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Home » STRATEGIC MARKETING » Six reasons for Market segmentation

Six reasons for Market segmentation

May 22, 2018 By Hitesh Bhasin Tagged With: Marketing strategy articles

In general, customers are willing to pay a premium for a product that meets their needs more specifically than does a competing product. Thus marketers who successfully carry out market segmentation and adapt their products to the needs of one or more smaller segments stand to gain in terms of increased profit margins and reduced competitive pressures. There are several important reasons why market segmentation needs to be done carefully. Some of the reasons are outlined below.

Reasons for market segmentation

Better matching of customer needs – Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution.

Enhanced profits for business – Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits.

Better opportunities for growth – Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product

Retain more customers – Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands

Target marketing communications – Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that

(1) the key customers are missed and

(2) the cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost

Gain share of the market segment – Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves.

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About Hitesh Bhasin

I love writing about the latest in marketing & advertising. I am a serial entrepreneur & I created Marketing91 because i wanted my readers to stay ahead in this hectic business world. You can follow me on Facebook. Let's stay in touch :)

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Course on Market Segmentation

Part 1. Basics Of Segmentation
  1. What is Market Segmentation?
  2. Why is Market segmentation needed?
  3. Criteria for Market Segmentation
  4. Advantages of Market Segmentation
  5. Limitations of Segmentation
  6. Steps of Market segmentation
  7. Segmentation Strategy
  8. Difference in Segmentation, Targeting and Positioning
  9. How segmentation helps decision making?
Part 2. Types of Segmentation
  1. Demographic Segmentation
  2. Geographic Segmentation
  3. Psychographic Segmentation
  4. Behavioral Segmentation
  5. Lifestyle Segmentation
  6. Benefit Segmentation
  7. Usage based Segmentation
  8. E-Commerce Segmentation
  9. The 4 Main types of Market Segmentation
Part 3. How to Segment
  1. How to Choose a Market Segment?
  2. Which Market segment should you target?
  3. How many Segments should a business enter?
  4. How to segment a Business market?
  5. How to segment on basis of Brand loyalty?
  6. How to segment on basis of Demographic segmentation?
  7. How to segment on basis of Geographic segmentation?

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