Market segmentation is a marketing strategy which involves separating a wide target market into subsets of customers, enterprises, or nations who have, or are perceived to have, common requirements, choices, and priorities, and then designing and executing approaches to target them.
Market segmentation approaches are basically used to identify the target clients, and provide assisting data for marketing plan components like positioning to get certain marketing plan objectives.
Businesses may discover product differentiation approaches, or an undifferentiated approach, including specific goods or product lines relying on the precise demand and attributes of the target segment.
The most common forms of market segmentation practices are as follows −
Dealers can segment market according to geographic criterion that is nations, states, regions, countries, cities, neighborhoods, or postal codes. The geo-cluster strategy blends demographic information with geographic data to discover a more precise or specific profile. For example, in rainy areas dealers can easily sell raincoats, umbrellas and gumboots. In winter regions, one can sell warm clothing.
A small business product store focuses on customers from the local neighborhood, while a larger departmental store focuses its marketing towards different localities in a larger city or region. They neglect customers in other continents. This segmentation is very essential and is marked as the initial step to international marketing, followed by demographic and psychographic segmentation.
Segmentation on the basis of demography relies on variables like age, gender, occupation and education level or according to perceived advantages which an item or service may provide.
An alternative of this strategy is called firmographic or character based segmentation. This segmentation is widely used in business to business market. It’s estimated that 81% of business to business dealers use this segmentation.
According to firmographic or character based segmentation, the target market is segmented based on characteristics like size of the firm in terms of revenue or number of employees, sector of business or location like place, country and region.
This divides the market into groups based on their knowledge, attitudes, uses and responses to the product.
Many merchants assume that behavior variables are the best beginning point for building market segments.
Psychographic segmentation calls for the division of market into segments based upon different personality traits, values, attitudes, interests, and lifestyles of consumers.
Psychographics uses people’s lifestyle, their activities, interests as well as opinions to define a market segment.
Mass media has a dominating impact and effect on psychographic segmentation. To the products promoted through mass media can be high engagement items or an item of high-end luxury and thus, influences purchase decisions.
Occasion segmentation is dividing the market into segments on the basis of the different occasions when the buyers plan to buy the product or actually buy the product or use the product. Some products are specifically meant for a particular time or day or event. Thus, occasion segmentation helps identify the customers’ various reasons to buy a particular product for a particular and thus boosts the sale of the product.
Any company on the marketing platform is expected to have a detailed analysis of the choices and preferences of the customers in the target market. That is where the company will be selling the products. This will help the company produce the products according to the demands of the customers and this will eventually lead to a win-win situation between the buyer and the seller.
The plan that leads to the analysis is a step by step approach wherein the analysis is done on cultural, economic, and political situation prevailing in the target market or the country.
The different steps in the planning process are as follows −
Phase 1 − Identifies the target market and builds relative priorities for resource allocation.
Phase 2 − Fixes the positioning approach for each target market. The aim is to match the requirements with the needs based on the analysis.
Phase 3 − Includes the preparation of the marketing plan. It consists of examining the situation, aim, objectives, approach and tactics, budgets and forecasts, and action programs.
Phase 4 − The plan is executed and managed. Results are checked and strategies adjusted when required to improve results.
Even though the international marketing planning process is very much similar to planning domestic marketing strategies but the environment is far more complicated, knotty and uncertain in international markets.