Knowing that the prospective customers and consumers (the market) are numerous and have varied buying motives and habits, marketing professionals have found it helpful to classify or categorize the type of customers. The process of classifying the market is known as market segmentation.
The market can be classified according to:
· Income: high, middle, low
· Age: infants, pre-schoolers, grade-schoolers, teenagers, young professionals, adult professionals, senior citizens
· Sex: male or female
· Educational attainment: no education, elementary, high school, college, graduate school
· Socio-cultural background: according to race or ethnic background, religion, etc.
· Geographical location: according to rural or urban location, town, province, region or specific location in the world
O Occupation – farmers, teachers, bank executives, musicians, engineers, office workers, etc.
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Aside from the above, there may be other ways to divide your market appropriate to your business and products.
In what way will market segmentation help in marketing activities?
First of all, it is useful in the preparation of a business plan. After thoroughly analyzing the company’s strengths and weaknesses and the opportunities and threats in the environment, the entrepreneur must make a decision as to target market or the market segments to sell to.
For example, if you want to put up a garments firm, a major decision you have to make is: Who is the target market for the garments? Will it be the high-income, middle-income or low-income bracket of the market? Will it be for domestic or the export market? By answering these questions, the firm will be able to focus on a particular segment or segments and thus be able to design a marketing program that is suitable for the prospective buyers.
In order to illustrate the concept of market segments, let us imagine a circle which is divided into sections or segments according to age group:
If the firm’s resources are limited, it may focus on selling to only one segment of the market. With one segment in focus, you can now design the marketing mix and the 4 P’s – production, promotion, place and price – most suitable to the target segment.
Looking at the diagram above, you can see that you will have different product offerings in terms of design, promotional materials and pricing structure for each segment you target.
(Watch out for articles on the marketing mix and the 4 P’s.)