Segmentation defines an act of subdividing market into smaller markets with homogeneous characteristics so as to meet the needs of that small market called a segment. The purpose of segmentation is the concentration of marketing energy and force on the market segment to gain a competitive advantage within the segment. . This helps the firm to subdivide the market into smaller market segments or groups each having a common variable and target these groups to enhance the firm’s performance.
There are several basis used in segmenting a market and these include demographic, behavioral, geographical basis just but to mention a few.Demographic segmentation involves various demographic variables such as Age, gender, family size, income, occupation, religion, race and nationality age, social class hence it is population based. This strategy aims at understanding the prospective markets and taking necessary steps to ensure that the needs of the targeted groups are met.
For example a firm like Tanganda Tea Company may target a market where there are high class customers who are high income earners where levels of disposable income is also high and customers in these market segments are quality conscious that is they care more about the quality of a product than its price. As a result the company will produce very good quality tea that is the “A grade” tea which is highly priced and channel it to these market segments. However this may not work in market segments where there is a lot of customers who are low income earners and their levels of disposable incomes are low respectively.
These customers are price sensitive that is they are affected by changes in prices of goods and services because an increase in the price of that product implies that they will turn to a substitute product which is less costly. In a bid to cater for these target markets Tanganda Tea Company will also produce low quality tea which is lowly priced and distribute it towards these markets hence improving the efficiency and competitiveness of Tanganda Tea Company on the market.Moreso a firm may also target a market on the basis of age. For example a company involved in the production of clothes may target a market which is dominated by a large number of young people may decide to produce trending fashion clothes so as to meet the needs of the target market which has a better taste and preference than a market segment containing older age groups. For example, a cosmetic company can increase their customer base, by targeting audience of different age groups with products designed to meet their specific needs.
For example, L’Oreal and Garnier are some of the leading cosmetic producers that cater to the needs of male and female customers of different age groupsMoreover a firm may consider a demographic factors such as religion, race and nationality. A firm targeting a market segment which has a large number of Indian Hindu may also produce cultural products such incense and also produce good quality traditional spices to cater for such customers in target market. For example in Zimbabwe firms are producing products which are HALAAL certified so as to cater for the Muslim community in Zimbabwe.
Not only that but also gender is also another factor used in segmenting a market. For examples if a discovers that the target market has a large number of females than males it means female products such as cosmetic products will be channeled towards that market to cater for the needs of that market e.g DOVE a company that soaps in a market with more females than males ended up producing a wide range of beauty soaps, lotions and cosmetics thus channel them to these markets so as to cater for the needs of the female customers in these target markets. Geographic segmentation involves subdividing markets into smaller segments on the basis of geographic location that is nations, states, regions, counties, cities, or neighborhoods. Geographic segmentation is a strategy that is usually used when you serve customers in a particular region, or when your broad target markets that has different tastes and preferences based on their geographic location.
Geographic segmentation may prove to be very useful especially to multinational corporations with bigger brands on the international market. This strategy is also of much importance to a firm with many customers in different geographic location hence it is very important in International Marketing. Geographic segmentation contain variables which include climate, population density, cultural preferences and size of region. A firm involved in the production of clothing line may proguces winter clothes and channel them to those market segments with colder climates and they will also produce light summer clothes they may distribute it to markets with a hotter climate.With geographic segmentation there is also a variable of population density.
Certain products are marketed on the basis of population density in different locations. High-density cities, like Harare, create a higher demand for products, like ready-to-eat meals. Even fast food restaurants are commonly found in such cities, rather than urban areas. For examples the city of Harare has more Chicken Inn branches than all the other cities and towns all over Zimbabwe due to high population density so as to cater for the large numbers of customers.Another geographic segmentation variable can also be taken into consideration that is cultural preferences.
Customers taste and preferences may also change due to geographic location. There different cultures in different areas and locations and as result firms may need to come up with a strategy that also suit the needs of these markets. For example a fast food outlet such as McDonalds has adopted a strategy where they serve local food in their menu served at different locations. For example, McDonald serves a non-beef diet in India, HALAAL CERTIFIED food menu’s in the Middle East and have also turned to serving beer in some countries like Germany whereas in their American outlets they don’t serve beer as it is not part of their menu.
Markets can also be segmented on the basis of consumer behavior thus it can be called Psychographic segmentation, or behavioral segmentation.This is a method of dividing markets on the bases of the psychology and lifestyle habits of customers. It is the marketers and the sellers of products and commodities who use this technique in order to decide their marketing strategy. Personality and lifestyle influence the buying decision and habits of a person to a great extent. A person having a lavish lifestyle may consider having an air conditioner in every room as a need, whereas a person living in the same city but having a conservative lifestyle may consider it as a luxury therefore the variable in this bracket of segmentation are physcological in nature.
With this marketing strategy the firm must understand the habits and lifestyle of its current and potential customers. For example a company involved in the production of cars e.g Bayerische Motoren Werke (BMW) may analyse the market and may observe that some people who live luxuriously may buy a luxury car as status symbol and those who live a conservative lifestyle may buy a car as a utility vehicle hence understanding the usage of the product gives a base for segmantion of the market allowing BMW to come up with luxury cars for those with luxurious lifestyles and habits and will also produce fuel efficient family cars or sedans to cater for the needs of those who have a conservative lifestyle.