Market segmentation involves four steps:
- Identifying product-related need Sets.
- Grouping customers with similar need sets.
- Describing each group.
- Selecting an attractive segment(s) to serve.
Product-Related Need Sets
Organizations approach market segmentation with a set of current and potential capabilities. These capabilities may be a reputation, an existing product, a technology, or some other skill set. The first task of the firm is to identify need sets that the organization is capable (or could become capable) of meeting.
The term need set is used to reflect the fact that most products in developed economies satisfy more than one need. Thus, an automobile can meet more needs than just basic transportation. Some customers purchase cars to meet transportation and status needs. Others purchase them to meet transportation and fun needs. Still others purchase automobile to meet status, fun, and transportation needs.
Customers with Similar Need Sets
The next step is to group consumers with similar need sets. Consumers with similar need sets can be grouped into one segment as far as product features and perhaps even product image are concerned despite sharply difficult demographics. This step generally involves consumer research - including focus group interviews, surveys, and product concept tests It could also involve an analysis of current consumption patterns and deductions based on an ,understanding of consumer behaviour.
Description of Each Group
Once consumers with similar need sets are identified, they should be described in terms of their demographics, lifestyles, and media usage. In order to design an effective marketing program, it is necessary to have a complete understanding of the potential customers. It Is only with such a complete understanding that we can be sure we have correctly identified the need set, In addition, we cannot communicate effectively with our customers if we do not understand the context in which our product is purchased and consumed ho it is thought about by our customers, and the language they use to describe lt.
Attractive Segment(S) To Serve
Once we are sure we have a thorough understanding of each segment, we must select our target market - that segment (s)of tile larger market on which we will focus our marketing effort. This decision is based on our ability to provide the selected segment(s) with superior customer value at a profit. Thus, the size and growth of the segment, the intensity of the current and anticipated competition, the cost of providing the superior value, and so forth are important considerations.