Importance of market segmentation is immense. Companies will not simply survive if their marketing strategy depended on targeting entire mass people instead of a similar group. The success of a business primarily depends on segmenting the market effectively.
What is market segmentation?
Market segmentation is a process of dividing the large market into smaller, clearly identifiable groups of people whose buying habits are similar. The purpose of market segmentation is creating an effective marketing campaign focusing only on this group of people. Horlicks company, for example, make television commercial featuring young growing kids 2- 4 years old and their mother. Here their market segment is moms of those tender kids. Fair and lovely company make TVC or youtube video featuring women of age group of 20-25 years old. So here their target market is women of age group 20-25 years old.
Types of market segmentation
Before understanding importance of market segmentation knowing types of market segmentation is important. There are mainly two types of market segmentation: One is single market segment and the other is multi-segment.
Single market segment: Some companies promote only one product through one particular group of people. This is the single market segment. This is also called concentrated strategy and the most focusing one. For example, Rolex watch company that manufactures luxury watch brand focuses only on rich consumer groups. The concentrated strategy has the following advantages:
- Doing all research and developments activities only for satisfying targeted customer group.
- Get specialization in one specific product
- The business that promotes only one product can spend less amount of money in a marketing campaign. Because promoting one product requires less financial resources compare to advertising for many.
Disadvantages in the single market strategy: Single market segment strategy has the following disadvantages
- Depending only one segment is sometimes vulnerable. Because customers may shift their attention to the same product of other company.
- Another drawback of concentrated strategy is the market segment may not grow over time.
Multi-segment strategy: The multi-segment strategy is when a company target more than one group of people to promote products of the same type but with different features. Web hosting companies, for example, offer three types of packages. These are basic, standard and premium. They are selling the same domain hosting services, but each of these packages has different features. And their target customers are also different. For instance, basic is for students or novice web developers, the standard is for small or medium business and premium is for large -multinational company. Less risk is associated with this strategy because companies have options of promoting and selling more than one products. On the other hand, this strategy is costly.
Importance of market segmentation allows business to reach precisely a consumer group with the specific offer. In turn, the chance of selling that product is much higher. For example, think about a rich businessman who has a desire to buy an expensive watch. If you can reach that businessman with a paid Facebook ad showing him luxurious world famous Rolex watch, then the chance is very high that he would buy the watch. In contrary, if you make the same Facebook ad targeting mass people then selling the luxurious Rolex watch is not that high.
In order to make a marketing strategy with effective market segmentation, a word document template is available to download. Marketing Strategy Worksheet Template
This template is free to download and use.