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Market Segmentation

To compete successfully in today’s volatile and competitive business markets, mass marketing is no longer a viable option for most companies. Marketers must attack niche markets that exhibit unique needs and wants. Market segmentation is the process of partitioning markets into groups of potential customers with similar needs or characteristics who are likely to exhibit similar purchase behavior.

Market segmentation is the foundation on which all other marketing actions can be based. It requires a major commitment by management to customer-oriented planning, research, implementation and control.

The overall objective of using a market segmentation strategy is to improve your company’s competitive position and better serve the needs of your customers. Some specific objectives may include increased sales, improved market share and enhanced image.

There are four major benefits of market segmentation analysis and strategy:

  • Designing responsive products to meet the needs of the marketplace
  • Developing effective and cost-efficient promotional tactics and campaigns
  • Gauging your company’s market position — how your company is perceived by its customers and potential customers relative to the competition
  • Fine-tuning current marketing strategies

A three-step process is used to develop a market segmentation strategy:

  • Segment Identification — determining a given number of homogeneous market segments based on selected segmentation variables and criteria. Segments should be customer-focused, a justifiable size, distinguishable, accessible, accountable and profitable.
  • Market Selection — selecting one or more groups to target for marketing activity. It is impossible to pursue every market opportunity so you must make strategic choices based on customer needs, competitive opportunities, corporate objectives, and your firm’s financial, technical and marketing resources.
  • Positioning — carving out a market niche for your firm. This may be accomplished by searching out unique marketing advantages, seeking new market segments that competitors are not cultivating, or developing new approaches to old problems. Your positioning should be based on a real (e.g., lower cost, superior quality) or intangible (e.g., company reputation) competitive advantage.

Market segmentation is both a science and an art. There are many alternative methods for segmenting markets.
SMART can help you determine the best approach to meet your objectives and develop an effective positioning.


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