14 Jan

Marketing Strategy: Segmentation

Segmentation is the way that large markets can be divided to smaller segments Kotler & Armstrong (2008, p. 185) so that each segments became a target market for offering a customized product that can be identified by customers according to their needs and wants, for example: dividing the market according to ages of customers require offering different products for different ages that satisfies customers, another example is gender segmentation, male and female clothes are difference so that different clothes must be offered.

Segmentation for some category will be easy like gender, age, size, profession, etc. However, affective segmentation must be measurable, accessible, substantial, differentiable and actionable Armstrong (2008, p. 194), so that the product can be identified by those that segmented for, incorporating those future in segmentation strategy require more effort for finding the target market, and efforts usually require resources, and resources are monetary terms. Thus, targeting more segmented market require more effort than single segment market.

Differentiated segmentation strategy is the strategy that first divides the target market to several segments and then offers a specific product to each segment (Kotler & Armstrong, 2008, p. 196) so that the company’s revenue will be increased theoretically. This strategy is limited according to company’s resources, for example:

  • Limited budget: company A is a small company that consist of 100 employees, when company A applying differentiated segmentation strategy for some products, it needs more money to spend on developing each products, but because its budget is limited, its might require to take loans from Bank and its products became expensive because of additional costs that came from interest rate. Or it might fail in designing some products because of its limited employee ‘designer’. For this case, company A will fail.

In conclusion, it’s better for limited company to focus on few segments its market for providing highe performance products, and for new firms, should first target the most attractive segment that matches its capabilities and later it can expand its market by pursuing a market specialization strategy and offering new products to its existing market NetMBA.com(2010) because expensive price of products losses a competitive advantage then it leads the business to fail in that segment.

References:

  • Philip Kotler & Gary Armstrong (2008) ‘Principles of Marketing’, 12th Edition, Pearson Prentice Hall, ISBN: 0-13-712827-4
  • com(2010) Target Market Selection [Online]. Available From: http://www.netmba.com/marketing/market/target/ (Accessed:  19 November 2011)

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