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Market Segmentation & Benefits
The division of a market into different homogeneous groups of customers is known as market segmentation.
In order to increase sales its very important to understand the market segmentation. Market Segmentation helps in understanding the needs of different market segments.
A market segment should be:-
3. Large enough to be profitable
The need for market segmentation has increased due to increasing competition. Customers are now becoming more diversified and firms are constantly working on differentiating their products from the competitors. When the focus is on segmented markets, the company’s marketing strategy will work better as it allows the firms to focus on their resources mote effectively.
Market can be segmented on the basis of:-
2. Customer type
3. Buyer behavior
In today’s competitive world it’s imperative to analyze the needs and wants of different market segments. We have to understand that each segment has its own needs and the firms should design products keeping in mind each segment’s need. For example: – Nowadays there are lots of mutual funds options available in the market. The younger segment would be willing to take risk and may go in for the risky portfolios whereas the older segment may look for stability in the earnings. On these bases, the firms can design the mutual funds for younger segment and older segment.
Improved segmentation can lead to significantly improved marketing effectiveness. With right segmentation, advertising results can be improved and customer satisfaction can be increased leading to overall profitability.
A good segmentation strategy would allow a company to develop one or more marketing mixes that are both effective and efficient. Market segementation would definetely result in better positioning of a product. Market segementation enables companies to target different categories of customers.
It would also help in ascertaining which segement is profitable to the company and which is not. Sometimes, the company is profitable on the whole however, it might not be earning appropriate profit from a particualr market segment.
In such cases either the product can be modified to meet the needs of that particualr segement or if need be that segement can be eliminated all together.
Thus, market segmentation would not only help in gaining a competitive edge but would also help in improving sales.