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Market Segmentation Process
In this section we will learn about the process of market segmentation. The process is continuous and follows four different stages: survey, analysis of findings, segment profiling and feasibility. These stages need not necessarily be sequential and will at times overlap.
1. Survey
The survey stage consists of extensive consumer research, as marketers try to gather extensive quantitative and qualitative information about consumer buying motivations, consumption goals and buying patterns. At this stage, marketers use the segmentation variables we studied earlier to gain an understanding of consumer behaviour. Various research methodologies are used to gain extensive information on consumer behaviour.
2. Analysis of findings
The data gathered has to be collated in a meaningful way and analyzed. The aim of the analysis is to identify need gaps in the market, emergence of new buying patterns shift in consumer perceptions, attitudes, values and other changes which may represent opportunities. Effective analysis will provide a rich understanding of consumer needs, whehter unmet needs, latent needs or newer needs as they emerge.
3. Segment profiling
As most companies use a hybrid segmentation approach, segment profiling becomes a part of the earlier stages. At this stage market may try to find additional information about the observed segments, such as media habits, ownership of durables, spending patterns on the related categories to gain a detailed understanding of the segment. Profiling is an important input the designing the marketing mix, especially the communication and distribution program.
4. Evaluating segment attractiveness
The last stage of the segmentation process, before the marketers decide on segment to target, is detailed feasibility study of the different market segments. The first step is to use the five criteria, we learnt earlier, to determine attractiveness. The segment may pass the first test, but marketers need to look at long term profit attractiveness of a segment as well.
Additional criteria for segment attractiveness are:
(i) Expected market growth rate. Unstable growth rates do not make for long term attractiveness of the segment.
(ii) Competitive intensity and other competitive forces. A “five forces” analysis can be done on market segments as well to determine profit attractiveness.
(iii) Segment development costs: emerging market segments would require market development efforts. Marketers must account for these costs to determine the feasibility of targeting a segment.
(iv) Availability of resources.
(v) Leveraging of existing competitive advantage and skills and competencies.
(vi) Impact of either environmental forces on the market segment
(vii) Impact on other market segments presently being targeted by the company.
All the factors that we learnt are used to evaluate the attractiveness of a potential market segment. Sometimes attractive segments may not mesh with the companies long-run objectives or the company may lack a competitive advantage and necessary competencies to offer superior value to the customers.
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1. Survey
The survey stage consists of extensive consumer research, as marketers try to gather extensive quantitative and qualitative information about consumer buying motivations, consumption goals and buying patterns. At this stage, marketers use the segmentation variables we studied earlier to gain an understanding of consumer behaviour. Various research methodologies are used to gain extensive information on consumer behaviour.
2. Analysis of findings
The data gathered has to be collated in a meaningful way and analyzed. The aim of the analysis is to identify need gaps in the market, emergence of new buying patterns shift in consumer perceptions, attitudes, values and other changes which may represent opportunities. Effective analysis will provide a rich understanding of consumer needs, whehter unmet needs, latent needs or newer needs as they emerge.
3. Segment profiling
As most companies use a hybrid segmentation approach, segment profiling becomes a part of the earlier stages. At this stage market may try to find additional information about the observed segments, such as media habits, ownership of durables, spending patterns on the related categories to gain a detailed understanding of the segment. Profiling is an important input the designing the marketing mix, especially the communication and distribution program.
4. Evaluating segment attractiveness
The last stage of the segmentation process, before the marketers decide on segment to target, is detailed feasibility study of the different market segments. The first step is to use the five criteria, we learnt earlier, to determine attractiveness. The segment may pass the first test, but marketers need to look at long term profit attractiveness of a segment as well.
Additional criteria for segment attractiveness are:
(i) Expected market growth rate. Unstable growth rates do not make for long term attractiveness of the segment.
(ii) Competitive intensity and other competitive forces. A “five forces” analysis can be done on market segments as well to determine profit attractiveness.
(iii) Segment development costs: emerging market segments would require market development efforts. Marketers must account for these costs to determine the feasibility of targeting a segment.
(iv) Availability of resources.
(v) Leveraging of existing competitive advantage and skills and competencies.
(vi) Impact of either environmental forces on the market segment
(vii) Impact on other market segments presently being targeted by the company.
All the factors that we learnt are used to evaluate the attractiveness of a potential market segment. Sometimes attractive segments may not mesh with the companies long-run objectives or the company may lack a competitive advantage and necessary competencies to offer superior value to the customers.
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