Marketing Entrepneurship - Essay Example

Market Segmentation: Aggregating prospective buyers into groups that have common needs and will respond similarly too marketing action. Aggregating prospective buyers Into groups that have common needs using different marketing mixes to help gain competitive advantage with a specific segment. While there Is an ‘Ideal’ market segments, In reality every organization engaged in a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments.

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The market segmentation and corresponding product differentiation treated can give a firm a temporary commercial advantage. Most market segmentations are the techniques used to attract the right customer. One of the main reasons for using market segmentation is to help companies to better understand the needs of a specific customer base. Mass marketing assumes that all customers are the same and will respond to the same advertising. By looking at ways in which potential customer groups are different from each other, the marketing message can be better targeted to the needs and wants of those people.

Often, dividing consumers by clearly defined criteria will help the company Identify other applications for their products that may not have been obvious before. These revelations often help the company target a larger audience In that same demographic classification, improving market share among a specific base. Segmenting the market can also serve to identify smaller groups of people who make up their own, previously unknown subsets, further improving the overall efficiency of the company’s marketing efforts. 2.

There are 5 key criteria that must be met for effective segmentation l. Response differences: Segmentation is not always necessary in a market. When a marketer perceives preferences between two groups of people given the same marketing mix, then the marketer Is said to have Identified response differences. The response difference might be noticed after the marketing effort starts predicted by an expert market knowledge perspective. There Is little to Justify the development of a separate and unique marketing program for a target segment unless It responds uniquely to these efforts.

Therefore, the problem is to identify market segments that will respond favorably to marketing programs designed specifically for them. II. Identifiably: Once differences between two groups are detected, the marketer must find the CAUSE for these differences. Care must be taken to not confuse correlations with cause. Knowing the underlying cause for the differences helps a marketer design the right mix for the segment. Identifiable and measurable is refer to segments must be identifiable so that the marketer can determine which consumers belong to a segment and which do not.

However, there may be a problem with the segment’s insurability (that is, the amount of information available on specific buyer characteristics) because numerous variables (e. G. Psychological factors) are difficult, If not Impossible, to measure at the present time. For example, If the marketer discovered that consumers who perspire profusely favored a particular brand, very little could be done with this information since such a group would be difficult to the ability to determine whether a particular segment is large enough and has enough purchasing power to be worth pursuing.

For you, it’s whether change in a particular segment of the population will have a significant effect on the issue you’re addressing. If your goal is to make sure that all five-year-olds in the community have ad a full range of immunization, for instance, you know you want to target their parents. But what about their grandparents or older siblings? Can you determine whether there are there enough of them, and whether they’re important enough in influencing parents’ decisions to make targeting them worthwhile? Ill.

Respectability/ accessible: Some segments may exist but are not “reachable. ” That is, it is difficult to design a marketing mix for the segment. This criterion refers to the ease of effectively and economically reaching chosen segments with marketing efforts. Some desired segments may be inaccessible because of legal reasons; for example, liquor manufacturers are unable to market directly to young teenagers, In fact, there is a vigorous debate dealing with the constitutionality of segmenting and targeting certain groups.

Cigarette companies that aimed recent new brands at 18 – 24 year old black women with a high school education or less have been criticized, and legislation to protect these targeted groups from such advertising has been proposed. The Association of National Advertisers defends the practice and claims such proposals amount to censorship and a violation of First Amendment rights. Accessibility is a matter of degree. A commercial marketer may not care if a particular segment becomes part of his customer base or not, as long as his bottom line is healthy.

A social marketer may have very different feelings about a particular segment of the population, and may be willing to spend vast amounts of time to develop accessibility to that segment. Cultivating personal contacts, learning the language and culture, and spending time in the community are some of the ways that you might create access to a particular segment. They all take time, but may be worth it if that segment is important to your goals. V. Profitability/ Substantial: This collection refers to the degree to which a chosen segment is large enough to support profitably a separate marketing program.

As was noted preciously a strategy of market segmentation is costly. Thus, one must carefully consider not only the number of customers available in a segment but also the amount of their purchasing power. Segmentation and targeting result in increased marketing expenses. The segment therefore should Justify the cost increase. Is the segment large enough and likely to yield enough of a return to be worth targeting? Developing a social marketing aiming around immunization may not be worth it if only a few families have failed to minimize their children.

It would make much more sense in that case to spread your message by personal contact. V. Accountability: The segment has to have characteristics that are distinct enough to make it possible to target a campaign specifically to it. “Parents of children under five” may not be distinct enough for a social marketing campaign to encourage immunization. You may have to target separately to teen parents, single mothers, families without health insurance, families whose locations make it difficult to get to a clinic, etc. VI.

Stability: It is very important that the need that has been identified is stable, and not Just a Facilitates consumer-oriented marketing: Market segmentation facilitates formation of marketing-mix which is more specific and useful for achieving marketing objectives. Segment-wise approach is better and effective as compared to integrated approach for the whole market. Facilitates introduction of suitable marketing mix: Market segmentation enables a producer to understand the needs of consumers, their behavior and expectations as information is collected segment-wise in an accurate manner.

Such information is purposefully usable. Decisions regarding Four As based on such information are always effective and beneficial to consumers and the producers. Facilitates introduction of effective product strategy: Due to market segmentation, product development is compatible with consumer needs as there is effective crystallization of the specific needs of the buyers in the target market. Market segmentation facilitates the matching of products with consumer needs. This gives satisfaction to consumers and higher sales and profit to the marketing firm. Facilitates the selection of promising markets:

Market segmentation facilitates the identification of those sub-markets which can be served best with limited resources by the firm. A firm can concentrate efforts on most productive/ profitable segments of the total market due to segmentation technique. Thus market segmentation facilitates the selection of the most suitable market. Facilitates exploitation of better marketing opportunities: Market segmentation helps to identify promising market opportunities. It helps the marketing man to distinguish one customer group from another within a given market. This enables him to decide his target market.

It also enables the marketer to utilize the available marketing resources effectively as the exact target group is identified at the initial stage only. Facilitates selection of proper marketing programmer- Market segmentation helps the marketing man to develop his marketing mix programmer on a reliable base as adequate information about the needs of consumers in the target market is available. The buyers are introduced to marketing programmer which is as per their needs and expectations. Provides proper direction to marketing efforts: Market segmentation is rightly described as the strategy of “dividing the markets in order to conquer them”.

Due to segmentation, a firm can avoid the markets which are unprofitable and irrelevant for its marketing purpose and concentrate on certain promising segments only. Thus due to market segmentation, marketing efforts are given one clear direction for achieving marketing objectives. Facilitates effective advertising: Advertising media can be more effectively used because only the media that reach the segments can be employed. It makes advertising result oriented. Provides special benefits to small firms: Market segmentation offers special benefits to small firms.

The resources available tit them are limited as they are comparatively new in the market. Such firms can select only suitable market segment and concentrate all efforts within that segment only for better marketing performance. Such firms can compete even with large firms by offering personal services to customers within the segment selected. Market segmentation facilitates efficient use of available resources. It enables a marketing firm to use its marketing resources in the most efficient manner in the selected target market. The marketing firm selects the most promising market segment and concentrates all attention on that segment only.

This offers best results to the firm in terms of sale, profit and consumer support as compared to the results available from spending such resources on the total market. 5. Bases of Market Segmentation Strategy: a. Geographic b. Demographic c. Cryptographic d. Behavioral Geographic Segmentation: The market is segmented according to geographic criteria-?nations, states, regions, countries, cities, neighborhoods, or zip codes. Gee-cluster approach combines demographic data with geographic data to create a more accurate profile of specific.

With respect to region, in rainy regions you can sell things like raincoats, umbrellas ND gumboots. In hot regions you can sell summer wear. In cold regions you can sell warm clothes. Region: By Continent, Country, State or by neighborhood also Size of metropolitan area: Segmented according to population size Population Density Climate Demographic Segmentation: Demographic segmentation consists of dividing the market into groups based on variables such as age, gender, family size, income, occupation, education, religion, race and nationality.

As one might expect, demographic segmentation variables are amongst the most popular bases for segmenting customer groups. This is partly because customer wants are closely linked to variables such as income and age. Also, for practical reasons, there is often much more data available to help with the demographic segmentation process. Age Gender Family Size Family Life Cycle Income Occupation Education Generation Ethnicity Nationality Religion Social Class Cryptographic Segmentation: Chirography’s is the science of using psychology and demographics to better understand consumers.

Cryptographic segmentation: consumer are divided according to their lifestyle, personality, values and social class. Aliens within the name demographic group can exhibit very different cryptographic profiles Interests Opinions Values Attitudes Behavioral Segmentation: In behavioral segmentation, consumers are divided into groups according to their knowledge of, attitude towards, use of or response to a product. It is actually based on the behavior of the consumer. Benefits Sought Usage Rate Brand Loyalty User Status Readiness to buy Occasions Advantages: Market segmentation can produce significant benefits for your company.

Some of the benefits that market segmentation can generate are: ; Better understanding of customers Products designed to meet the needs of the market ; Effective and cost-efficient marketing strategies ; Accurate positioning ; Competitive analysis ; Competitive position ; Focused marketing efforts ; Reduction of competition ; Establish a niche ; Become overall more efficient and effective Along with playing a role in the development of new marketing approaches, market segmentation can also help a company identify ways to enhance customer loyalty with existing clients.

As part of the process of identifying specific groups within the larger client base, the company will often run surveys which encourage customers to suggest ways of improving the company’s products or services. This may lead to changes in packaging or other similar cosmetic changes that do not necessarily impact the core product, but sometimes making a few simple changes in the appearance sends a clear message to consumers that recognizing their needs is as important to the company as making sales.

This demonstration of good might go a long way to strengthen the ties between the consumer and the producer. Market segmentation is not only beneficial to the manufacturer or retailer, but can also have benefits to a consumer as well. People in a particular market segment may get facial deals on products as the company focuses on that group, or find that those products are available more widely. When a company responds to consumer feedback, it can mean that those people get changes in composition or packaging that better meet the user’s needs.

Disadvantages: One of the biggest disadvantages of this marketing technique is the expense. A great deal of research often needs to be done to correctly identify those subsets that are most important for a company, and this takes time and money. Once the key subsets In addition, changing the appearance of a product based on which segment it is Ewing sold to adds to the production costs. If the market isn’t segmented effectively, then all this money will be wasted.

When the market segments that are identified are too narrow, it may be difficult for a company to be profitable. Niche marketing can work for some industries, but if the tastes of that subset change or a stronger competitor enters the field, a company that has focused too much on the one segment can lose its customer base quickly. Targeting smaller segments also means that potential consumers outside of those groups may be ignored and their business lost.