Market Segmentation Analysis

When the producer of a specific commodity decides to undertake the marketing and promotional activities for that commodity, what makes him decide how to approach his potential customers? The base of his customers is obviously vast and varied and contains people from all walks of life and belonging to different income groups. Each of these different groups of customers require an altered and unique approach. The basis for this approach is arrived at by carrying out market segmentation analysis.

One of the most widely used concepts in marketing management is that of STP, that is, Segmentation, Targeting and Positioning. What this implies is that the potential customer base is studied by the marketer by carrying out market segmentation analysis, the most approachable and profitable segment is chosen and targeted, and the necessary marketing and promotion steps are taken. For a marketer his resources are absolutely vital and he cannot afford to waste these resources on useless purposes. He has to have a specific target audience in mind (for any form of promotion), and then take steps accordingly. The first step of this entire process is market segmentation analysis.

Why Segment Your Market?

Now the question that surely arises is what is the purpose of market segmentation analysis, and why must it be performed. The following are the primary reasons for carrying out market segmentation for market trend analysis.

1. To avoid wastage of precious company resources.
2. To divide the market into various segments, or target groups.
3. To target each profitable segment in a unique way that suits that particular segment, and provides adequate returns.
4. To avoid overlapping and redundant information to one particular segment.
5. To get maximum response and sales from each segment.

Basis for Market Segmentation

When it comes down to practical application of market segmentation analysis, there have to be some fixed parameters that marketers must adopt and enforce in order to achieve the best results and maximum profits. The following are the different factors that determine how the different market segments are arrived at.

Geographic Segmentation: This segmentation is done on the basis of the physical location and boundaries of the customers. The following considerations are necessary here.

• Which country the customer resides in.
• Are there any limitations on the usage and promotion of the product in the country.
• What is the size of the country and what is the density of the population there.
• What are the climate conditions in that country.

Demographic Segmentation: This process of analysis comes into play when the quality and other characteristics of the general population are taken into consideration.

• The age and the gender of the target audience needs to be considered.
• The common occupations and income levels of the population also play a part.
• The religion and language that the people follow also needs to be kept in mind.
• The family size and quality of education are also important here.

Psychographic Segmentation: In this category the attitudes and lifestyle of the consumers are considered. Also known as the IAO (Interests, Activities and Opinions) model, it plays a major part in devising successful marketing strategies.

• The general personality traits of the customers must be kept in mind.
• The values of the people and the attitudes that they have towards certain products are crucial pieces of information for a marketer.
• The hobbies and the perception of the selling company are also necessary to be obtained.

Behavioral Segmentation: Here the marketer takes into account the general behavioral patterns of the customers and tries to forecast what reactions they would possibly have to the adopted marketing strategies.

• The benefits that the customers are looking for, and the value they seek and derive.
• The degree of brand loyalty and brand satisfaction.
• The willingness to buy a product, and also the rate of its usage.
• The profitability of marketing there and also the income level of the targeted customer base.

Knowing how to do a market segment analysis provides a marketer with a range of information about the possible reactions of the customer, and can also help in devising accurate sales projection charts. The main objective of marketing is to have the customers purchase the products, and there has to be a means of predicting the sales figures. This information will provide the marketer with very useful information about which could be the most profitable segment, and he can thus focus his maximum resources on that particular segment. Market segments that are less profitable can either be completely scrapped, or if their potential value is high they can be targeted with more intensity. Thus, there are plenty of advantages of market segmentation analysis, and it is a necessary marketing tool for the promotional activities undertaken by any company.