Market Segmentation: Top 10 Benefits of Market Segmentation
Segmentation
of target markets has several advantages.
1. Determining market
opportunities:
Market
segmentation enables to identify market opportunities. The marketer can study the
needs of each segment in the light of current offerings by the competitors.
From such study, the marketer can find out the current satisfaction of
customers.
Segments
with low level of satisfaction from present offering may represent excellent
market opportunities. For example, customers may not be satisfied with the
current offering of water purifiers in terms of product or after-sale service.
Such situation enables a marketer to launch a new range of water purifiers and
market them well.
2. Adjustments in marketing appeals:
Sellers
can make best possible adjustments of their product and marketing appeals.
Instead of one marketing programme aimed to draw in all potential buyers,
sellers can create separate marketing programmes designed to satisfy the needs
of different customers. Proper advertising and sales promotional appeals can be
made depending on the target audience.
3. Developing marketing
programmes:
Companies
can develop marketing programmes and budgets based on a clearer idea of the
response characteristics of specific market segments. They can budget funds to
different segments depending on their buying response.
4. Designing a product:
Market
segmentation helps in designing products that really match the demands of the
target audience. Products with high market potential can be designed and
directed to meet the satisfaction of the target market.
5. Media selection:
It
helps in selection of advertising media more intelligently and in allocating
funds to various media. The funds are allocated to various media depending on
the target audience, impact of the media, competitor advertising, and so on.
6. Timing of marketing
efforts:
It
helps in setting the timings of the promotional efforts so that more emphasis
is placed during those periods when response is likely to be at its peak. For
instance, consumer goods can be heavily advertised to Christians during
Christmas season and to Hindus during Durga Puja & Diwali time.
7. Efficient use of
resources:
By
tailoring marketing programme to individual market segments, management can do
a better marketing job and make more efficient use of the marketing resources.
For example, a small firm can effectively use its limited resources – money,
sales force, etc. – in one or two segmented markets rather than unsuccessfully
aiming at a wider market.
8. Better service to
customers:
Market
segmentation enables a company to concentrate its marketing efforts in a
particular market area, thereby, providing a better service to the target customers.
Proper marketing segmentation can facilitate customer satisfaction.
9. Helps in fixing prices:
The
marketing segmentation also enables to fix prices of the goods and services.
Since different market segments have different price perceptions, it is necessary
to adopt different pricing strategies for the markets. For instance, the prices
for lower-income groups have to be lower and the product and promotional
efforts are adjusted accordingly.
10. Assist in distribution
strategies:
Segmentation
also assists in adopting suitable distribution strategies. Different market
segments may require different distribution mix. For example, if the product is
of very high quality intended to target the upper class, then it must be
distributed at prestigious outlets located at selective places.
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Advantages or Benefits of Market
Segmentation
Market
segmentation consists of identifying a sufficient number of common buyers. It
enables subdivision of the total aggregate demand for a product into economically
viable segments. Segments fall between the two extremes of total homogeneity
and total heterogeneity. Segments benefit the marketer in several ways which
may be discussed under four heads:
1. Proper
choice of target market: The market for any
product is made up of several segments. A market is the aggregate of consumers
of a given product. Consumers are not a homogeneous lot. They differ a lot in
their characters and buying behaviour. Thus, many differing segments exist in a
market. Market segmentation helps the marketer divide the heterogeneous market.
It is possible to distinguish one customer group from another.
2. Tapping
a particular market: Segmentation enables
the marketer to understand the needs of the customers and serve them well. Prediction
of the likely response from each segment is possible. With homogeneous
responses from each segment, marketer finds it easy to develop an appropriate
marketing programme. By tailoring the marketing programmes to individual market
segments, marketers perform their tasks effectively.
Specialization
can be achieved in product distribution, promotion and pricing for catering to
a particular segment.
3. Efficient and economic marketing efforts: Segmentation makes marketing efforts both efficient and economic. Marketers segment the market and try to fulfil the needs of that segment. It helps in designing the kinds of promotional devices that are effective from the view point of customers.
Marketing
efforts are focused on the well-defined needs of the segment. Thus, marketing
efforts undertaken by the marketer become more productive. They help the
marketer to evaluate the results of his marketing programme. Best time to
introduce new products, advertising etc., could be easily determined.
4. Benefits
to the customer: Segmentation benefits not only the
marketer but the customer as well. It distinguishes one customer group from
another within a given market. It helps the marketer concentrate on the
fulfilment of the well-defined needs of the specific segment. Now-a-days,
segmentation has attained a high degree of sophistication.
Though
market segmentation offers a lot of advantages, it has some limitations with
respect to cost and market coverage.
Disadvantages or Limitations of Market
Segmentation
1. Sometimes, market
segmentation becomes an expensive proposition. A marketer experiences
considerable difficulties, as he has to develop different marketing mixes for different segments. Moreover, mass production is much
cheaper than making a variety of products.
Even
major players like Bata have erred in market segmentation. In the early 1990s,
Bata introduced a few brands with high price tags in the high-end segment of
the Indian footwear market. This segment was not a sizable one for Bata. This
segment accounted for a mere 5 - 10 percent of the Indian footwear market. The
sales trend could not facilitate mass production. Having incurred a loss in the
high-end segment, Bata had returned to the mass segment.
2. Promotional expenses,
costs of keeping adequate inventory of each variety of goods etc., also go up,
eroding profitability.
3. Since the marketer
has to implement varying marketing programmes suiting to the different
segments, administrative expenses increase.
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