Market segmentation = The classification of customers or potential customers into groups or sub-groups (market segments), each of which responds differently to different products or marketing approaches
Types of marketing segmentation:
Demographic segments
Geographic segments
Income segments
Behavioural segments
Stage 1 = Market segmentation
Stage 2 = Market targeting
Stage 3 = Market positioning
The main forms of demographic segmentation are age and gender but could also include:
marital status
family size
Benefits of market segmentation
to increase market share (identify gaps and target those)
to assist new productdevelopment
to extend products into new markets
to identify ways of marketing a product
Drawbacks of market segmentation
Difficulty to always identify most important segments to a product
reaching chosen segments with marketing (e.g. how do you reach primary school teachers on a national scale)
meeting needs of customers not included in the segments
The first step to market targeting is to asses the nature of each market segment and identify those that provide the best match to the businesses existing capabilities
Niche marketing = targeting a product or service at a small segment of a larger market
Advantages of Niche Marketing:
Less competition
Small-scale production
Tailor-made products
Easier to target customers
Disadvantages of Niche Marketing:
lower profits due to small-scale of market
changes in demand
market entry - from larger firms who notice interest
Mass marketing - Aiming a product at all (or most) of a market
Advantages of mass marketing:
large scale production leads to lower unit costs
high revenue due to volume of customers
barriers to entry - MM allows businesses to use the most expensive marketing
research and development - requires large funding
increases brand awareness
Disadvantages of mass marketing:
fixed capital costs are high (e.g. factories, machinery, delivery lorries)
vulnerable to changes in demand
competition
effects of standardisation (harder to appeal to all customers)
Market positioning = where your product or brand stands in relation to other businesses products or brands
Good market positioning means that consumers believe they receive benefits from buying the product
Factors that help decide on market positioning:
attributes and benefits of the product
competition
product user
pricing
product application
Value of market positioning is:
maximise sales revenue by increasing sales volume
provides scope for higher prices as establishes a USP
marketing dept save money by focusing budget
increases marketing efficiency due to understanding of customer needs