Banking Marketing Aptitude Market Segmentation Marketing Aptitude - Market Segmentation

Introduction

The market for any product is normally made up of several segments. A market segment consists of a group of customers who share a similar set of needs and wants. Market segmentation is a marketing strategy when the marketer divided a broad target market into subsets of consumers who have common needs and priorities and then designing and implementing strategies to target them.

Objectives of Market Segmentation

• To identify the needs, tastes, priorities, buying motives of the target consumers.
• To make grouping of customers on the basis of their homogeneous characteristics such as nature, habit, behaviour, income, age, education, profession, religion, etc.
• To make the activities of the firm consumer oriented.
• To determine marketing strategies, targets and goals of the firm.
• To identify the areas where the customers may be created and market area can be expanded.

Importance of Market Segmentation

There are the following importance of market segmentation

• Understand Customers

To sell to your customers, you first must understand why they would want to buy your product. Market segmentation allows for the development of profiles of the many different kinds of customer groups who buy your products. It also can be used to develop products for your target audience.

• Maximize Product Potential

During the course of your market segmentation, you may come across an alternate use for your product that had not been previously discussed. You may discover a new market for your product.

• Improve Distribution Network

By studying the buying behaviors of various target customer groups, you can determine the way that customers prefer to buy your product. Market segmentation also helps you to identify geographic areas where your products are popular.

• Gain New Clients

A comprehensive market segmentation analysis includes reasons why consumers are not buying your products. By understanding the reason, you can alter your marketing or change your product development to try to gain new customers.

Characteristics of Market Segmentation

• The market segments must be measurable so that they can be identified.
• It must be reachable through communication and distribution channels.
• It should be sufficiently large to justify the resources required to target them.
• It must respond differently to the different marketing mixes.
• It should be relatively stable to minimise the cost of frequent charges.

Requirement for Successful Market Segmentation

There are four criteria which must be met for successful market segmentation. By segmenting your market, you should be able to consider your customers buying behavior and specific traits.

• Substantiality Your targeted segment needs to be sufficient in size to justify creating and sustaining a customized marketing mix.
• Identifiability and Measurability You must be able to identify and measure the specific segment.
• Accessibility You must have access to your targeted segment with your specific marketing mix.
• Responsiveness You should consider how your target segment shall respond to your proposed marketing mix. What will your customers respond to and what will they disregard as unimportant?

Causes of Segmentation

Market segmentation is necessary due to the following reasons

• Increase in Profit

Segmenting a market will enable organisation to sell same product to different set of customers based on their disposable income. Organizations can enhance their profits by raising their prices for different segments.

• Popularity in the Market

Through careful segmentation and proper targeting, smaller businesses are able to compete with stronger and leading ones in the market.

• Better Customer Satisfaction

            By creating separate solutions for each segment a better satisfaction to the customers can be achieved.

• Better Opportunity for Product Sales Growth

            Market segmentation can build sales margin, consumer may be encouraged to sell a product.

• Very Easier Customer-Business

Communication Flow Manufacturers of products need to advertise and deliver their message to a relevant customer audience. And where there is a broad target market, the key customers will be missed and even the cost of communicating to customers will be too high. But if the market has been segmented, the target customers can be easily reached more often and at a lower cost.

Basis of Market Segmentation

Market segmentation can be classified on the basis of two groups

• Consumer Market

Segmentation of consumer market are

            (i) Geographic Segmentation

(ii)  Demographic Segmentation

            (iii) Psychological Segmentation

            (iv) Behavioral Segmentation

• Brand loyalty
• Consumer status: first time, potential. Regular, etc.
• Readiness to purchase
• Usage rate
• Occasions stimulating product purchase

            (v)  Segmentation by Benefits

• Industrial Market
• Location
• Type of business
• Form of consumer
• Method of purchase

Merits of Market Segmentation

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• Increase the focus of a firm
• Increase in competitiveness
• Increase in brand loyalty
• Market expansion
• Customer retention
• Increases profitability
• Have better communication

Demerits of Market Segmentation

• Segments are too small
• Consumers are misinterpreted
• Costing is not taken into consideration
• Increased costs to develop variations of the product
• Higher stock holding costs

Tit- Bits

• Prospective customer means a potential customer. Prospects for a bank may be a student, manager of other bank administrator of government department.
• Target customer means new customer.
• Product positioning is the process by which marketers try to create an image of the product and to create an identity of the product.
• Re-positioning of product involves changing identity of the product.
• De-positioning involves changing the identity of competing products.
• Customisation results in customer retention.