Segmentation and targeting

Introduction to Segmentation and Targeting

• Market segmentation involves separating a market into subsets based on distinct needs, characteristics, or behaviours of the consumers.
• Targeting is the process of evaluating and selecting the most valuable market segments to enter.
• When a business tailors its product or services to suit a specific group, it can maximise customer satisfaction, yield increased sales and maintain a competitive edge.

The Importance of Segmentation

• Businesses utilise market segmentation to better understand the needs of specific customers.
• This helps optimise product offerings, tailor marketing efforts and allocate resources more efficiently.
• When a business can identify who their customers are, they can develop and implement a segmentation strategy to target them more effectively.

Criteria for Effective Segmentation

• To be effective, market segments should possess certain characteristics: they should be identifiable, measurable, accessible, practical, and differentiable.
• The market segment must react similarly to the marketing approach.
• This means that if one part of the segment is provided with a specific product offer, the rest should respond in a similar manner.

Types of Market Segmentation

• Demographic segmentation is when a market is divided based on variables such as age, gender, income, occupation, and family size.
• Geographic segmentation involves dividing the market based on geographical boundaries like regions, states, countries.
• Behavioural segmentation categorises markets based on the customers’ knowledge, attitudes, uses, or response to a product.
• Psychographic segmentation classifies consumers based on values, lifestyle or personality traits.

The Importance of Targeting

• Once a company has identified its market segment, it must decide which ones to target.
• Targeting strategies can be either undifferentiated (mass) marketing, differentiated (segmented) marketing, concentrated (niche) marketing, or micro-marketing (local or individual marketing).
• All these strategies aim to appeal directly to a specific group in a unique way to maximise the marketing effectiveness.

The Needs and Wants of the Target Market

• Businesses need to cater to the needs and wants of their identified target market.
• By understanding what these needs and wants are, businesses can develop products and marketing strategies that best meet them.
• This can greatly improve a business’s success, as it ensures they are delivering products and services that customers truly value.