Soda ash, for example, can be produced by two methods that require different capital equipment and supplies. The production of Japanese color televisions is highly automated and uses a few large, integrated circuits.
In the United States, on the other hand, color TV production once involved many discrete components, manual assembly, and fine tuning. In Europe, production techniques made use of a hybrid of integrated circuits and discrete components.
One of the easiest ways, and in some situations the only obvious way, to segment a market is by product and brand use. Users of a particular product or brand generally have some characteristics in common; at the very least, they have a common experience with a product or brand.
Manufacturers who replace metal gears with nylon gears in capital equipment probably share perception so frisk, manufacturing process or cost structure, or marketing strategy. They probably have experienced similar sales presentations. Having used nylon gears, they share common experiences including, perhaps, similar changes in manufacturing approaches. One supplier of nylon gears might argue that companies that have already committed themselves to replace metal gears with nylon gears are better customer prospects than those that have not yet done so, since it is usually easier to generate demand for a new brand than for a new product.
But another supplier might reason that manufacturers that have not yet shifted to nylon are better prospects because they have not experienced its benefits and have not developed a working relationship with a supplier.
A third marketer might choose to approach both users and nonusers with different strategies. Current customers are a different segment from prospective customers using a similar product purchased elsewhere. Sometimes it is useful to segment customers not only on the basis of whether they buy from the company or from its competitors, but also, in the latter case, on the identity of competitors.
This in formation can be useful in several ways. Sellers may find it easier to lure customers from competitors that are weak in certain respects.
When Bethlehem Steel opened its state-of-the-art Burns Harbor plant in the Chicago area, for example, it went after the customers of one local competitor known to offer poor quality. Marketers might find companies with known operating, technical, or financial strengths and weaknesses to be an attractive market.
For example, accompany operating with tight materials inventories would greatly appreciate a supplier with are liable delivery record. And customers unable to perform quality-control tests on incoming materials might be willing to pay for supplier quality checks. Some raw materials suppliers might choose to develop a thriving business among less sophisticated companies, for which lower-than-usual average discounts well compensate added services.
Technically weak customers in the chemical industry have traditionally depended on suppliers for formulation assistance and technical support. Some suppliers have been astute in identifying customers needing such support and in providing it in a highly effective manner. Technical strength can also differentiate customers. Both companies used segmentation for market selection. Many operating variables are easily researched.
In a quick drive around a soda ash plant, for example, a vendor might be able to identify the type of technology being used. Data on financial strength is at least partially available from credit-rating services.
The factors in this middle segmentation nest include the formal organization of the purchasing function, the power structures, the nature of buyer-seller relationships, the general purchasing policies, and the purchasing criteria. A centralized approach may merge individual purchasing units into a single group, and vendors with decentralized manufacturing operations may find it difficult to meet centralized buying patterns.
These also vary widely among customers. The impact of influential organizational units varies and often affects purchasing approaches. The powerful financial analysis units at General Motors and Ford may, for example, have made these companies unusually price-oriented in their purchasing decisions.
Or a company may have a powerful engineering department that strongly influences purchases; a supplier with strong technical skills would suit such a customer.
A vendor might find it useful to adapt its marketing program to customer strengths, using one approach for customers with strong engineering operations and another for customers lacking these. A supplier probably has stronger ties with some customers than with others. The link may be clearly stated. A lawyer, commercial banker, or investment banker, for example, might define as an unattractive market segment all companies having as a board member the representative of a competitor.
A financially strong company that offers a lease program might want to identify prospective customers who prefer to lease capital equipment or who have meticulous asset management.
Or they may prefer to buy systems rather than individual components. Some purchasers require an agreement based on supplier cost, particularly the auto companies, the U. Other purchasers negotiate from a market-based price, and some use bids.
Bidding is an important method for obtaining government and quasi-government business, but because it emphasizes price, bidding tends to favor suppliers that, perhaps because of a cost advantage, prefer to compete on price. Some vendors might view purchasers who choose suppliers via bidding as desirable, while others might avoid them. The power structure, the nature of buyer-seller relationships, and general purchasing policies all affect purchasing criteria.
Benefit segmentation in the consumer goods market is the process of segmenting a market in terms of the reasons why customers buy. It is, in fact, the most insightful form of consumer goods segmentation because it deals directly with customer needs.
In the industrial market, consideration of the criteria used to make purchases and the application for these purchases, which we consider later, approximate the benefit segmentation approach. Up to this point we have focused on the grouping of customer companies. Now we consider the role of the purchase situation, even single-line entries on the order form. Situational factors resemble operating variables but are temporary and require a more detailed knowledge of the customer.
They include the urgency of order fulfillment, product application, and the size of order. It is worthwhile to differentiate between products to be used in routine replacement or for building a new plant and those for emergency replacement of existing parts.
A supplier of large-size, heavy-duty stainless steel pipe fittings, for example, defined its primary market as fast-order replacements. The requirements for a 5-horsepower motor used in intermittent service in a refinery will differ from those of a 5-horsepower motor in continuous use. Requirements for an intermittent-service motor will vary depending on whether its reliability is critical to the operation or safety of the refinery.
Product application can have a major impact on the purchase process and purchase criteria and thus on the choice of vendor. The most basic is identifying users based on their locations such as their country, state, county and zip code. Identifying characteristics can require you to get more specific since one county could have rural, suburban and urban areas.
People who live in different countries may also have different interests. Baseball is very popular in the United States, for example, while cricket is more popular in India. Companies can also consider different needs in different regions.
A clothing company, for instance, will show ads featuring warmer clothing to people living in cooler climates and show the opposite to people living in warmer climates. Psychographic segmentation is similar to demographic segmentation, but it deals with characteristics that are more mental and emotional.
Understanding these aspects of your audience can help you to create content that appeals to them more effectively. Some examples of psychographic characteristics include personality traits, interests, beliefs, values, attitudes and lifestyles. If you find that members of a demographic segment are responding differently to your content, you might want to add in some psychographic information.
While demographics provide the basic facts about who your audience is, psychographics give you insight into why people decide to purchase or not purchase your product, click on or ignore your ad and otherwise interact with you. Some members of this segment are converting, while others are not. When you add psychographic information into the mix, you may find that people that purchase your products often value community and friendships and are environmentally conscious.
Based on this information, you could create ads that show people entertaining friends in their home and emphasize the environmentally friendly attributes of your brand.
You can collect this data in many of the same ways you can gather demographic data. You can ask your existing customers for this information using surveys. You can also look at the way people interact with your website and see what types of content they engage with, which gives you insight into their interests and preferences. You can also supplement your first-party data with second-party and third-party data. Demographic, psychographic, behavioral and geographic segmentation are considered the four main types of market segmentation, but there are also many other strategies you can use, including numerous variations on the four main types.
Here are several more methods you may want to look into. In a recent survey of marketing professionals in North America, 62 percent of respondents said improving audience segmentation to enable more precisely targeted messaging was a top priority. Market segmentation offers many benefits to marketers, publishers and others, including the following advantages. Market segmentation can help you to improve the performance of your marketing campaigns by helping you to target the right people with the right messaging at the right time.
Segmentation enables you to learn more about your audience so you can better tailor your messaging to their preferences and needs. Targeting a specific segment that is likely to be interested in your content or product is much more effective than targeting an overly broad audience.
If you advertise to an entire market, you will end up spending a massive amount of money on ads, but a relatively small percentage will convert. If you instead direct your marketing to a segment with the right characteristics, you can increase the conversion rate of your campaign considerably.
The more specific the audience of people interested in your brand, the more beneficial targeting can be. Marketing them to a broad audience would result in wasted ad dollars.
You might split your audience up by age and push individuals ads that show people who are close to their age. Market segmentation can also help companies to develop products that better meet the needs of their customers. You can create products to appeal to needs your main market segment may have and develop different products tailored to different parts of your customer base.
Say, for instance, you run an automotive company, and your primary market segment is middle-class families. You would likely design your car with lots of seating, leg room and space to accommodate a family with multiple kids.
You would also create mid-range priced vehicles. You could, however, also segment your audience further, and create vehicles that appeal to each of those segments. For example, one segment might be families who like to go on outdoorsy vacations. To appeal to this group, you could offer a vehicle with four-wheel drive and lots of cargo space. Another segment might prefer to take trips into the city.
You might make this car smaller so that the drivers can easily navigate narrow city streets and fit into tight parking spots. Designing your products with the needs of your customers in mind will help you to sell more and will make your customers happier.
Market segmentation can also help businesses to identify audience segments that they are not currently reaching with their marketing efforts and then expand into new markets. For example, a company might make the majority of their sales in physical stores. When looking at behavioral data, they might see that many of their customers like to shop online. Based on this information, they could then either open an online store or stat advertising their online marketplace more.
As another example, a clothing company that primarily targets middle-aged women might decide to start selling kids clothing as well. They could introduce these items and market them to their current customers, encouraging them to buy them for their kids. Market segmentation can also help businesses to focus their efforts, which enables them to establish a brand identity and specialize in a particular type of products.
A brand that tries to appeal to everyone in their marketing will come off as generic and unmemorable. It could also leave customers confused about what the brand stands for and what kind of company it represents. You could target nonusers to entice them to buy, prior users to get them back, potential users to convince them to give your product a try, and current users to strengthen their level of commitment. If you have a large base of existing customers, you might also build campaigns centered on light, medium and heavy rates of usage.
With light or medium users, you could explain other ways customers can benefit from your product. With heavy users, you can offer rewards programs to encourage their ongoing commitment and motivate them to buy even more.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since He has been a college marketing professor since Kokemuller has additional professional experience in marketing, retail and small business. By Neil Kokemuller. Demographics Demographic segmentation is the most common and traditional form of market segmentation. Lifestyle In lieu of clear demographic qualities, companies often turn to shared lifestyle interests and hobbies to target customers.
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