Market segmentation process
In the article of Today I am going to talk to you about the market segmentation process, its importance, the advantages and disadvantages. It should be noted that market segmentation is only the first step to be able to select a objetivo market or objetivo market.
For this reason, I want you to keep in mind from the beginning that market segmentation is part of another process, which will allow you to accurately delimit the group of people whose product will satisfy their needs and position said product.
I hope the article is useful to you and remember that you will be able to find the bibliography at the end of the article.
What is the market?
Of course, before explaining what market segmentation means, you first have to know what the market is.
Of course, there are many definitions of the market, but from a marketing point of view, the market cánido be seen as the place (physical or virtual) in which suppliers satisfy the needs of demanders (clients and consumers), through of the exchange.
Market Definition
If you want to know other definitions or if you want to know the market types, I recommend you entrar the following article:
Definition of market segmentation
What is market segmentation? Next, I am going to share some of the definitions that I have found in books on market segmentation.
In such a way that you perro know the definition of market segmentation according to authors and not just what I tell you.
Of course, at the end of the article you will be able to find the bibliography.
Definition according to Laura Estela Fischer de la Vega
«Market segmentation is a process by which a group of homogeneous buyers is identified or taken, that is, the market is divided into several submarkets or segments according to the different purchase desires and requirements of buyers» (2018, p.57).
Definition of market segmentation according to Roger A.
Kerin and Steven W.
Hartley
“Market segmentation consists of dividing potential buyers into groups that: 1) have common needs and 2) respond in a afín way to a marketing action»
(2018, p.221)
Notably the groups resulting from the process are the market segments.
Definition of market segmentation according to Philip Kotler
«Divide a market into smaller groups with different needs, characteristics, or behaviors, and who might require different strategies or marketing mixes”
(2012, p.190)
Definition according to Michael R.
Solomon and Elnora W.
Stuart
“Segmentation is the process of dividing a large market into small parts based on one or more significant shared characteristics”
(2001, p.202)
Definition of the segmentation process according to Munuera Alemán
«Market segmentation is a process aimed at identifying those consumers with homogeneous needs so that it is possible to establish for each group a differentiated commercial offer, oriented in a specific way towards the needs, interests and preferences of the consumers that make up the market. that group or segment» (2016 p.79)
Explanation of what market segmentation is
We know that companies are not capable of covering their entire reference market.
Therefore, they have to choose a small part of their entire reference market.
By choosing a smaller equipo of people we cánido ensure that that group have something in common (they are afín people)in such a way that encuentro your needs is much easier.
In simpler words, what market segmentation does is divide a population into groups according to a certain criterion (characteristic) or criteria.
For example, let’s group all the people who like vídeo games.
By the way, you perro continue segmenting more.
So that Market segmentation answers the following question: Who will be our clients?
Importance of market segmentation
As I have said before, it is important to carry out market segmentation, because thanks to which you will be able to respond more effectively to the needs of the chosen group.
So that your product will be able to better satisfy the needs of that group and therefore, you will be able to increase your sales (more profits).
Think about the following, if you wanted to eat a whole cake, would you be able to? There may be people who cánido, but most couldn’t.
Which is why you have to take a slice or two of the pie.
The same happens with companies, since you are not going to have the ability to cover all market segments and instead of ineffectively covering all segments, it is better Focus your resources on one segment.
To further highlight the importance of market segmentation, then I am going to put you benefits and advantages.
Benefits of using the market segmentation process according to Munuera Alemán
- It helps you identify good market opportunities, since you cánido discover niches or needs that are not being exploited.
So you cánido meet those needs.
- In mature products-markets, or in decline, you cánido come to identify segments in the growth phase.
- It allows you to establish an order of priority between the segments, which contributes to a better allocation of resources.
- You perro better adapt your marketing strategies, because they cánido be better adapted to the needs of consumers.
Advantages of using the market segmentation process
Laura Estela Fischer de la Vega tells us that the advantages of implementing the market segmentation process (segment) are the following:
- Clearer and more appropriate classification of the product being sold.
- Centralization of the market towards a specific area.
- Provide better service for customers and consumers.
- It has a good image, exclusivity and category.
- Facilitates advertising.
- You get more sales.
- Achieve better product distribution.
- It is known what the source of the business is and where the resources and efforts will be focused.
- You save time, money, and effort by not placing your product where it won’t sell.
- It defines who the product is aimed at and the characteristics of the consumers.
- Facilitates analysis for decision making.
- The competition is easier to identify.
Disadvantages of using the market segmentation process
The disadvantages that Estela Fischer mentions in her book depend on one thing, the fallo, that is, if a good market segmentation is not carried outthe following may occur:
- Decrease in profits.
- Customer exclusion.
- Loss of business opportunities.
- Wrong selection of market strategies.
When should market segmentation not be carried out?
According to Roger A.
Kerin and Steven W.
Hartley, a company has to avoid making market segmentation “when the expenses exceed the possible increases in income resulting from the process” (2018, p 222).
Criteria and methods of the market segmentation process
According to Munuera Alemán, segmentation criteria cánido be classified according to three large groups:
- 1) Segmentation based on the benefit sought by the consumer (What does he want?).
- 2) Segmentation focused on its behavior (What does it do?).
- 3) Segmentation based on the characteristics of the consumer (Who and what is he like?).
Profit-Based Segmentation
It really is very fácil and the name already tells you everything.
It is basically based on the reasons why a consumer chooses your product and not that of the competition, that is, on the characteristics and attributes of the product that induce them to buy.
segmentation based on behavior
Like the previous one, the name says it all.
What you have to do is segment according to consumer behavior.
For example, what brands do you buy, what is your price sensitivity, how often do you buy, etcétera.
Segmentation based on consumer characteristics
Here, a subdivision cánido be made, that is, we perro include criteria of demographic, socioeconomic characteristics, lifestyle and the personality of the segment that we want to attack.
It should be noted that Munuera mentions that segmentation based on the benefit sought is known as first-order segmentation or direct segmentation.
On the other hand, when the segmentation is based on the characteristics of the consumer, it is an indirect or second-order segmentation –also called descriptive–, since the emphasis is placed on the description of the individuals that constitute a segment, rather than on the analysis.
of the factors that explain its formation.
With the above in mind, some researchers begin segmenting with first-order segmentation and then use second-order segmentation.
Although, it should be noted that some prefer to start with the second order segmentation, and then the first order.
In the case of behavioral segmentation, it is often combined with segmentation based on characteristics and build a good marketing program from them.
Now that you know which criteria are most useful for what the company intends to achieve (the objectives), it is time to use statistical methods that allow us to divide consumers into homogeneous segments.
Two methods that you perro use are the following:
- 1) Segmentation techniques or a priori segmentation designs.
- 2) Typology techniques or a posteriori segmentation designs.
Segmentation techniques or a priori segmentation designs
«The researcher selects a variable to explain before carrying out the analysis.
Subsequently, he considers various explanatory cambiantes and tries to analyze how they are related to the previous one through a equipo of techniques.
The most widely used are the Belson method, the analysis of variance, the Chi-square, the Sonsquist and Morgan method, the Canguilhem model and the discriminant analysis» (Munuera, Alemán).
Typology techniques or a posteriori segmentation designs
«Consumers are grouped according to the similarity of their multivariate profiles, without making a distinction between explanatory cambiantes and explained cambiantes.
For the application of these techniques, classification analysis or cluster analysis is preferably used.
This type of analysis adapts to any kind of measurement, continuous or discrete, of objective or perceptual research» (Munuera, Alemán).
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Definition of objetivo marketing or objetivo market
According to Philip Kotler, the objetivo market “It is the process of evaluating the attractiveness of each market segment and choosing one or more elements to try to entrar it” (2012, p.190).
Therefore, in a nutshell, it is the segment (segments) that you have selected and in which you have wanted to compete.
Of course, in relation to your product.
Note: the objetivo market is also known as objetivo market either objetivo audiences.
Steps to select a objetivo market
In the book «Digital Marketing», written by María Luisa Martín Jiménez, the 3 primordial steps so you perro select a objetivo market.
In fact, I have to say that it is not the only book in which the same three steps cánido be found.
For example, you perro also find the same steps in the book “Marketing: Real People, Real Decisions,” written by Michael R.
Solomon and Elnora W.
Stuart.
The steps in the process to select the objetivo market are:
- Segmentation.
- Determination of the objetivo market.
- Positioning.
Next I am going to put an image, taken from Philip Kotler’s book, where you perro see the same three steps, but with sub-steps.
(2000)
Segmentation
In the segmentation part, well, that is what has been talked about, that is, market segmentation has to be carried out.
It should be noted that you cánido use different segmentation methods, which I will talk about later.
Determination of the objetivo market
As the definition of the objetivo market says, since you have all the segments, you have to evaluate them and select at least one.
So, you have to select the segment or segments in which you want to compete.
positioning
The product you have designed has to meet the needs of the segment in which you are going to compete (the one you have chosen) and you have to start positioning your product. What is positioning? According to María Luisa Martín Jiménez, the positioning is as follows:
“The place that the product occupies in the minds of consumers in relation to competing products”
(2019, p.16)
For example, what do you think of when I say Pritt? Actually, the correct thing would be to say Pritt adhesive pencil, because there are more brands that offer adhesive pencils, but Pritt’s positioning is so great that when we talk about adhesive pencils, the first thing many people think of is Pritt.
What do you think? I think you would like to work on positioning your product to that degree.
Bibliography
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