Market segmentation denotes dividing a market into specific and more defined categories. It involves assigning customers into groups with similar characteristics. The process allows businesses to design and present a product that appeals to a specific consumer group. Dividing a market enables marketers to maximize marketing efforts by identifying the right consumers for a product. It prevents wastages, losses, and mistakes witnessed when a business uses a trial and error method to enter a market it does not understand.
Types of Market Segmentation
The primary types of market segmentation are demographic, geographic, behavioral, and psychographic segmentation.
Demographic segmentation involves dividing consumers based on demographic factors, including age, gender, education level, religion, ethnicity, employment status, marital status, and income level. Certain products explicitly target a specific demographic. For example, a nursing home specifically targets the elderly population, while a gaming console business targets the youths.
Geographic segmentation uses physical locations to divide a market. Physical locations can constitute a city, state, country, region, or continent. The demand for a product or service can vary across physical borders, whether internal or external. For example, a company specializing in modern fashion trends cannot venture into Muslim countries, whereas a budget phone company stands to sell more in African and Asian markets.
As the name suggests, this segmentation utilizes consumer behavior. Consumer behaviors include purchasing habits, brand loyalty, spending habits, brand interactions, online shopping habits, and product rating habits. In the current e-commerce environment, learning about consumers helps deliver targeted ads. It allows a business to design campaigns and messages tailored toward a specific customer. For example, a company can offer discounts or coupons to customers who repeatedly buy goods on its online store. Such discounts and vouchers persuade the customer to buy more goods and spend money on the site.
Psychographic segmentation splits customers based on psychological elements such as personality traits, beliefs, hobbies, values, and lifestyles. Psychographic segmentation is challenging because mental or emotional characteristics are difficult to identify. Identifying these characteristics allows a business to understand a target market and closely relate with them. For example, a restaurant chain can design an animal-free menu targeting vegans or activists who advocate against animal cruelty.
Product Life Cycle: Definition and Stages
Product life cycle denotes the timeframe from when a product is introduced to the market to when it is removed. The product life cycle includes four primary stages: introduction, growth, maturity, and decline.
The introduction stage constitutes launching a product and presenting it to the consumers. It involves creating awareness and reaching consumers to inform them about the new product. The sales and demand are considerably low because people are yet to learn about the product.
At the growth stage, consumers are aware of the product and are increasingly purchasing it. The phase is characterized by growing demand, increased production, growing sales, and increased profits. Furthermore, competition intensifies at this stage as other brands observe the success and start imitating. As companies experience growth, they initiate expansion efforts by opening new distribution stations and adding support services such as customer care and delivery.
Maturity is the peak of a product. The company is generating steady profits but cannot grow or expand beyond this point. The maturity stage is characterized by a reduction in marketing and production costs. Because a business or product cannot grow beyond the maturity phase, it might be forced to reduce prices to retain customers and remain competitive. A company can also differentiate products to keep consumers interested.
The decline stage is characterized by a drop in sales, production, and profits. The product no longer appeals to consumers at this stage regardless of marketing, differentiation, pricing, or distribution efforts. It is almost impossible to revive a product because it has become obsolete or the market has new and better offerings. The product loses its market share to the competitors.
Unique Selling Point
A unique selling point or proposition denotes the aspect of a business or product that makes it unique and appealing to the customers. It describes the benefits or attributes that make a product /business stand out compared to competing or similar products/businesses. A unique selling proposition includes the lowest cost, free transport, efficiency, highest quality, or the first-ever product in its category. A unique selling point provides a company with a competitive advantage to attract new customers and retain existing ones.
To support our work