Free Sample: Now why do companies segment their customer base? paper example for writing essay

Now why do companies segment their customer base? - Essay Example

The gains of marketing segmentation are of vital importance for the companies. First of all, market segmentation provides the basis for the selection of target markets. A target market is a chosen segment of market which a company has decided to serve. As customers in the target market segment have similar characteristics, a single marketing mix strategy can be developed to match those requirements. In Burger King, for example, the target market was the fast food fans and generally people who seek quick service and a good place to satisfy their hunger.

Another benefit of Market segmentation is that, it allows the grouping of customers based upon similarities (e. g. benefits sought-Appendix 2, Figure2), that are important when designing marketing strategies. Consequently, this allows marketers to understand in-depth the requirements of a segment, and tailor a marketing mix package that meets their needs. This is a fundamental step in the implementation of the marketing concept: “segmentation promotes the notion of customer satisfaction by viewing marketers as diverse sets of needs which must be understood and met by suppliers”.

Finally, but equally important, opportunity and threats can be spot by marketing segmentation. Markets are rarely static, and as customers become more affluent, seek new experiences and develop new values, new segment emerge. The company that first spots a new underserved market segment, and meets its needs better than the competition can find itself on a sales and profit growth trajectory. (Appendix1, Figure 1)Benefits sought can be applied when people in a market seek different benefits from a product.

For example the benefits sought for Ribena are vitamins, for Red Bull is extra energy and for Burger Kings Chicken Flame grill meal are low calories. Benefit segmentation provides an understanding of why people buy in a market and can aid the identification of opportunities. Customers can be distinguished according to the occasions when they purchase a product. For instance, a product or service may be purchased as a result of an emergency or as a routine unpressurized buy.

Price sensitivity, for example, is likely to be much lower in the former case than the latter. Some products may be bought as gifts or as self-purchases. For Burger King, the tendency to cook lunch at home with family, is a major trend that can affect occasions of the need for fast food. Differences in purchase behaviour can be based on the time of purchase relative to the launch of the product, or on patterns of purchase.

The introduction of Burger king in India is targeted to people that can be positive, indifferent or even hostile to the product for various reasons. The readiness of the people to buy the product can vary. Special offers and advertisement can really enhance this trend. Customers can also be segmented on the basis of: heavy users, light users and non users of a product. A very clever strategy that suits our case here, as many writers suggest, is to seek to attract the heavy users rather than several light users, and then to vary our promotional efforts accordingly.

This is because the profiling of heavy users allows the group to receive most marketing attention (particularly promotion efforts) on the assumption that creating brand loyalty among these people will pay “heavy dividends”. Sometimes the 80:20 rule applies where about 80% of a product sales come from 20% of its customers (Beer market). This is classified as a variable behaviour because perceptions, beliefs and values are often strongly linked to behaviour. Consumers are grouped by identifying these people who view the products in a market, in a similar way and have similar beliefs.

Value-based segmentation is based on the principles and standards that people use to judge what is important in life. Burger King for example is well known globally and the customers expect to find high quality food in all their branches worldwide. Brands like Burger King, give you a promise that wherever you enter the premises, the product will be of the same quality standards. If a brand fails to deliver equal service and product standards in different countries, then it fails as a Brand therefore letting its customers down.