Market Segmentation

It is not possible to develop marketing strategies for every consumer. Rather, the marketer attempts to identify broad classes of buyers who have the same needs and will respond similarly to marketing actions. As noted by Eric N. Berkowitz, Roger A. Kerin, and William Rudelius, market segmentation is "dividing up a market into distinct groups that (1) have common needs and (2) will respond similarly to a marketing action."4 The segmentation process involves five distinct steps:

1. Finding ways to group consumers according to their needs.

2. Finding ways to group the marketing actions—usually the products offered— available to the organization.

3. Developing a market-product grid to relate the market segments to the firm's products or actions.

4. Selecting the target segments toward which the firm directs its marketing actions.

5. Taking marketing actions to reach target segments.

The more marketers segment the market, the more precise is their understanding of it. But the more the market becomes divided, the fewer consumers there are in each segment. Thus, a key decision is, How far should one go in the segmentation process? Where does the process stop? As you can see by the strategy taken in the beer industry, it can go far!

In planning the promotional effort, managers consider whether the target segment is substantial enough to support individualized strategies. More specifically, they consider whether this group is accessible. Can it be reached with a communications program? For example, you will see in Chapter 10 that in some instances there are no media that can be used to reach some targeted groups. Or the promotions manager may identify a number of segments but be unable to develop the required programs to reach them. The firm may have insufficient funds to develop the required advertising campaign, inadequate sales staff to cover all areas, or other promotional deficiencies. After determining that a segmentation strategy is in order, the marketer must establish the basis on which it will address the market. The following section discusses some of the bases for segmenting markets and demonstrates advertising and promotions applications.

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