Market segmentation, Target market and Market growth

A market segment is a sub group of a whole market in which consumers have similar characteristics.

This refers to the process of dividing the whole market for a product into sub identifiable markets with the aim of reaching such groups with a particular marketing mix

Segmentation can be carried out on the following bases:

1. Demographic
   • Age
   • Sex
   • Income
   
2. Geographic
   • Region
   • Location
   • Climate
   
3. Psychological
   • Loyalty
   • Culture
   
4. Behavioural
   • Mood
   • Belief
   
5. Cultural
   • Religion
   • Norms
   • Values
   

Advantage of Market segmentation

1. Focus of the Company: Segmentation is an effective method to increase the focus of a firm on market segments.
2. Increase in competitiveness: Naturally, once your focus increases, your competitiveness in that market segment will increase.
3. Market expansion: Geographic segmentation is one type of segmentation where expansion is immediately possible.
4. Customer retention: By using segmentation, Customer retention can be encouraged through the life cycle of a customer.
5. Have better communication: The communications of a company needs to be spot on for its target market.
6. Increases profitability: Segmentation increases competitiveness, brand recall, brand equity, customer retention, communications.

Disadvantage of market segmentation:

1. Segmentation increases costs: When a firm attempts to serve several market segments, there is a proliferation of products. Cost of production rises due to shorter production runs and product variations.
2. Research and development costs could be higher due to the several different product variation.
3. Larger inventory has to be maintained by both the manufacturer and the distributors.
4. Promotion and distribution expenditures increase when separate programme are used for different market segments.
5. When characteristics of a market segment change, investment made already might become useless.

Target market

This refers to the specific segment of the whole market, in which marketing activities will be carried out with the aim to satisfy the target market.

Niche marketing

It involves identifying and exploiting a small segment of a larger market by developing products to suit it.

This segment can be a very small section of the whole market and may be one that has not yet been identified and filled by competitors.

Advantages:

• Small firms can survive and thrive in markets being dominated by large firms

• Firms can exploit the market so long as no new competitor enters the market

• Such a market can be used to create image and status

Mass marketing

This involves selling the same product to the whole market with no attempt to target group within it. e.g. coca cola

Advantages:

• Firms can enjoy economies of scale

• Fewer risks are involved in the marketing process with more consumers

Market share

The market share of a business can be defined as the proportion which its sales represent of total market size. Market share = Firm's sales/Total market sales

Market size

This refers to the total level of sales of all producers within the market.

Market growth

This means the rate at which total sales in the market are rising each year.