When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) ÃÂ¡V maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence).
Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix.
Market segmentation as defined by Kotler, is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way those differences between buyers within each segment are as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix.
The importance of market segmentation results from the fact that the buyers of a product or service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors.
Since it is virtually impossible to cater for every customer's individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment. There are a huge number of variables that could be used for market segmentation in theory. They comprise easy to determine demographic factors as well as variables on user behavior or customer preferences. In addition, there are differences between individual customers and businesses.
As already stated, segmentation is the basis for developing targeted and effective marketing plans. Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments.
A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers.
Better serving customers needs and wants
It is possible to satisfy a variety of customers needs with a limited product range...