SCC-Market Segmentation

Market Segmentation

What is marketing segmentation?

The process of splitting customers, or potential customers, in a market into different groups, or segments, within which customers share a similar level of interest in the same or comparable set of needs satisfied by a distinct marketing proposition. Market segmentation strategies can be developed over a wide range of characteristics found among customers. The group within the market may be identified by gender, age, geography, income level, or education level. The primary objective of segmentation, therefore, must be how to win and retain the customers an organization want to serve.

Why market segmentation is important?

Segmentation supports the development of niche strategies.Thus marketing activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves the competitive position of the whole organization in its relationship with suppliers, channel partners and customers. It strengthens the brand and ensures profitability. On that basis, organizations have better chances to increase their market shares in the overall market.

Segmentations provide information about smaller units in the total market that share particular needs. Only the identification of these needs enables a planned development of new or improved products that better meet the wishes of these customer groups. If a product meets and exceeds a customer’s expectations by adding superior value, the customers normally is willing to pay a higher price for that product. Thus, profit margins and profitability of the innovating organizations increase.

The accurate market segmentation can help a company understand ways to enhance customer loyalty with existing customers. As part of the process of identifying specific groups within the larger customer base, the company will get more accurate feedback from customer about how to make the products and services more desirable to them. For example, Apple identifies their market segmentation by job position, income, age, and need for specification. In order to satisfy their customers’demand, Apple provides graphics-oriented hardware and software which offered the benefit of very easy typesetting to users in the ordinary office environment. This change will help Apple more human and make customer more loyalty than before.

It also provides the opportunities for growth and higher profits. Organizations can launched different products to different market segmentation and thus attract additional customer groups. Segmentation by price level will provide higher profits for organization. For example, Boots Beauty identifies their market by the price level, and need for specification. The cosmetics in high price level provide for the people who are able to purchase, providing a high profit. Boot’s own brand ‘NO.7’, ’Botanics’provide a high quality and inexpensive cosmetics for customer. This different level of products and the own brand attract a lot of customer shopping in Boots.

Market segmentation helps organization reducing cost. It is possible to satisfy a variety of customer needs with a limited product range. For instance, the computer manufacturer DELL, organize its website by customer groups (private, small business, large business etc.). They offer the same products to all customer groups. Nevertheless, they suggest product bundles and supporting services that are individually tailored for the needs of each particular group. As an example, Dell offers to take on all IT-administration for companies. This service provides a huge potential for savings for corporate customers. However, it would be absolutely useless for private customers. Thus, segment-specific product bundles increase chances for cross selling.

Market Planning Process

Retail marketing planning is a logical sequence of activities. It is leading to the setting of marketing objectives and the formulation of plans for achieving them. Most companies generally go through some kind of management process in developing marketing plans. Of course each organization will adapt their marketing planning to suit their own circumstances.

Generally, there are 4 main stages of marketing planning.

Stage 1: Set up a mission statement.

All businesses should be able to know concisely what their main reason for existing is, to define their purpose. For example, Boots has decided its overall mission that’Our purpose is to help people look and feel their best’.

Stage 2: Marketing Analysis.

In this stage, organization needs to analysis internal market environment and external market environment. SWOT theory could be used in both internal and external market. More especially, ‘strength’and ‘weakness’can help an organization understanding their advantages and disadvantages. ‘Opportunities’and ‘threats’can help an organization analysis the external marketing in a logical way. In addition, PESTAL (Political, Economic, Social, Technological, Environmental, Legal) theory provides the main factors which an organization should to analysis.

Moreover, competitors should also be considered in this stage. Porter’s 5 forces can be used in this part.

Stage 3: Marketing Strategy

Market segmentation: dividing a potential market by geographically, economically, demographically etc.

Target market: focusing on a particular segment of the market. single strategy, multiple strategy, concentrated strategy (niche market)

Marketing positioning: 4 P---product, price, place, promotion.

The image for the organization---high quality and expensive

---low quality and cheap

Unique designs or mass produced

The value of position

Communication strategy

Stage 4: Marketing Management

Four areas of activity associated with successful marketing management.

Analysis: customer demand, competitors (existing, potiential), entry barriers and risks, market environment (spending power).

Planning: market selection, entry method, push and pull theory, marketing motivation

Implementation and Control: budget and schedules, personnel and responsibilities, benchmarking and monitoring progress


A marketing planning framework needs to take into account the realities of the environment and allow for rapid change. Here are a few reasons that an organization may have to keeping their plan update.

1.Owing to the rapid changes in technology, the economy, regulations, etc., a marketing plan

should be conducted in time to identify the organizational goals.

2.Marketing planning should also be done in preparation for a new major venture, for example,

developing a new department, division, major new product or line of products.

3.The market changing is the most obvious reason for updating market plan. Possibly the

organization reached their goals faster than they thought would be possible and new goals need to be established. Or the original goals didn't reflect current marketing conditions.

Otherwise, in order to keep step with the constantly changeable demand of customers, the marketing plan should response the changes in time.