Consumer Behavior: Market Segmentation

Consumer Behavior: Market Segmentation

Introduction

Market segmentation, as a crucial step of marketing, is not what you do to a product, but something you know about your customers. A good knowledge of your customers can enable you to yield twice the result with half the effort. Every consumer is different. Some prefer stylish products, while some want cheap and durable, so it is impossible for a company with limited resource to meet every individual's need. The best a company can do is to provide products for a certain group of people with same requirement. Thus, the purpose and task of segmentation is to concentrate a company's energy and resource on a targeted segment so that a competitive advantage can be assured.

Concepts of Market segmentation

When it comes to market strategy, almost all of us will consider these four elements: Product, Price, Place and Promotion. While, before examining 4Ps, we should first segment the market and identify the consumers, which is also called market segmentation. It is the basis of all the other marketing mix. Just like Beane and Ennis eloquently commented, ‘a company with limited resources needs to pick only the best opportunities to pursue' (Dibb, 1998). Then it comes the market segmentation. Market segmentation is the division of markets into homogenous groups of consumers according to their particular needs and the need of promotion, communication, pricing and other reasons. In another word, each group of consumer share similar habits and attitude towards the product. If the difference between buyers within a segment is small enough, this manager can easily find the right and targeted strategy. As a result, there is a widespread belief that a successful market strategy cannot live without good market segmentation (Gottlieb, 2006).

Market can be segmented according to different variables. Among these variables, there are four traditional criteria, which are also considered as the most important.

-- Geographic segmentation: The consumers of the market are grouped according to their location –nations, states, regions, and countries. For example, a company may utilize the postal or zip code system to assess brand penetration in a certain area (Y，1996). That is because the regional differences exist. For instance, people live in southeastern Asia don't eat pizza much; instead, their main food is rice. If this company wants to open restaurant chains in southeastern Asia, it must consider the eating habits of this region seriously.

-- Demographic segmentation: It is divided based on the variables like gender, age, income, education level, family size, income and so on. This segmentation is quite popular and convenient to use (Dibb, 1998). Also, there are a lot of data resources available to