Market segmentation is the process through which a huge and homogenous market is subdivided into segments that can be identified without difficulties. The segments are characterized by similar wants, needs, or demand qualities.
Segmentation aims at developing a marketing mix which meets customer’s expectations in a particular segment. Most companies are small; hence, they find it difficult to adequately satisfy the whole market; thus, the entire demand is broken down into segments. Segmentation has several disadvantages that companies should overcome.
Although segmentation has its advantages, the strategy still has disadvantages that companies should find ways of overcoming. This is because segmentation may lead to losses instead of the anticipated profits and growth of the companies. Different companies experience losses as a result of their failure to overcome the disadvantages associated with segmentation.
The first disadvantage of segmentation that companies should overcome is the disadvantage of the high cost of segmentation. Companies that engage in segmentation incur additional costs since the process of developing separate marketing mixes for each segment involves a lot of effort and additional costs.
This interferes with the financial stability of companies and often leads to financial problems. Companies can diversify their sources of income to overcome the disadvantage of increased cost associated with segmentation. They should not solely rely on the financial resources of the company. For example, companies can look for sponsors and other internal ways of increasing their income to cater for segmentation costs. This is a viable method they can use to overcome the disadvantage.
The second disadvantage of segmentation that companies should overcome is the loss of focus on important markets. Market segmentation requires companies to satisfy too many market segments; thus, some crucial markets lack enough attention. This leads to financial shortages because of losing focus on markets that are key in funding companies.
To overcome this disadvantage, companies should identify the most important markets and focus on them as they carry out market segmentation. For example, certain workers can be assigned the work of monitoring the crucial markets to ensure that the profits of the company do not go down as a result of losing focus on important markets.
The third disadvantage associated with segmentation that companies should overcome is cannibalization. This occurs when some segments overtake others such that no gains are recorded. In some serious cases, the market shares are completely lost. Also, segmentation can send the wrong information to the customers or result in brand dilution. To overcome this disadvantage, companies should ensure that all segments are given equal attention. For example, if the companies decide to add the stock, this should be done in all segments.
Market segmentation can also result in over segmentation where individuals are excluded making it difficult to assess the profitability of the market. This disadvantage can be overcome by companies by keeping segmented sections generalized and large to prevent segmentation downfall.
Generally, companies should consider the reasons for carrying out segmentation to overcome their disadvantages. In diverse markets, companies should develop marketing mixes that cater to the needs of small sections of the market instead of developing mixes that meet the needs of all the people. For example, companies can curve a niche in particular segments and customize the marketing efforts to realize full profits. This enables them to satisfy and meet the needs of certain niches in the market hence overcoming most of the disadvantages of segmentation.