Identifying Market Segments and Selecting Target Markets

Market for product is big and diverse making it difficult for companies to be able to satisfy every customer. Companies need to identify a certain set of customer within a market and work towards satisfying them. This set of identification is market segment. Companies further need to understand the intricacy of how this segment behaves and operates. An approach known as target marketing is gaining prominence where companies identify the market segment on similar needs and wants, select one of the market segments and then focus in developing products and marketing program.

Earlier business operation was in the form of mass marketing. In mass marketing companies produce a product in large quantities and serve this product to as many consumers as possible. This made sense as markets were developing and not much variety was on offering. Now product offerings have under gone radical change thanks to advertising and communication reach. Therefore, companies look forward to marketing at segment, niches, local and individual level.

In segment marketing companies identify consumer with similar needs and wants. For example, an airline is looking forward to providing no frills’ connectivity between metro cities on US east coast compare. This segment is within airline industry but needs of customer is different. T target audience is low budget travelers. However, customers within the segment look for different attributes, for example, lunch or beverages as part of travel. Here companies can offer this by charging the customer.

In niche marketing, companies target limited customer set. A niche market is worth exploring where customers are willing to pay a premium for product, entry barriers are high and market has growth potential. In local marketing, customers are local neighborhood, trading stores, etc. For example, many banks prefer local marketing for better understanding of client and provide them right type of service. In individual marketing, companies look forward to satisfying needs and wants of individual customer. Internet is facilitating the process of individual marketing, where in customer log on to the site and creates products from available options. This process is not feasible for high technology products like automobiles.

The market segmentation task has to follow a scientific process.

  • The first task is to group customer according to product and service they want.
  • The second task is to analyze customer by summarizing demographic, lifestyle and usage pattern, which helps in the definition of market segment.
  • The third task is due diligence of the market for growth potential, competition and other factors.
  • The fourth task is to profitability of market segment.
  • The fifth task is to undertake positioning activity for pricing and marketing programs.
  • The sixth task is to explore different positioning and marketing strategies to explore the market to its full potential.

There are various factors, which affect segmentation in a consumer market. Geographic is one such factor, where a country is segmented on basis region, city, urban, rural and climate. Demographically market is segmented on the basis of age, family size, gender, household income, life stage, occupation, education, religion, race, generation and social class. Further, segmentation can be done on the basis of lifestyle and personality traits. On an individual level market can be segmented on the basis of attitude, belief and perception of products, product awareness and usage pattern.

There are various factors, which affect segmentation in the business market. Demographic is one such factor, which consists of type of industry, size of company and geographical location of the company. Operational segmentation is on the technology class, customer consumption and customer requirements. Purchasing methodology includes segmentation based on purchase policy, purchase department structure, relation with companies and market positioning of companies. The order Requirements lets segmentation be based on nature of requirement and size of order. Personality trait segmentation looks at loyalty and risk profile.

Companies have to finalize target market in which it wants to operate. After which segments have to be identified based of various factors as discussed. Once segments are identified, in-depth evaluation analysis has to be done come for a conclusion, whether to target one or several segments.


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