you will explore the concept of market segmentation
MODULE 2 OVERVIEW
In Module 2, you will explore the concept of
market segmentation. Segmentation is an important component of marketing since
it is vital to understand and respond to the different needs of each group of
A market segment consists of group of customers who share a similar set of
needs and wants. Understanding your core customer and his or her needs and
wants is a critical component of marketing strategy. If you truly understand
your customers and their needs, you can focus your advertising and promotional
resources to generate the best return on investment for your organization and
In addition to market segments, this module will also explore how one can go
about creating a brand position. In this regard, understanding your
organizationâs strengths, weaknesses, opportunities, and threats (SWOT) is
critical to your success. This starts with an honest self-assessment of your
organizationâs viability and success. What are your organizationâs operating
and reputational strengths and weaknesses? What segments and trends present the
most viable opportunities? What are your organizationâs competitive threats?
Will your competition exploit your weaknesses? Do you know your competitorâs
strengths and weaknesses? Does your organization have the ability to complete
the tasks at hand? What resources would be required to win?
Researchers define market segments by looking at descriptive
characteristics: geographic, demographic, and psychographic.
segmentation divides markets into states, regions, counties, or cities. Each
segment presents its own set of opportunities that may be unique to that area.
segmentation divides segments into variables such as age, family size, gender,
income, occupation, education, religion, race, generation, nationality, and
is the science of using psychology and demographics to better understand how
consumers think about products as part of their personality and lifestyle.
Buyers are divided into different groups on the basis of personality traits,
lifestyle, or values.
A popular psychographic segmentation model has identified four groups with
greater economic resources: innovators (upscale, niche-oriented products and
services), thinkers (mature, satisfied, and reflective), achievers (successful,
goal-oriented people), and experience (young, enthusiastic, seeking
There are four groups with relatively fewer economic resources: believers
(conservative and traditional), strivers (trendy and fun-loving), makers
(practical, down-to-earth), and survivors (elderly, passive, concerned about
change). Thus, marketers who adopt this segmentation model might tailor their
product features, pricing, distribution, and promotion and communications to
MARKET SEGMENT IDENTIFICATION
identify and analyze your intended target markets, you must first understand
the essence of buyer behavior. Understanding buyer behavior is
to successful relationship marketing to attract and retain guests.
are different factors that influence buyer behavior.
factors have a significant impact on customer behavior. Marketers are always
trying to spot cultural
that indicate the emergence of a demand for new
or an increase in the demand for existing
For example, the cultural shift toward greater concern about health and fitness
for salad offerings in fast food restaurants.
factors that influence customer behavior include age and life cycle states,
marital status, children (if any) and employment status; occupation and income,
including the level of education and household income; the lifestyle, including
activities, interests, and hobbies and the personality, including the level of self
confidence and social abilities.
factors include Maslowâs hierarchy of needs (physiological, safety,
belongingness and love, esteem, and self actualization), our perception of the
world and our role and status in the community, and the family.
factors that influence buyer behavior are motivation; selective exposure or a
sudden spurt in
number of advertisements for a product; beliefs and attitudes,
positive, neutral, or negative
products, services, firms, people, issues, and institutions; the importance of
purchase; and the
risk of purchase.
Create your Brand
A successful brand is a product or service that delivers an expected level
of value for the price being paid by the consumer. It helps create loyalty and
a relationship with the consumer that can persist over time.
Brands have other benefits for organizations. They communicate quickly to a
buyer information about quality, price, and other characteristics of a product
or service and differentiate it from similar products.
Brands are important competitively because they are not easily
imitatedâalthough competitors may be able to duplicate manufacturing processes
and product designs, it takes longer to duplicate the level of trust a strong
brand has with customers. Conversely, brands that fail to meet expectations
(like Toyota in 2010) can expect to spend years earning back the trust that was
lost by breaking the brand promise.
What does it mean to position a brand? Positioning a brand consists of
defining its offering and image so that it is unique in the perceptions of
those in the target market. Positioning acts as a guide to marketing decisions
by clarifying what the brand represents to its target customers, what goals it
helps them achieve, and what is unique about it.
Therefore, it is imperative for a company to understand its strengths and
weaknesses. Consider Southwest Airlines. Early in its history the company made
a strategic decision to serve only shorter routes between city pairs where
travelers were likely to drive. All of the companyâs operating tactics were
thus designed to minimize the amount of time spent waiting in airports. It used
less congested secondary airports; it did not offer assigned seating to speed
the boarding process; it used one type of aircraft to simplify operations and
minimize mechanical disruptions, and so on. Other actions by Southwest enabled
it to offer low fares. As a result, Southwest was able to offer a cost
competitive alternative to long drives (up to 500 miles) for business and
Southwest offers a very good example of a well-defined market segmentation
model that underpinned its business strategy. It avoided direct competition
with many carriers and gave many travelers a compelling reason to fly instead
of drive. This strategy served Southwest very well for over two decades as it
posted 25 consecutive years of profitability, which was virtually unprecedented
in commercial aviation.
However, as with many segmentation models, Southwest began encountering
limits to its strategy and eventually found itself operating in some of the
nationâs busiest airports, including San Francisco and Denver, while also
expanding into long-haul service and competing directly with big carriers. As
Southwest grew and matured, it began to resemble the large carriers with more
complex route systems and operations.
Southwest’s strategy was not bad, but its experience shows how market
segmentation can drive a unique strategy that eventually grows obsolete as
markets become saturated.
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