CONSUMER BEHAVIOUR HANDOUT MARKET SEGMENTATION INTRODUCTION Market Segmentation and diversity are in natural harmony. Diversity in the Kenyan marketplace (as well as diversity in the global marketplace) makes market segmentation an attractive, viable, and potentially highly profitable strategy. The necessary conditions for successful segmentation are: - A large enough population with sufficient money to spend and Sufficient diversity to be capable of being divided into sizable segments on the basis of demographic, psychological, or other strategic variables. Market Segmentation can be defined as the process of dividing a potential market into distinct subsets of consumers with common needs or characteristics and selecting one or more segments to target with distinct marketing mix. Customers are not a homogeneous group. Customers are a heterogeneous group. Customers are not homogeneous because: – Different types of customers have different needs. – Different categories of customers have different price sensitivities. – Different categories of customers react differently to different marketing activities. Identifying and taking advantage of these differences between customer groups or segments is the key to profitable marketing today. Segmentation Criteria Differences in needs among your customers. Demographic differences e.g. age, income, sex, etc. Psychographic differences e.g. lifestyle, personality, social class. 1
Once you have chosen a possible segmentation scheme, then ask: – How could we modify our products or services to make it more attractive to each separate group? You must also prepare a profile for each brand and the segment it serves. Consider also the price you could offer for each segment. Is there an opportunity to get a premium price? Premium product or service offerings must be clearly differentiated in their offerings so as to attract a premium price. How can we build an enduring reason for preference among target customers in the segments? Before the widespread adoption of the marketing concept, the prevailing way of doing business with consumers was through mass marketing – that is offering the same product and marketing mix to all consumers. The essence of this strategy was summed up by the entrepreneur Henry Ford, who offered the Model T automobile to the public “in any color they wanted, as long as it was black”. If all consumers were alike, if they all had the same needs, wants, and desires, and the same background, education, and experience, mass (undifferentiated) marketing would be a logical strategy. Its primary advantage is that it costs less: one advertising campaign, one marketing strategy, and one standardized product is usually all that is offered. Some companies, primarily those that deal in agricultural products or very simple manufactured goods, successfully follow a mass marketing strategy.
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