The Importance of a Market Segmentation Strategy
Marketers like to create segments — groups of people who have things in common and can, therefore, be grouped for marketing purposes. They are people who tend to like or dislike the same things. They have similar needs. They are easily distinguishable from the rest of the population. They also respond to marketing efforts in a similar way.
Marketers have found that when they apply market segmentation, it is easier to communicate the value of their offers.
When an insurance company creates a motor insurance product specifically for women, that is an example of market segmentation. It has recognized that women have some specific needs and wants that they can cater to.
Defined segments with similar characteristics characterize market Segmentation strategy. These market segments are called submarkets. Submarkets can be identified by their geographical location, lifestyle, demographic characteristics, or behavioural patterns.
Better Conversion Rates
The advantage of breaking down a larger market into smaller segments is that you end up with groups that are easier to target because they have a lot more in common. Your marketing efforts will be more efficient as a result.
More targeted marketing campaigns have better conversion rates. Marketers who segment their markets will have an opportunity to create a customised marketing mix for each segment.
Undifferentiated Targeting Strategy
Some products are designed for everybody. Undifferentiated targeting means that everyone is a potential customer. This strategy is applied to mass market products like aspirin or ketchup. As long as the product is not designed for a specific group of people, marketers may apply an undifferentiated targeting strategy.
The product will also be sold under a singular pricing structure. It will not have different prices for children and adults, or individual and corporate clients. The distribution of the product will be uniform for all consumers. Marketers will not try to use different distribution channels to reach specific markets.
The promotion of the product will be done using messages designed to appeal to the general public, and the company will be trying to create a similar customer experience for all customers.
On the other hand, a differentiated marketing strategy will have a unique marketing mix for each of its different market segments.
Concentrated Targeting Strategy
Sometimes a company wants to create a marketing mix for a specific audience only. Perhaps they might create a product specifically for children, with no offers for any other segment of the population.
This approach works well when marketing budgets are limited, and it is practical to focus resources on one thing. It is also ideal for serving customers who have unique needs.
A concentrated targeting strategy is likely to achieve greater success than one that is not concentrated. Unfortunately, the scope of that success will probably be limited. This approach makes it easier to capitalise on the weaknesses of competitors, but this can only be achieved with a thorough understanding of the niche market.
Some marketers choose this strategy after identifying a neglected or underserved market segment. It reduces inefficiency because every resource can be used in a way that is tailor-made for that market segment.
Some advertising agencies work exclusively for certain industries. For example, they may focus on law firms. Local businesses also practice concentrated targeting because their focus is a specific geographical area.
Micro Segmented Targeting Strategy
Micro-targeting is a more precise approach to segmentation whereby marketers. With micro-segmentation, the segments are divided into small niche groups that can then be targeted. Technology can be leveraged to predict people’s behaviour. Micro-targeting is a way to target only people who are most likely to buy. This makes it possibly the most efficient strategy.
Micro segmented targeting brings together the benefits of scale and the precision of concentrated targeting. Today’s digital tools like Google make it easy to target people who are more likely to make a purchase based on their behaviour. This is only possible because of the wealth of information that they have about people.
Retailers use loyalty programs to help them understand more about their customers. They have found for example, that women are more likely to try new products when they are pregnant.
The choice of a market segmentation strategy will depend on the product and the target market.
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