Market Segmentation

Published October 11, 2013 by Mayrbear's Lair

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Most experts agree that effective marketing campaigns communicate their messages directly to their intended audience. McDonald (2012) suggests that in addition, the objective of a successful advertising campaign is to gain the competitive advantage by building a loyal customer following providing them with products and services that meet the demands of clearly defined markets. Many advertisers fail to reach their target audience, however, because they rarely focus beyond the basic demographics. In addition, the complex arena of today’s marketplace presents many challenges for companies trying to identify their target audience. To address this, marketers implement various strategies of segmentation to divide potential consumers into different market groups recognizing that not all customers are created equally (McDonald, 2012). The focus of this research is centered on the importance of market segmentation and the components that are utilized to help companies develop a detailed understanding of their arena. For the sake of this analysis, the Apple Corporation’s iPad is included as an example product to help illustrate how marketers incorporate a variety of target market segmentation practices to help them develop their marketing campaigns. In addition, the study will also look at how core messages can be implemented to support these campaigns. The findings of this research will conclude that market segmentation is a strategy that can help corporations stop wasting money on ads that do not reach their intended buyers and is effective in helping companies identify their target audience.

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Definition

Market segmentation is an important component because it helps advertisers reach their core audience and turn them into advocates for their products and services. Many leaders know that advertising is a significant business strategy that fulfills a fundamental purpose. Gallagher and Zoratti (2012) explain that the marketing process: (a) defines markets, (b) quantifies the needs of customer groups within these markets to determine the value propositions, (c) communicates these value propositions effectively to those in the organization responsible for delivering them, (d) deliver these value propositions, and (e) monitor the value that is delivered. Many of today’s top performers in business are committed to consumer focus strategies. This is achieved through extensive data mining, analysis, and enriched profiling utilizing outside data sources in addition to behavioral, transactional, and conversational tracking methods. These strategies are designed to help companies define their markets and understand their value. These methods typically include incorporating: (a) the corporate mission and objectives which in turn helps determine markets of interest, (b) external data such as market research, and (c) internal data which flows from ongoing operations. The organization then processes this information and divides it into segments of consumers with similar needs so they can also predict future behavior (Gallagher & Zoratti, 2012). In other words, marketers gather sufficient data from consumers to help them quantify the needs of consumer groups to determine value propositions. Marketers then communicate their message implementing the company’s core values in their propositions to the appropriate parties in an effort to inspire action.

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Applications

Market Segmentation

Market Segmentation is one of the most efficient strategies available to advertisers because it helps them develop a unique selling proposition. Kennedy (2011) postulates that because of advances in technology, many companies have issues identifying the most appropriate media for the delivery of their message to prospects. In fact, most use media because that is the traditional course. This approach is both ineffective and inefficient. To construct a marketing campaign that conveys a powerful message, leaders must conduct a thorough survey of all the components they are up against (Kennedy, 2011). In short, their goal is to design a message that translates into a transformational experience that trumps all others and places them in their own category. One way to achieve this is to divide consumers into separate groups. For example, Baack and Clow (2012) explain that the foremost method of segmentation implemented employs demographics, or the characteristics of the inhabitants of that region. Typical examples include gender, age, education, income, and cultural ethnicity. Organizations use this information to construct products and services that meet specific demographic segments (Baack & Clow, 2012). For example, when the Apple Corporation introduced the iPad tablet as a new product, the goal was to convince their target audience that the new electronic devise was the future of computer technology and designed their campaigns to transmit that message effectively. Apple’s core message communicates their commitment to bring consumers the best products. In exchange for keeping their promise to deliver high quality merchandise, consumers agree to pay higher prices to support these innovations. Apple marketers that design their campaigns using market segmentation as a model will focus their campaigns based on the demographics of consumers that have the most influential buying power, which for this product could include such factors as income, education, geography, and age.

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Product Segmentation

Product Segmentation can help companies stop wasting money on campaigns that do not reach intended buyers. Godfrey (2007) purports that retailers need to present their products in ways that consumers can efficiently search and select them. The WalMart Corporation, like many large retail outlets, sells thousands of merchandise in a variety of categories including electronics, grocery, household, and personal care items. Their core value is transmitted in their company tagline: save money, live better. To help them keep their promise they must have knowledge and insight on consumer spending habits. One way the retail giant does this is by implementing a variety of segmentation techniques to better serve their clientele in a way they can discover more about them. First, their strategy identified and separated consumers into the following six categories as their target audience: Hispanics, African-Americans, Suburbanites, Rural Residents, Affluent, and Empty-nesters. Next, the store designed their layout by segmenting their products and organizing them into various categories. To enhance the shopping experience, for instance, merchandise is organized into collections of products to attract each target audience member. In other words, they present their merchandise in a way that is more appealing to target consumers by incorporating a methodology that identifies consumer behavior. This strategy helps them match consumers to specific groups of services and products (Godfrey, 2007). Retailers refer to this practice as product segmentation because they group and display products strategically in a manner that attracts a certain type of clientele. For example, consumers seeking the iPad tablet will find them situated in a specific location of the retail outlet with other popular electronic devices. These items are strategically placed where the eyes can find them quickly and easily. However, in keeping their promise to deliver high end merchandise, the Apple products are placed only where employees can access them under lock and key for security purposes. This is one example of how product placement and segmentation provides a significant model to help identify and serve target consumers more effectively.

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Generational Segmentation

Generational segmentation helps marketers identify groups of consumers that share similar experiences from common events. These occurrences help create bonds in individuals of a similar age group. Baack and Clow (2012) contend that similar experiences in certain age groups impact consumer perceptions, penchants, and social morals (Baack & Clow, 2012). Generational segmentation is one way Apple Corporation marketers, for example, can transmit their campaign messages to motivate a target audience to take action.  Apple’s website clearly states that their core message is a commitment to produce quality products. To demonstrate this concept, the promotion department may create a strategy to transmit that message to the Older Boomers age group for instance.  A campaign targeted at them would be developed in a different manner than a campaign that targets Generation Y, for instance, because each age group evolved with a different set of experiences. For example, Older Boomers grew up with TV shows like Star Trek. Knowing this, marketers can use this factor to influence their interest in iPad products because they remind them of the devices their heroes used in the show.  On the other hand, a marketer would appeal to Generation Y consumers based on the exciting new apps and features as the next evolution of the electronic devices they grew up with. Generational segmentation is an effective strategy that is utilized to help marketing experts transmit relevant information to the intended consumer.

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Benefit Segmentation

Benefit segmentation focuses on customer benefits or improvements that are provided by a product or service. Baack and Clow (2012) propose that demographic and psychographic information are united with benefit data to help identify these groups so that marketers can analyze further variables that affect their audience (Baack & Clow, 2012). For example, another strategy Apple Corporation marketers can develop to promote their product is one that highlights the benefits of the new iPad by comparing it to other tablets and portable laptop computers available on the market. Some of these benefits may focus attention on components like the larger viewing display, the lightweight design, and that it is more compact than laptop computers. Marketers that feature product benefits in their campaigns can attract consumers effectively. A company in the health care industry, however, like the Chopra Center, that wants to transmit the benefits of their facility and services to consumers, would implement completely different segmentation strategies based on the consumer’s desire to improve their fitness and maintain a healthy lifestyle. The Chopra Center in San Diego is designed and operated by licensed physicians and medical practitioners for a specific target audience. Chopra Center marketers for example, would identify individuals that are experiencing health issues who are looking for alternative methods in health care. The Center’s core message is to serve as a global source for balance, healing, transformation, and the expansion of awareness (Chopra & Simon, 2013). This is stated clearly on their website and in their promotional material. This declaration helps to provide consumers with confidence and security in the organizational management of their institution. As a medical facility that offers both products and services, it is important that their marketing campaigns keep their promises and are designed to protect them from fraud and liability issues that may arise. Companies that incorporate benefit segmentation are focused on fulfilling consumer needs based on a desire to improve their life in some manner.

Conclusion

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Leaders that acknowledge the concept that markets are not homogenous and use market segmentation strategies are in a better position to standout in their industry and maintain a competitive edge. Baack and Clow (2012) purport that developing effective targeted advertising is the key to a successful marketing campaign. Marketers that identify their target audience by implementing precision plans to influence consumer: (a) awareness, (b) knowledge, (c) liking, (d) preference, (e) conviction, and (f) the actual purchase, are significant elements that impact consumer buying power. These strategies are designed to impact consumer cognitive, affective, and conative components in an effort to produce a powerful feeling or experience that motives them to take action (Baack & Clow, 2012). The findings of this research conclude that market segmentation is an effective strategy that helps corporations stop wasting their advertising investments on campaigns that do not reach intended buyers, and plays a significant role to help them identify a target audience.

Next week my research work is centered on advertising strategies and media buying. Stay tuned … until then, have a great weekend everyone!

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References

Baack, D., & Clow, K. (2012). Integrated advertising, promotion, and marketing communications (Fifth ed.). Upper Saddle River, NY: Pearson Education, Inc.

Chopra, D., & Simon, D. (2013). The Chopra Center for Well-Being. Retrieved July 14, 2013, from The Chopra Center for Well-Being: http://www.chopra.com/welcome-chopra-center

Gallagher, L., & Zoratti, S. (2012). Precision marketing: Maximizing revenue through relevance. London, UK: Kogan Page Ltd.

Godfrey, A. L. (2007). A product segmentation approach and its relationship to customer segmentation approaches and recommendation system approaches. ProQuest Dissertations and Theses. Ann Arbor, MI, USA. Retrieved September 25, 2012, from http://search.proquest.com/docview/304811614?accountid=32521

Kennedy, D. (2011). The ultimate marketing plan: Target your audience (Fourth ed.). Avon, MA, USA: Amazon Digital Services, Inc.

McDonald, M. (2012). Market segmentation: How to do it and how to profit from it. Chichester, West Sussex, UK: John Wiley & Sons.

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