Lecture Notes: Market Segmentation

Introduction to Market Segmentation

• Definition: Segmentation is dividing potential customers into groups or segments such as gender, income, location, or lifestyle.
• Objective: Identify the most profitable or potential growth segment and target it.
• Strategy: Position the business in a market and utilize a marketing mix that suits the chosen segments.

Methods of Market Segmentation

Gender

• Example:
  • T-shirt business: Offers different shapes, sizes, colors.
  • Moisturizer business: Same product, different packaging colors for different genders.

Income

• Strategies:
  • Different packages (basic and premium) for different income brackets.
  • Car business: Offer a range of cars to meet various income needs.

Location

• Approaches:
  • Tailor products based on geographic location (e.g., McDonald's offering rice in the Philippines).
  • Expansion decisions based on profitable locations.
  • Marketing mix adjustments, such as local promotions or coupons.

Lifestyle

• Examples:
  • Holiday providers offer various experiences based on lifestyle (e.g., all-inclusive, spa, family holidays).
  • Tailoring experiences to lifestyle enhances marketing effectiveness.

Pros and Cons of Market Segmentation

Pros

• Meeting Customer Needs: Better tailored products lead to meeting customer needs more effectively.
• Increased Brand Loyalty: Enhanced customer satisfaction can increase loyalty and repeat business.
• Price Sensitivity: Reduced sensitivity may allow for higher pricing and increased revenue.
• High Profits: Potential for increased profitability.

Cons

• Higher Costs:
  • Increased R&D, production, and marketing costs.
  • Need for more raw materials and components.
• Economies of Scale: Wider product range can limit the ability to exploit economies of scale.

Conclusion

• Market segmentation allows businesses to target specific customer needs effectively, though it may result in higher operational costs.