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Market Segmentation: An important marketing strategy tool

Market Segmentation in Marketing

The starting point of segmentation is mass marketing. In mass marketing, the seller engages in mass production, mass distribution and mass promotion of one product for all the buyers. Henry Ford epitomized this strategy when he offered the Model-T Ford in one color, black. Coca-Cola also practiced mass marketing when it sold only one kind of Coke in a 6.5 ounce bottle.

The argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. However, many critics point to the increasing splintering of the market and proliferation of advertising media and distribution channels, which are making it difficult and increasingly expensive to reach a mass audience.

Market Segmentation: An important marketing strategy tool

Segment Marketing

A market segment consists of group of customers who share a similar set of needs and wants. Rather than creating the segments, the marketer’s task is to identify them and decide which ones to target. Segment marketing offers key benefits over mass marketing. The company can offer better design, price, disclose and deliver the product or service and also can fine tune the marketing program and activities to better reflect competitors’ marketing.

However, even a segment is partly a fiction, in that not everyone wants exactly the same present flexible market offerings to all members of a segment. A flexible market offering consists of two parts of solution containing the product and service elements that all segment members value, and discretionary options that some segment members value. Each option might carry an additional charge. For example, automobile companies in India offer different versions of the same model with different features. The base model of the vehicle may not have an air conditioner or power steering or power windows. But, for models that have these features, the buyer has to pay a higher price. Similarly, domestic airlines in India offer economy class and business or executive class for travelers and the prices of these two options differ significantly. The executive or business class passengers get extra facilities, such as more comfortable seats, better menu for food, and greater preference while checking in and boarding the aircraft.

We can characterize market segments in different ways. One way is to identify preference segments. Homogeneous preferences exist when all customers have roughly the same preferences. The market shows no natural segments. At the other extreme, consumers in diffused preferences vary greatly in their preferences. If several brands are in the market, they are likely to position themselves throughout the space and show real differences to match differences in consumer preference. Finally, clustered preferences result when natural market segments emerge from groups of consumers with shared preferences.

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