Segmenting the market

Segmenting the Market

Market SegmentationWhat Does it Mean?

Photo:http://cyberchaos05.deviantart.com/http://creativecommons.org/licenses/by-nc-nd/3.0/

the world becomes your market … but the cost to market to the world would be prohibitive

Market SegmentationWhat Does it Mean?

Photo:http://cyberchaos05.deviantart.com/http://creativecommons.org/licenses/by-nc-nd/3.0/

That is why marketers will segment the market – or in other words, divide the market in smaller groups (segments)

Market Segmentation ExampleOpening a retail operation in the Far West End

to sell bird feeders

We have just made a “geographic” segmentation by dividing the consumer market into a geographical area

Market Segmentation ExampleBut the market is still too big to pick up a good ROI

So let’s divide the market again by age

We are going to make the assumption that consumers over the age of 30 are more apt to buy birdfeeders. So

we will segment the Far West End market by age.

Market Segmentation ExampleSo let’s look at what we have …

We have segmented the consumer market by geographical location and by age. That narrowed our market down from

a global market to more defined market.

Market Segmentation ExampleBut we can probably do another segmentation to really

find our buyer … this time by economic life cycle

This segmentation will be those consumers who own a home and who are over the age of 30 and reside in the Far

West End.

Market Segmentation ExampleLet’s try another segmentation …

We are going to segment our market further by home owners who are empty nesters or couples without children.

This is a family-life segmentation

Market Segmentation ExampleSo let’s look at what we have … we have segmented

the consumer market into these aggregate segments …

• living in Richmond Far West End (geographic) consumers who are over the age of 30 (age) consumers who are homeowners (economic life-cycle) consumers who are empty-nesters or with no kids

This becomes the market that you will target your product offering – bird feeders and other bird-loving supplies

Why Market Segmentation

To divide the market into smaller segments where marketers can test new products, price discounts, promotional media, and

distribution outlets.

Types of Market Segmentation

The most common method of segmentation is the use of “physical descriptors” as illustrated below:

Geographic location

Age

Gender

Race/Ethnic Origin

Education

Occupation

Economic position

Family life cycle

Income

And more

Business-to-Business Segmentation

In B-to-B, marketers and sales managers will segment the business market using similar descriptors:

Geographic location

Company Size

SIC Category

Application of Product

Organization Structure

And More

These segmentation descriptors (for both consumer and business) can be easily purchased or obtained from census

data and other data collection agencies.

Segmenting the Market

In summary, segmentation allows business owners to narrow their market to maximize overall sales by developing new

products, pricing, media promotion and distribution outlets.