Watching this resources will notify you when proposed changes or new versions are created so you can keep track of improvements that have been made.
Favoriting this resource allows you to save it in the “My Resources” tab of your account. There, you can easily access this resource later when you’re ready to customize it or assign it to your students.
A market segmentation is developed based on one of two strategies and several consumer identifying characteristics like demographics and behavior.
Review the characteristics of market segmentation
The two major segmentation strategies followed by marketing organizations are concentration strategy and multi-segment strategy.
Segmentation of a market to reach a target consumer base can be done by defining consumers in terms of geographic, demographic, psychographic, and behavioral characteristics.
An ideal market segment is possible to measure, large enough to earn profit, stable, possible to reach, internally homogeneous, externally heterogeneous, consistent in response to market stimulus, reachable in a cost-effective manner, and useful in determining marketing mix.
Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and desires as well as common applications for the relevant goods and services.
The science of using psychology and demographics to better understand consumers.
What is a concentration strategy? The manufacturer of Rolex watches has chosen to concentrate on the luxury segment of the watch market. This allows them to focus all of their efforts on a single segment. If Rolex chose to use a multi-segment strategy they would be marketing to every watch user and thus their brand value would diminish. Their use of the concentration strategy has helped define themselves as a luxury brand.
There are two major segmentation strategies followed by marketing organizations: a concentration strategy and a multi-segment strategy.
In the concentration strategy, a company chooses to focus its marketing efforts on only one market segment. Only one marketing mix is developed. This strategy is advantageous because it enables the organization to analyze the needs and wants of only one segment and then focus all its efforts on that segment. The primary disadvantage of concentration is that if demand in the segment declines, the organization's financial position will also decline .
Rolex uses a Concentration Strategy
Rolex focuses on a single market segment-- those who want a luxury watch. Rolex is thus a prime example of the concentration strategy of market segmentation.
In the multi-segment strategy, a company focuses its marketing efforts on two or more distinct market segments. The organization does so by developing a distinct marketing mix for each segment. They then develop marketing programs tailored to each of these segments. This strategy is advantageous because it can increase total sales since more marketing programs are focused at more customers. The disadvantage of this strategy is the higher costs stemming from the need for multiple marketing programs.
Segmentation of a market to define a targetconsumer base can be done in a variety of methods such as:
Geographic criteria—nations, states, regions, countries, cities, neighborhoods, or zip codes--define the market segments. The geo-cluster approach combines demographicdata with geographic data to create a more accurate profile of a specific consumer. In areas prone to rain, you can sell things like raincoats, umbrellas, and gumboots. In hot regions, you can sell summer wear, while in cold regions, you can sell warm clothes.
This consists of dividing the market into groups based on variables such as age, gender, family size, income, occupation, education, religion, race, and nationality. Demographic segmentation variables are among the most popular bases for segmenting customer groups because customer wants are closely linked to variables such as income and age and because there is a plethora of demographic data available.
Buyers of the same age, family size and income., People living in tropical climates or in cities where apartments have limited space., A large population sharing similar buying habits, known product preferences and historic sales data, and Consumers who are transient, expensive to reach with diverse tastes and multiple product choices.