Market segmentation is the process of dividing an entire market up into different customer segments. Targeting or target marketing then entails deciding which potential customer segments the company will focus on. Marketing segmentation always comes before targeting, which helps a company be more selective about who they are marketing their products to. Marketing segmentation and targeting are equally important for ensuring the overall success of a company.
Significance of Marketing Segmentation
Marketing segmentation and targeting are particular important for finding customers that are the best match for a business’s products and services. It is not feasible to go after all customers, because customers have different wants, needs and tastes. Some customers want to be style leaders. They will always buy certain styles and usually pay a high price for them. Other customers are bargain shoppers. They try to find the lowest price. Obviously, a company would have difficulty targeting both of these market segments simultaneously with one type of product. For example, a company with premium products would not appeal to bargain shoppers.
Identification of Marketing Segmentation
The process of marketing segmentation and targeting are necessary to identify and target certain demographic groups. Customer demographics can include gender, age, income, household size, geographic area and even various ethnic groups. One or more of these demographic segments will be more likely to purchase a company’s products or services, while other demographic segments may be more suitable for competitive products or services. Hypothetically, a certain new radio station may discover that their music appeals more to 34-to-54-year-old women who earn over $50,000 per year. The station would then target these women in their marketing efforts.
Types of Marketing Segmentation
Marketing segmentation and targeting can be used for both consumer and business customers. Besides demographics, other ways to segment consumers is by different psychographic or behavioralistic characteristics, such as their interest and usage rate, respectively, according to the article “Market Segmentation” at Net MBA, a well-respected online business reference site. Business customers are usually segmented by company type and size. For example, a small food distributor may likely target small or mid-sized restaurants, hospitals and nursing homes.
Function of Marketing Segmentation
Marketing segmentation can be a lengthy process. It is important for the company to know exactly which segments represent the most potential sales for its business. After a company identifies all possible market segments, it can start targeting these customer segments with direct mail, magazine, radio, television, and even Internet marketing. Targeting specific customers entails creating the right advertising message with the right media. For example, an ad for an expensive perfume would be well-suited for one or more premium style magazines that fill grocery store magazine racks.
Considerations of Marketing Segmentation
Companies can perform marketing segmentation and targeting by first conducting some marketing research. The company will need to include demographic types of questions, so it can later determine which demographic groups comprise the majority of their customer base. Companies that use marketing segmentation and targeting properly can usually expect great sales and profits, according to Evan Carmichael’s site, a top resource for small business strategies.