Market in simple terms is people or organizations who have the ability to purchase products or services provided by a producer. The market is a broad term, which accumulates all the people and organizations in general. Furthermore, market segmentation is a marketing strategy used to describe the division of the market based on various targets and specific groups. The literature on market segmentation studies the optimal pricing of independent products that are differentiated by quality in a market of heterogeneous consumers whose valuations of quality vary. Market segmentation can be obtained according to various factors like,
- Demographic Segmentation
- Geographical Segmentation
- Behavioral Segmentation
- Benefit Segmentation
For example, in the case of a bike spare parts selling company, say GearMoto; the company segments its customers and products in such a way that it solely focuses on the customers who own a bike, and other bike repair shops and mechanics. GearMoto will focus on selling parts like helmets, gloves, and repair gears to the segmented market “target costumers” rather than targeting the overall market. In this way, the company can gain recognition in their respective field and gain profits due to the calculated production of goods. One of the pioneers of marketing described the strategy of product differentiation and market segmentation as meeting human wants more accurately. Therefore, market segmentation is important for the sustainable production of goods by a provider as it allows for a better allocation of a company’s resources due to the primary focus on more tangible customers and buyers.
Two ways firms can segment consumer markets,
- Demographical Segmentation:
With this segmentation strategy, a company divides and targets groups based on age group, gender, marital status, occupation, and income.
For example, perfumes firms effectively use a variety of segmentation variables. Products like Axe Deodorants target male gender customers, however, Layer’r Wottagirl focuses on female gender customers.
- Geographical Segmentation:
When a business divides its market on the basis of geography. This segmentation is used by companies that sell products or services to a certain community, state, terrain, region or country.
For example, McDonald’s offers seasonal seafood meals, including lobster and crab, in select markets like New England.
Working in a digital marketing agency like Half Full Technology, it is imperative to know about the ways we can segment our users in order to reach the precisely targeted audiences. Without proper segmentation, there is a huge chance of missing out on the potential customers and missing the mark on effective promotions.
Written By: Aayush Sharma