Executive summary
Marketing segmentation is the new cliché in the field of marketing. Initially, mass marketing was very popular, but the new concept of market segmentation was developed to address challenges arising from mass marketing. Unlike mass marketing, market segmentation recognizes disparities that exist among different consumers and it is upon this notion that its principles both in theory and practice are founded.
During segmentation process, consumer needs among individuals with similar characteristics are identified and concurrently specific products and services are designed to suit those needs. The popularity of the above strategy has been accelerated by instability of segmentation variables such as demography, behavior and geography.
In addition, firms that have adopted marketing segmentation have realized benefits such as market niche benefits, consumer brand loyalty and competitive positioning in the market. On the other hand, market niche might lead to negative results especially to small firms in the event of sales decline.
Introduction
The concept of marketing is not anything new in business. The rise of free markets, in spite of its numerous benefits, posed serious challenges to businesses due to increased competition (Martin, 20011, p. 15). As a result, the idea of marketing was conceived as firms tried to promote brand recognition among potential consumers (Martin, 20011, p. 15).
Initially, firms embarked on mass marketing whereby consumer’s tastes and differences were not differentiated (Bell, 2009, p. 27). However, numerous researches in this field exposed new information that consumers’ needs were diverse and differed from one individual to another (Bell, 2009, p. 29). It is against this background that the concept of market segmentation was developed in theory and sooner adopted into practice.
According to Dibb and Simkim (2007, p. 53) the concept of market segmentation seeks to establish different needs of targeted consumers with an aim of grouping together individuals who share several characteristics.
Since the initial conception, market segmentation has experienced rapid growth owing to its popularity in the business arena around the world (Martin, 2011, p. 17). The recent popularity of market segmentation can be linked to several condusive environment factors.
Unstable and evolving demographic factors
To begin with, market segmentation is dependant on demographic composition of a population (Kim, 2011, p. 153). Concurrently, research studies have indicated that demographics variables such as lifestyle and gender based preferences and tastes are evolving each day (Martin, 2011, p. 16). For instance, only recently men were not known to take interest in cosmetic products and fashion.
However, in recent years, the rise of metro-sexual man has compelled producers to come up with cosmetic products, fashion magazines and other similar brands that target male consumers. For instance, Nivea for men brand which was developed to address the needs of the aforementioned type of men (Kim, 2011, p. 156).
In terms of lifestyle variable, research has shown that present day consumers have developed sophisticated tastes and this has greatly impacted businesses dealing with food be it raw or ready, as people become more conscious of their health.
As part of market segmentation strategy , products to suit the needs of this particular group of people have found their way into the market and it is now common to see food labels such as ‘low fat’ ‘whole meal’ , ‘high protein’ and so on (McWilliams, 2011).
Similarly, consumers’ needs vary with age, hence market segmentation based on the same. However, in recent years, aging is being looked at differently. Whereas there are individuals who are proud of the various body changes that occur with age, others despise the aging process.
For this reason, products targeting this group of consumers have evolved and nowadays it common to find cosmetics with labels such as ‘anti-aging cream’ in supermarket shelves (Martin, 2011, p. 17).
In addition, income disparities among populations have promoted market segmentation based on this concept. Marketers have realized that price sensitive buyers represent the larger part of the population (Raaij, 2004, p. 52). In order to maximize turnover, firms have no alternatives but to develop products and services that target this particular group of people.
The recent economic recession has reduced consumer spending habits and thus firms are rushing to tap the little money that consumers are willing to spend (Martin, 2011, p. 16). The recent rise and popularity of budget hotels all over the world can be attributed to reduced disposable income due to deteriorating economic times (Bell, 2009, p. 30).
Geographical factors and globalization
Secondly, globalization has accelerated market segmentation based on geographical variables (Gaston & Oscar, 2011, p. 268). As businesses explore international markets, they are compelled to modify their products and services with an aim of capturing the different and diverse market characteristics (Bell, 2009, p. 32).
For instance, when MacDonalds ventured into China market, they realized that beef burger brand was not popular since the locals preferred chicken. To counteract this challenge, chicken burger brand was initiated although they still retained beef to cater for international visitors especially those who originated from U.S (Bell, 2009, p. 31).
A similar situation was present in India whereby due to religious concernss, beef in the burger was replaced with lamb (Raaij, 2004, p. 52). The examples above signifies that market segmentation in terms of geographical variable is not going to ease anytime soon since international business ventures are gradually gaining momentum.
Evolving behavioral factors
Thirdly, changes in consumers’ behavior have heightened the need for continuous market segmentation researches in order to capture the new and discard dated consumer needs (Dibb & Simkin, 2007, p. 58). The underlying principle behind marketing is to attract potential customers to a particular brand and consequently create brand loyalty.
At times, it is becomes necessary for a business to develop brands targeting loyal consumers. For instance, tour firms dealing with holiday packages design special offers for loyal customers (Martin, 2011, p.15). Still, market segmentation will continue to be popular based on the fact that consumer behaviors in terms of level of usage are changing.
For instance, initially women were not known to be heavy drinkers of beer, but this trend is slowly changing and beer manufacturers have diversified the brand of beers targeting women (Geraghty, 2009, p. 146).
Similarly, as organizations reduced usage for office machines such as fax and photocopiers mainly because more of the paperwork is nowadays conducted via digital platform, manufactures have come up with brands targeting light users of the said gadgets (McWilliams, 2011).
Benefits of marketing segmentation
It is imperative to mention that the rationale behind market segmentation was to confront the competition challenges present in mass marketing. Marketing literature indicates that a wide market segment attracts more competition among businesses than sub segments (Dibb & Simkin, 2007, p. 59). According to Thomas and Brook-Carter (2011) increased competition among firms limits the benefits of mass marketing.
Therefore, businesses use marketing segmentation to acquire a strategic niche in the market. Marketing segmentation is greatly advantageous especially to small firms whereby they concentrate their resources to develop a product that would meet the needs of a particular group of consumers who are more often ignored by the large companies (Gaston-Breton & Oscar, 2011, p. 280).
The dissatisfaction might be in terms pricing or quantity. For instance, Unilever, in an attempt to meet the needs of low income consumers in developing countries, it came up with small packaging of products such as toothpastes (Gaston-Breton & Oscar, 2011, p. 284).
On the other hand, marketing segmentation can also bring benefits to large firms whereby targeting different markets ensures that their brands do not compete against each other but achieves a competitive edge with competitors brand (McWilliams, 2011). For instance, the various brands of soaps such as Ivory, Coast, Zest and so on by Procter and Gamble target different market segments.
Needless to say, marketing segmentation enables marketers to establish hidden needs of their target markets and from this information, they get ideas for improving existing products to capture whatever hidden need is available (Martin, 2011, p. 18).
Similarly, through marketing segmentation, firms are able to establish whether their targets consumers bring froth profitable benefits and this act as guidance to the firm to avoid future investment in unprofitable brands (Thomas & Brook-Carter, 2011).
As aforementioned, brand loyalty is an important factor to beat competition, and this is usually promoted via market segmentation, whereby if a business suceeds to satisfy the needs of its target customers fully, there is a possibility that brand loyalty will be achieved (Martin, 2011, p.15).
Finally, the process of marketing segmentation lays the foundation for competition analysis. Kim (2011, p. 155) highlights that it is highly important to be knowledgeable about the strengths and weaknesses of a competitor in order to succeed in market segmentation.
Competitors’ analysis should aim at establishing areas where a competitor have exhibited some weaknesses and capitalize on the same to achieve success in segmentation and probably realize higher return of marketing expenditure (Kim, 2011, p. 157).
Shortcomings of market segmentation
The fact that effective marketing segmentation has the possibility of reaping maximum benefits for a business is not disputable. However, literature in this field indicates that there are several shortcomings arising from this marketing strategy.
However, it is important to mention that there are several strategies that firms adapt in the process of market segmentation and each strategy is susceptible to unique shortcomings (Geraghty & Torres, 2009, p. 149).
As exemplified above, small firms can benefit from niche market segmentation. Apparently, niche markets can do both harm and good to the profitability of small firms. Isolated but closely related case studies have indicated that sales and growth of economies of scales in niche markets is greatly restricted. The above situation can threaten the survival of a firm in the event of declining sales (Kim, 2011, p. 152).
In a nutshell, it is evident that the recent concept of market segmentation is gaining popularity in marketing. Increasing competition amongst firms triggered and heightened by globalization has accelerated adoption of the concept owing to myriad of benefits attached to segmentation.
Although the strategy attracts both benefits and shortcomings, the benefits exhibit more weight. Thus any profit minded firm have no otherwise but to adapt market segmentation. As a matter of fact, mass marketing is both ineffective and expensive as compared to segmented marketing.
References
Bell, J. 2009. BRICOland brands: the rise of the new multinationals. The Journal of Business Strategy, 30(6), 27-35.
Dibb, S. & Simkin, L.2007. A program for implementing market segmentation. Journal of Business & Industrial Marketing, 12(1), 51-65.
Gaston-Breton, C & Oscar M. M. 2011. International market selection and segmentation: a two-stage model. International Marketing Review, 28(3), 267 – 290.
Geraghty, S. Torres,A. M. 2009. The Irish wine market: a market segmentation study”, International Journal of Wine Business Research,21(2), 143 – 154.
Kim, T. H. 2011. External validity of market segmentation methods: A study of buyers of prestige cosmetic brands. European Journal of Marketing, 45(1/2), 153– 169.
Martin, G. 2011. The Importance of Marketing Segmentation. American Journal of Business Education, 4(6), 15-18.
McWilliams, J. 2011. MARKETING: Singing Coke’s praises evolves: Company strengthening ties to music world to reach young buyers. Web.
Raaij, W. F. 2004. Domain-specific Market Segmentation. European Journal of Marketing, 28(10), 49-66.
Thomas, J. & Brook-Carter, C. 2011. Social Media in the Food and Drinks Industry – 2011 edition: Case Studies. just – food: Social Media in the Food and Drinks Industry [Online ].