Target Marketplaces And Market Segmentation

The first few parts of the Ideas of Marketing Courses have introduced the essential concepts needed as a foundation for creating a strong marketing program. Specifically, it has emphasized the importance of understanding customers being that they are the reason a business is in business. With customer knowledge at hand, it is now time to turn our focus on the procedure of responding to customers' needs through actions performed by the marketer.

In this training we verify decision #1 - how marketers determine which sets of customers to target. This is a critical point in marketing planning since all additional marketing decisions will be directed toward satisfying the markets selected. http://www. knowthis. com/images/stories/target. jpg

For those new to marketing, selecting target markets may seem to be like a not too difficult decision to make. Actually, many inexperienced marketers will simply conclude that "We will just sell to whoever desires to buy. " However, this mind-set is both inadequate and inefficient as the professional will probably drain resources in their pursuit to find those inclined to buy. Utilizing a target market way an organization tries to get the most from its resources by following a planned procedure for figuring out customers that seem to be the best candidates to respond to the marketer's message.

What is a Market?

The simplest way to specify market is to think of it as comprising all individuals or organizations that may don't mind spending time in investing in a company's products or services. Quite simply, a market comprises all customers who've needs that may be fulfilled by an organization's offerings. Yet just getting a need is not enough to define market. Many people may say they require a California mansion that overlooks the Pacific Sea but most would not be considered prospects of a real estate agent who is trying to sell such a property. So other factors enter into play when determining a market.

The first factor is the fact markets consist of customers who are experienced to make a purchase. Experienced customers are thought as those who

Seek a solution to a need, and

Are permitted make a purchase, and

Possess the financial potential to make the purchase, and

Have the specialist to consider.

Note that a customer must meet ALL factors listed above, though for a few markets the client may have a surrogate who will handle a few of these skills for a targeted customer. For instance, market may consist of pre-teen customers who've a need for certain clothing items however the real purchase may relax with the pre-teens' parents. So the parents may assume one or more surrogate roles (e. g. , financial capacity, authority) that will bring about the pre-teen being a experienced customer.

A second factor for defining a market rests with the company's potential to service the market. To a business a market can only are present if the alternatives desired by customers are ones that the business can satisfy with their offerings. If the company identifies a group of customers who are trained to make purchases they only turn into a market for the company after the company is able to implement marketing activities made to service those customers.

Thus, for the purposes of the tutorial, a market is defined as several customers who are trained to buy things of products that a marketer can offer. However, even if an organization can offer products and services to market, not all markets will fit an organization's goals and targets. With this in mind, we now switch our attention to examining the procedure marketers follow to choose which markets are better to target with their marketing work.

Target Marketplaces and Market Segmentation

The market decided on by the company as the prospective because of their marketing work (i. e. , target market) is crucial since all following marketing decisions will be directed toward gratifying the needs of the customers. But what way should be taken to select markets the company will aim for?

One methodology is to target at an extremely wide-ranging level by determining the market as consisting of qualified customers who have a simple need that must be satisfied. For example, you can consider the beverage market as consisting of all customers that are looking to buy liquid refreshment products to solve a thirst need. While this may be the greatest possible market a company could hope for (it could appear to contain just about everybody in the world!) the truth is there are no commercial products that would appeal to everyone on earth since individual nutritional needs, flavor, purchase situations, economic conditions, and a great many other issues lead to dissimilarities in what folks seek to satisfy their thirst needs.

Because people are different and seek different ways to satisfy their needs, practically all organizations, whether for-profits or not-for-profits, professional or consumer, domestic or international, must use a Market Segmentation approach to target marketing. This process divides broad markets, comprising customers possessing different characteristics, into smaller market sections in which customers are grouped by quality distributed by others in the segment.

To successfully focus on markets by using a segmentation procedure, organizations should take part in the following three-step process.

Identify sections within the overall market

Choose the segment(s) that fits best with the organization's aims and goals

Develop a online marketing strategy that appeals to the selected target market(s)

Step 1: Identify Market Segments

The first step in targeting markets is to split up customers who make up large, general marketplaces into smaller groupings predicated on selected characteristics or factors (also referred to as bases of segmentation) distributed by those in the group. Standard markets 're normally associated with basic product communities, such as auto, beverage, footwear, home entertainment, etc. The goal of segmentation is to look deeper within the overall market in order to find customers with an increase of specific needs within the merchandise group (e. g. , seek cross types cars) AND who also discuss similar characteristics (e. g. , university educated, support environmental issues, etc. ). When grouped alongside one another these customers may form a smaller segment of the overall market. By concentrating market research on these smaller segments the internet marketer can learn a great deal about these customers and with these details can get started to craft highly targeted marketing campaigns.

For this tutorial, we take the approach that the variables used to section market segments can be labeled into a three-stage hierarchy with higher periods building on information obtained from lower stages to be able to reach increased precision in determining distributed characteristics. Yet, the greater precise a marketer hopes to be with their segmentation work the more this process requires sufficient funding and strong research features. For instance, a marketer joining a fresh market may not have the ability to segment beyond the first two stages since the accuracy available in Stage 3 segmentation may demand an established marriage with customers in the market.

The three-stage segmentation process shown below works for both consumer and business markets (e. g. , manufacturers, reseller, etc. ), though, as you might expect, the variables used to portion these market segments may vary. Each segmentation level includes an explanation along with recommendations for factors the marketer should consider. This is not meant to be an exhaustive list, as other variables are potentially available, but also for marketers who are not used to segmentation these will give you a good starting point for segmenting market segments.

Stage 1 Segmentation Variables

Stage 1 segmentation consists of variables that can be easily recognized through demographics (i. e. , statistics that describe a human population), geographics (i. e. , location issues) and financial information. For both consumer and business segmentation this information focuses mostly on easy to obtain data from such options as authorities data (e. g. , census information), evaluating secondary data options (e. g. , news media), trade associations and financial reporting services. While Level 1 segmentation does not provide segmentation benefits available with higher-level phases, the marketer benefits from completing the segmentation process very quickly frame with lower cost.

Segmentation Variables

Consumer Markets

Segmentation Variables

Business Markets

Demographics

age group (e. g. , teenagers, retirees, adults), gender, education level, ethnicity, income, profession, social category, marital status

Geographics

location (e. g. , countrywide, regional, urban/suburban/rural, international), climate

Demographics

type (e. g. , company, dealer, wholesaler), industry, size (e. g. , sales size; number of retail outlets), time (e. g. , new; young development, established growth, mature)

Geographics

location (e. g. , nationwide, regional, urban/suburban/rural, international), climate

Business Arrangement

ownership (e. g, . private versus public, independent versus string), financial condition (e. g. , credit history, income growth, stock price, cashflow)

Stage 2 Segmentation Variables

Some businesses, especially companies with limited cash or those who feel they have to move quickly to get their product to advertise, will stop the seek out segmentation factors at the Level 1 level. However, moving beyond Stage 1 segmentation offers a wealthy amount of customer information that will allow marketers to more effectively and efficiently concentrate on customers' needs. To segment using Level 2 parameters marketers must use general market trends techniques that help gain information into customers' current purchase situation and the surroundings where the customer operates. Information at this time includes learning what options customers have chosen to satisfy their needs, what circumstances within customers' environment could have an impact on how purchases are made, and understanding local conditions that can impact purchase decisions. Marketers might find some of these details through the same options used in Stage 1 (e. g. , may find out brands most frequently purchased) but most of these parameters require the marketing expert to activate in at least everyday contact with customers on the market. This can be done through principal research methods, such as surveying the market, having sales workers contact customers, purchasing research studies from commercial research companies or selecting consultants to undertake research projects. The cost and time needed to acquire this information may be significantly higher than that of Stage 1 segmentation.

Segmentation Variables

Consumer Markets

Segmentation Variables

Business Markets

Current Purchasing Situation

brands used, purchase regularity, current suppliers

Purchase Ready

possess necessary equipment, property, knowledge and skill sets

Local Environment

cultural, politics, legal

Current Purchasing Situation

brands used, purchase occurrence, current suppliers

Purchase Ready

possess necessary equipment, property, knowledge and skill sets

Local Environment

cultural, politics, legal

Customers Offered by the Business

identify the business' market

Business' Perceived Image

identify how targeted businesses are recognized by their customers

Stage 3 Segmentation Variables

Marketers choosing to segment at the Level 3 level face an enormous challenge in gathering useful segmentation information but, for those who do commit to segmenting at this level, the rewards may include gaining competitive benefit over competitors whose segmentation attempts never have dug this deep. However to attain the prize the internet marketer must make investments significant time and money to amass the thorough market intelligence needed to achieve Stage 3 segmentation. On top of that much of what's needed at Level 3 is information that is often well secured rather than easily distributed by customers. In fact, many customers are unwilling to share certain personal information (e. g. , mental health) with marketers with whom they are not familiar. Subsequently, segmenting on Stage 3 factors is often not an option for marketers new to market unless they purchase this gain access to via other means (e. g. , seek the services of a consultant who knows the marketplace to attempt customer research). To access this information, marketers who already provide the market with other products might be able to use principal research such as concentration categories, in-depth interviews, observation research and other high level general market trends techniques.

Segmentation Variables

Consumer Markets

Segmentation Variables

Business Markets

Benefits Sought

price, overall value, specific feature, ease-of-use, service, etc.

Product Usage

how used, situation when used, etc.

Purchase Conditions

time of day/month/12 months when purchased, credit conditions, trade-in option, etc.

Characteristics of Specific Buyer

purchase experience, how purchase is made, influencers on purchase decision, need for purchase

Psychographics

personality, behaviour, and lifestyle combined with demographics

Benefits Sought

price, overall value, specific feature, services, profit margins, promotional assistance; etc.

Product Usage

how used (e. g. , uncooked materials, component product, major offering item at retail level), situation when used, etc.

Purchase Conditions

length of sales cycle, set product features, bid costing, credit conditions, trade-in option, product handling, etc.

Characteristics of Buying Center

purchase experience, quantity of people, make-up of key influencers, determination to expect risk;

Step 2: Choosing Market Segments

The second part of selecting target marketplaces requires the internet entrepreneur to critically evaluate the segments discovered in Step one 1 to be able to select those which are most attractive. For small firms this step might not exactly be very regarding since they may lack the resources needed to take action effectively. So they are generally left with utilizing their own intuition or wisdom to determine which segments will be the most encouraging. For companies with enough time and money to invest in this task, the results may identify the segments that are major individuals for current marketing work and also present segments that are future focuses on for the business's offerings.

In identifying whether a segment is worth being a target market, the marketer must address the following questions

Is the segment large enough to aid the marketer's aims? This is a particularly critical question if the professional is entering a market offered by many opponents.

Is the segment showing indications of growth? Among the most severe situations for a internet marketer is to enter into a market whose expansion is level or declining, especially if competitors already can be found.

Does the company have the necessary skills, knowledge and experience to service the segment? The business should understand and be able to communicate with the clients in the segment, otherwise they could face a significant learning curve in understanding how to effectively market to a portion.

Does the portion meet the mission of the company? The segment should not extend too much beyond the path the business has chosen to take.

Once a number of segments have been discovered the internet marketer must choose the most attractive option(s) because of their marketing efforts. At this point the choice becomes the firm's marketplace(s).

Step 3: Develop Marketing Strategy

The results of examining market segments leads the professional to consider one of the next concentrate on marketing strategies.

Undifferentiated or Mass Marketing - Under this strategy the marketer attempts to appeal to one large market with an individual online marketing strategy. While this approach offers advantages in terms of decreasing development and production costs, since only 1 product is sold, there are few market segments where all customers seek the same benefits. While this approach was extremely popular in the early times of marketing (e. g. , Ford Model-T), few companies now view this as a feasible strategy.

Differentiated or Segmentation Marketing - Marketers choosing this plan try to appeal to multiple smaller market segments with a distinctive marketing strategy for every market. The underlying concept is that bigger markets can be split into many sub-markets and a business chooses different marketing strategies to reach each sub-market it focuses on. Most large consumer products organizations follow this plan as they provide multiple products (e. g. , jogging shoes, golf ball shoes) within a larger product category (e. g. , footwear).

Concentrated or Market Marketing -This strategy combines mass and segmentation marketing by by using a single online marketing strategy to appeal to 1 or more really small markets. It is primarily utilized by smaller marketers who've recognized small sub-segments of a larger segment that aren't dished up well by greater businesses that follow a segmentation marketing procedure. In these situations a smaller company can do quite nicely marketing an individual product to a narrowly described target market.

Customized or Micro-Marketing - This newest target online marketing strategy attempts to charm to targeted customers with individualized marketing programs. For micro-marketing segmentation to be effective the professional must, to some degree, allow customers to "build-their-own" products. This approach requires extensive technical capability for marketers to reach individual customers and invite customers to connect to the marketer. The Internet has been the catalyst because of this target marketing strategy. As more companies learn to utilize the Internet micro-marketing is likely to flourish.

Product Positioning

No matter which target marketing strategy is selected, the overall marketing strategy should involve the procedure of positioning the firm's offerings with techniques that will charm to targeted customers. Placement is concerned with the belief customers maintain regarding something or company. In particular, it pertains to marketing decisions a business undertakes to get customers to think about something or company in a certain way in comparison to its competitors. The goal of setting is to influence customers to believe the marketer's offerings are different in some way from its opponents by using an important benefit desired by the marketplace. For instance, if a customer has discovered she's a need for an affordable laptop, an organization such as Dell will come to mind since their marketing work position their products as offering good value at an acceptable cost.

To position efficiently the marketer will need to have thorough understanding of the key benefits wanted by the market. Obviously the greater effort the marketing expert expends on segmentation (i. e. , come to Stage 3) the more likely they will know the huge benefits sought by the market. Once known, the marketing consultancy must: 1) tailor marketing initiatives to ensure their offerings meet the most sought after benefits, and 2) communicate to the marketplace in a way that differentiates the marketer's offerings from competitors.

For companies that seek to charm to multiple goal markets (i. e. , segmentation marketing), placing strategies may differ for every single market. For instance, a internet marketer may sell the same product to two different focus on markets, but in one market the emphasis is on design while in another market the emphasis is on ease-of-use benefits. The important point is the fact the entire market strategy must be evaluated for each marketplace since what is effective in a single market may not are well in another market.

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