Customer or market segmentation is the process of dividing large markets into smaller groups based on shared characteristics. The demand function of these smaller groups differs, and businesses can gain a competitive advantage by identifying and serving specific segments. Factors such as lifestyles, attitudes, values, beliefs, and culture can all be explored as a basis for segmentation.
Porter’s generic strategies include cost leadership, differentiation, and focus. According to Porter, pursuing more than one strategy leads to resource waste.
- Differentiation involves developing different products/services for multiple segments.
- Focus means targeting only one specific segment.
- Undifferentiated strategy refers to developing a product that meets the needs of the largest number of buyers, often leading to cost leadership.
Hyper-segmentation is the practice of dividing a target market into highly granular segments. Digital communication, social media, and the internet have enabled businesses to segment down to the level of individual consumers.
A market segment becomes a target market when it is addressed with a marketing mix.
Old 4 P's
- Product - An item that satisfies consumer wants.
- Price - The amount a customer pays for a product/service.
- Place - Direct or indirect channels of marketing (e.g., franchise, retail outlet, website).
- Promotion - Tailored marketing communications.
New C's
- Customer - A customer need that must be satisfied.
- Cost - Price is only part of the total cost of procurement to the consumer.
- Channels - Various marketing channels.
- Communication - Promotion should not be manipulative; instead, it should be a cooperative dialogue with the consumer.
Conclusion
Understanding market segmentation and the marketing mix is crucial for businesses looking to optimize their marketing strategies. By leveraging segmentation techniques and adapting the marketing mix, businesses can create stronger connections with their target audience and achieve competitive success.
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