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Market segmentation is a method used by marketers to help identify the most profitable customers for their product or service. You will learn four approaches to market segmentation that include demographic, geographic, psychographic, and behavioral.

What Is Marketing Segmentation?

In today’s economy, it is more important than ever that business owners are able to locate the most desirable group of individuals to whom they should advertise and promote their product or service.

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It’s often said that the job of the marketer is to provide the right product to the right customer at the right price and at the right place. But, who is this right customer, and how do marketers go about finding them?Market segmentation is a method used by marketers to break up the overall market into meaningful segments, much like you would segment an orange. Once you have split the orange apart, you can examine each segment to determine which ones look to be the most desirable.To the marketer, each segment of the overall market has its own unique characteristics, and understanding this, the marketer can identify the market segment or segments that would be most interested in their product or service. The definition of a market segment, then, is a group of customers who share a similar set of wants.

Generally, there are four approaches to segmenting the market:

  • Demographic
  • Geographic
  • Psychographic
  • Behavioral

By using one or more of these approaches to segmentation, marketers are better able to identify potential customers, which will improve the competitiveness of the company and aid in increasing its profitability. Marketers scan the overall market in search of groups with similar characteristics who will respond to a marketing mix in a similar way. While this is not a fool-proof method for success, market segmentation does provide a way for marketers to minimize risk when developing products by focusing on the needs of their most desirable customers.Let’s take a deeper look at each of the four approaches.

Demographic

Demographic segmentation is the most often used approach because we can count the number of individuals within a segment who have similar characteristics such as gender, age, educational background, marital status, occupation, and income. As an example, a number of years ago, a major automobile manufacturer wanted to develop a vehicle that would appeal to individuals between 20 and 35 years of age. Marketers were able to determine the number of individuals within this age range and set about to create a non-traditional marketing campaign to appeal to these individuals.Since the median age of their customers was 53 years of age, the marketers had a lot of work to do in order to change the image of the company to showcase the youthful side of the brand. Posters and ads were created to run in movie theaters directing viewers to the website of the brand. Television programs were sponsored, public test-drive sites were developed, and vehicles were available at concert venues. It was as if the marketers actually got into the heads of this unique segment.

Geographic

Geographic segmentation is used when a product or service would appeal to individuals within a specific community, state, and region of a country or group of countries. Climate – such as cold and hot regions or wet and dry regions of a country – is also a consideration in geographic segmentation. A company would not be very successful marketing snow-blowers in Florida or surfboards in Alaska.

Some marketers need to operate in large cities with a population size of 250,000-500,000, for example, while others select cold, northern regions of the country, depending on the product. For the automobile company mentioned, the initial focus was in very large cities on the West coast. Once the product had proven to be widely adopted by the target market in that region, the company made the brand available for distribution throughout the entire country.

Psychographic

Psychographic segmentation relates to lifestyle and personality traits and is used to identify individuals based on interests and activities. It can be easily understood when thinking about boat shows, car shows, fashion shows, or outdoor exhibitions.

There are multiple demographic characteristics evident in the consumers who would frequent these types of events.By focusing on the lifestyle and personality traits of these individuals rather than just on demographics, marketers can better create marketing campaigns unique to the interests of their customers. Using the example of the automobile company again, the marketers realized that their target segment would not at all be interested in a vehicle that would appeal to their parents, so they created separate showrooms to display their vehicles. To avoid a cookie cutter image, multiple customizable options were offered, and the price was kept at a very affordable level.

Behavioral

Behavioral segmentation divides buyers into groups on the basis of desired product benefits as well as their knowledge of, attitude toward, use of, or response to a product.

Occasions, user status, loyalty status, and even buyer-readiness stage are important considerations when using this segmentation approach.Would the car be a gift to celebrate a graduation or a job promotion? Is the target market for this brand of car interested in low price, convenience, reliable service, or premium products and quality service? Are individuals in this segment loyal to any brand; might they shift their loyalty? Is this targeted segment aware of the brand, informed, or interested with intention to purchase?

Lesson Summary

Let’s review. In today’s economy, it’s more important than ever that business owners are able to locate the most desirable group of individuals to whom they should advertise and promote their product or service.

There are many ways to approach this task, and one of them is by market segmentation; that is, breaking up the overall market into meaningful segments.The marketer is able to use one or more approaches to identify the most profitable customers. These approaches include demographic, geographic, psychographic, and behavioral segmentation. Depending on the product or service to be offered, the marketer can select the best approach to understand as much as possible about their present and potential customers and focus on the needs of their most profitable customers.

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