The paper "Market Segmentation Concept" is a perfect example of marketing coursework. Market segments are significant because they enable any company to take a high share of the niche or segment and thus boost their sales and competitive advantage. This paper discusses the meaning and importance of market segmentation and notes that marketers would be misplaced if they failed to segment their markets. Meaning of market segmentation Market segmentation refers to the process of splitting customers or potential customers in a market into various meaningful, relatively similar and identifiable groups or segments (McDonald 2012, p.
9). During the segmentation process, the market will focus on the needs and wants of particular subgroups to ensure that the product offering and marketing method meets their needs or wants. Methods of market segmentation Demographic segmentation According to Rix (2010, p. 124), demographic segmentation is probably the method that is most widely used for segmenting consumer markets. This type of segmentation involves dividing the market on the basis of factors such as age, income, gender, stage in the family cycle, ethic or cultural background, occupation, family size, and nationality (Rix 2001, p.
124; Lee & Johnson 2005, p. 92). There are two main reasons why demographic segmentation is commonly used. First is that the wants of consumers and the products that consumers use are often linked to one or more of the demographic factors. The second point is that most demographic factors can be measured, they are accessible and they are large enough. The demographic factors can thus serve as a basis for functional market segments because they fulfil the conditions necessary for effective segmentation (Rix, 2010, p. 124-125).
For example, it is easy for players in the clothing industry to segment their products by age. Behavioural segmentation In this type of segmentation, marketers use actual consumer behaviour or product usage to make distinctions among market segments (Ferrell & Hartline 2010, p. 176). Since these distinctions are based on the reasons that make customers buy or use products, behavioural segmentation, unlike other methods of segmentation, is the most closely related to consumer needs. A common application of behavioural segmentation is to group consumers according to their level of product usage – that is, heavy, medium and light users (Ferrell & Hartline 2010, p.
176). Psychographic segmentation The term ‘ psychographics’ refers to customers’ inner feelings and tendencies to behave in certain ways (McDonald 2012, p. 13). Psychographic segmentation revolves around state-of-mind issues like attitudes, motives, lifestyles, values, personality and interests (Ferrell & Hartline 2010, p. 177). These factors are used because of the realisation that while demographic variables are used to segment markets because they are related to behaviours, they are not the causes of behaviour. That is, demographic variables often correlate with behaviour but they do not explain why people behave differently (Rix 2010, p.
127). For instance, some people buy bicycles not because they do not have cars, but because they want to use them for evening cycling exercises. Others may buy bicycles because they do not own cars and would like to use bicycles to travel to work. Psychographic segmentation, therefore, goes beyond demographic variables by examining how people think, how they feel and how they behave. By employing lifestyle and value as segmenting variables, psychographics helps marketers to create detailed and more inclusive descriptions of segments (Rix 2010, p.
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