Market segmentation is a premise that plays a core role in identifying, analyzing, and retaining customers most effectively. On the other hand, mistakes at this stage can lead to many serious consequences in later marketing strategies. So, how to understand market segmentation correctly? What is the basis for correct market segmentation? Find out now!
What is market segmentation?
Market segmentation, also known as target marketing, is the opposite of mass marketing and product variety marketing. The purpose of target marketing is to divide the market into different segments to help businesses easily identify, grasp and respond more effectively to their customer base.
What is
Target marketing aims to divide the market into different segments.
2. Examples of market segmentation?
To better understand the concept ofyou can follow the 2 examples below!
Toothpaste
Toothpaste manufacturers know that it makes no sense to segment the consumer market by age, gender, geography, religion, etc., because these are not the salient features that give value to the product. Indeed, in the toothpaste market segmentation is based on the benefits that customers want.
market segmentation example
Example of market segmentation.
Next, companies will position their products based on the outstanding features they bring, such as lines for sensitive teeth, bad breath treatment, pain relief, teeth whitening, enamel protection, etc.
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Another more specific example of success when segmenting the market correctly – Viettel.
When Viettel Military Telecommunications Group first entered the telecommunications sector, it chose to do business in low-cost products and services for low-income people. This is a market segment with low competition but high potential. The group’s prosperity in this century is concrete evidence to affirm that Viettel was right from the very beginning when it laid the first bricks of the foundation.
Market segmentation example
Viettel – listen to develop.
Viettel has achieved great success domestically and internationally thanks to its investment in telecommunications networks reaching remote areas, places that have not yet had access to telephone waves. Targeting such market niches, although small, brings great potential. Viettel’s success is a typical example of choosing a niche market segment is extremely promising. With bold business ideas, stimulating the needs of the target group in that market will be the key to reaping many achievements in business.
3. Why is it necessary to segment the market?
In the process of market segmentation, the researcher must understand the motivations for making purchasing decisions and the factors that stimulate demand in the market, thereby finding the basis of the enterprise’s own competitive advantage.
Through analyzing the needs of each customer group, businesses will be able to see their opportunities in the market. Thanks to that, managers can launch products of the same type but with differences in function, design or price, etc. to serve the different needs of each target customer group.
Why market segmentation?
Why segment the market?
Most importantly, market segmentation is the factor that plays a fundamental role in building an effective marketing strategy for the business. If the target marketing stage is well implemented, the business will identify a suitable market segment, which will be the premise for the success of the business’s market strategy later.
On the contrary, mistakes in determining market segments can lead to many huge consequences such as failure of marketing strategies. Because, when a business chooses a market that is too large, beyond its capacity or a market that is within its capacity but the company is not able to respond better than other competitors, … then this market strategy is facing an extremely high risk of bankruptcy.
Target marketing is also the basis for managers to assess, evaluate and monitor market fluctuations. Thanks to that, they can predict future trends to anticipate the latest trends in the market.
4. Market Segmentation Criteria
There are many different criteria for market segmentation, usually summarized in the 4 criteria below:
4.1. Market segmentation by geography
Geographic market segmentation is based on variables such as region, climate, population density, etc.
Geographic market segmentation is not only useful in understanding customer consumption characteristics but also helps businesses manage marketing activities by region more easily.
For example, in B2C , luxury car companies target customers living in warm climates, because these cars do not need to be equipped with snow protection.
4.2. Market segmentation by demographics
Demographic is a form of dividing the market into groups based on factors such as: age, gender, family size, family life cycle, income, occupation, education, religious beliefs, race, etc.
This is a popular basis for because customers’ desires, preferences, and consumption behaviors are often linked to demographic variables. At the same time, variables belonging to this factor are often easy to measure, convenient for market research.
The most typical example of demographic market segmentation is calcium-fortified milk products that are specifically designed for seniors.
Market segmentation by psychology
In psychological marketing, customers are divided into different groups based on: social class, life views, style or lifestyle, etc.
Customers in the same demographic group can have completely different psychological characteristics. This criterion is also subjective, not clearly statistically optimize product descriptions measured, requiring in-depth research to understand customers.
For example, high-end cosmetics and fashion lines target senior managers who want to impress when meeting partners and demonstrate their value to employees.
4.4. Market segmentation by behavior
According to this criterion, customers are divided into many groups based on: understanding ability, attitude, reaction and way of using the product.
By analyzing the number of purchases, time and method of purchase, loyalty level helps marketers understand customer purchasing behavior, thereby b to c database creating good market segments.
An example of B2C in behavioral segmentation is a luxury car brand targeting customers who have purchased a luxury car in the past three years.
Market segmentation is an important premise and a key link, affecting many other factors in building an effective marketing strategy. Equip your business with specific, realistic target marketing criteria to facilitate the steps of determining the target market and positioning the product in the market later.
