Category : Banking
According to Philip Kotler: Market segmentation is sub dividing of a market into homogeneous subset of customers. Where any subset may conceivably be selected as a market target to be reached with a distinct Marketing Mix
According to American. Marketing Association: "Market segmentation refers to dividing the heterogeneous market into smaller customer divisions having certain homogeneous characteristics that can be satisfied by the
Firm Market segment is a large identifiable group of customers within a market which shows a predictable pattern of behavior in buying situation, and which can be profitably reached by means of distribution and communication. Market segmentation is the process of dividing the total market into a number of homogenous subgroups or submarkets and designing Products to satisfy the needs of each of these subgroups. A market can be segmented by various bases and industrial markets are segmented somewhat from consumer markets like ?
(i) Geographic Segmentation: In this segmentation customers are segmented on the geographical basis. It includes District, Division, Country, City, Town /Village etc.
(ii) Demographic Segmentation: In this segmentation customers are segmented on the demographic basis. It includes Age, Sex, Marital status Occupation Profession, Education etc.
(iii) Psychographic Segmentation: In this segmentation customers are segmented on the psychographic basis. It includes Perception, culture, Attitudes, Need or Want of customers. Thought etc.
(iv) B5dsehavioral Segmentation: In this process customers are segmented on the basis of behavior it includes Loyalty, Brand Loyalty, and Consumption rate. Buying Occasion, Buying Principles. Market segmentation is a "Consumer-oriented philosophy'. We first identify customers' needs in a sub-market. Then we design a product and or a marketing programmer to reach the sub-market and satisfy those needs.
Characteristics of Market Segmentation:
(i) It should be measurable i, e. it should possible to measure the size of the segment in, terms of sales generated.
(ii) The segment should be attractive that is substantial in size.
(iii) It should be accessible by communication.
(iv) Accessible by distribution channels.
(v) Different in its response to a marketing mix.
(vi) It should be durable.
(vii) Substantial enough to be profitable.
Strategic Approaches in Market Segmentation:
(a) Undifferentiated Marketing / Mass Marketing: In this case the same product is offered to the entire market, also complete standardizations of product and marketing mix element is done. And the entire market is treated as a single and common entity. The main benefit of standardization is that the promotional expenses will be uniform countrywide. However the demerit is that it can lead to the neglect of several small segments which could have given rise to a large attractive market.
(b) Differentiated Marketing: It is the process of identifying a group of customers having similar needs and producing a product to satisfy these needs profitably. Here the company wants to do successfully in several businesses.
(c) Customization: Customization means treating every customer as a unique or different and producing a product to satisfy each and every customer separately. It is generally adopted in case of industrial machinery, large installation etc.
(d) Concentrated Marketing: A company may decide to concentrate its entire resources and efforts in one particular area within the total market. It chooses a specific area where competition is relatively less and the company thinks that it can do best in that area. If the company is able to match the resources with the customer demand successfully then it may enjoy a monopoly. In concentrated Marketing the product line will be limited and the level of customer loyalty will be very high.
Merits of Market Segmentation:
(i) Segmentation improves the efficiency of marketing activities since marketing efforts are focused specifically on those customer groups who are most likely to purchase the product that is offered by the company.
(ii) It enables the company to identify the target customers and make necessary adjustments in the promotional messages whenever required.
(iii) The strengths and weaknesses of competitors can be understood clearly and this helps the company to fulfill the customer demand which is not being met by the rivals.
(iv) It leads to effective utilization of resources since customer is the central focus of all activities and only the target markets are served
Demerits of Market Segmentation:
(i) Whenever Segmentation is considered it means that the company has to produce customized products which implies higher cost in both production and marketing.
(ii) In Research and Development cost can increase because of the need to produce different version of the product.
(iii) Higher Inventory cost are possible because of the need to maintain adequate stock.
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