promotion. Segments are changing that is why it is important to carry out segmentation on a regular basis.

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