Class 5 - February 10, 2011

This week we discussed Chapter 7, Segmenting and Targeting Markets.

In class we discussed in great detail market segmentation.  To begin, a market is people of organizations with needs or wants and with the ability and willingness to buy.  A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.  And the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups is called  market segmentation.  Market segmentation helps markets define customer needs and wants more precisely. 

Marketers segment markets for 3 main reasons:

1. Segmentation enables marketers to identify groups of customers with similar needs and to analyze the characteristics and buying behavior of these groups.
2. Segmentation provides markets with information to help them design marketing mixes specifically matched with the characteristics and desires of one or more segments.
3. Segmentation is is consistent with the marketing concept of satisfying customer wants and needs while meeting the organization's objectives.

To be useful, a segmentation scheme must produce segments that meet four basic criteria:

1. Substantiality:  A segment must be large enough to warrant developing and maintaining a special marketing mix.
2. Identifiability and measurability:  Segments must be identifiable and their size measurable.
3. Accessibility:  The firm must be able to reach members of targeted segments with customized marketing mixes.
4. Responsiveness:  Markets can be segmented using any criteria that seem logical. 

Marketers use segmentation bases, or variables, which are characteristics of individuals, groups, or organizations, to divide a total market into segments.  Consumer goods marketers commonly use one or more of the following characteristics to segment markets:

• geography:  region of a country or the world, market size, market density, or climate.
• demographics:  age, gender, income, ethnic background, and family life cycle.
• psychographics:  personality, motive, lifestyles, and geodemographics (combination of geographic, demographic, and lifestyle segments).
• benefits sought:  grouping according to benefits they seek from the product.
• usage rate: amount of product bought or consumed. -- 80/20 principle:  20% of all customers generate 80% of the demand.

I learned that I will need to pay close attention to these details as I start to market my services to be sure that I am focusing on the right groups of people and not wasting time and money marketing to the wrong groups.