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Market Segmentation Process
The market segmentation 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 time overlap.1. Survey
This stage consists of extensive consumer research, as marketers try to gather extensive quantitative and qualitative information about consumer buying motivators, consumption goals and buying patterns. At this stage, marketers use the segmentation variables to gain an understanding of consumer behavior.
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 any other changes, which may represent opportunities. Effective analysis will provide a rich understanding of consumer needs, whether present 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 other related categories to gain a detailed understanding of the segment. Profiling is an important input in the deigning of the marketing mix, especially the communication and distribution program.
4. Evaluating Segment Attractiveness/ Feasibility
The last stage of the segmentation process, before the marketers decide on segments to target, is a detailed feasibility study of the different market segments. For a market segment to be an effective target, a market segment should be Substantial, Accessible, Differentiable, Actionable, and Measurable. The first step used in the feasibility stage is to us e these five criteria’s, 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:
• Expected market growth rate. Unstable growth rates do not make for long-term attractiveness of the segment.
• Availability of resources.
• Leveraging of existing competitive advantage and skills and competencies.
• Impact of either environmental forces on the market segment.
• Impact on other market segments presently being targeted by the company.