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Product Segmentation

Market Segmentation
The introductory phase of the product life cycle begs the question of how and to whom a
product will be marketed. A marketer must determine if the product will be introduced to a mass
of population or customized groups of populations. Market segmentation involves aggregating
prospective buyers into groups that have common needs and will respond similarly to a
marketing action. Market segments are the relatively homogeneous groups of prospective buyers
that result from the market segmentation process (Hartley, Kerin, & Rudelius, 2010).
Segmentation allows a firm to introduce products that specifically address the wants and needs of
potential buyers. This strategy allows a firm to increase sales and profits by conforming unique
marketing activities that correspond with diverse preferences. Identifying the five steps used in
market segmentation, differentiating the bases used, and defining the positioning of products in
the market place will prove the profitability of market segmentation.
The first step of market segmentation is to group potential buyers into segments. This
step involves meeting five essential criteria that will determine if the segmentation is worthwhile
as well as possible. The five criteria includes: simplicity and cost-effectiveness of assigning
potential buyers to segments, potential for increased profit, similarity of needs of potential
buyers within a segment, different needs of the potential buyers among the segments, and
potential of a marketing action to reach a segment (Hartley, Kerin, & Rudelius, 2010). During
step one the marketer must use one of the four bases to segment consumer markets.
The four general bases of segmentation are: geographic segmentation, demographic
segmentation, psychographic segmentation, and behavioral segmentation. Geographic
segmentation is based on where prospective customers live or work; such as the region or size of
the city. Demographics are based on some objective physical, measurable, or other classification
attribute of prospective customers (Hartley, Kerin, & Rudelius, 2010). The demographics can
include age, gender, family size, family lifecycle, birth generation, income, occupation,
education, ethnicity, nationality, religion, and social class (Market Segmentation, 2010).
Psychographic segmentation is based on some subjective mental or emotional attributes,
aspirations, or needs of prospective customers. The variables are broken down by personality
types, lifestyles, and individual needs. The forth base is behavioral segmentation determined by

Product Segmentation

some observable actions or attitudes by prospective customers; such as where consumers shop
(Hartley, Kerin, & Rudelius, 2010).
The second step of market segmentation is to group products to be sold into categories.
According to Hartley, et.al; products are developed individually and grouped together into
selling combinations. Products that are similar or that can be used with another product are
placed in the same location. Once the consumer relates the products together, the consumer can
relate to multiple products as opposed to one. This process allows firms to maximize profits by
introducing products to customers that otherwise would have ignored.
The third step is to develop a market-product grid and estimate the size of markets. A
market-product grid is a framework to relate the market segments of potential buyers to products
offered or potential marketing action by an organization. Analysis of a market product grid
allows the marketer to visually comprehend the estimated market size of a given products sold to
a specific market segment (Hartley, Kerin, & Rudelius, 2010).
The fourth step of segmenting markets is to select target markets. This step is crucial to
effectively and efficiently spread a firms marketing efforts. Hartley, et. al, defines two kinds of
criteria in the market segmentation process: one, divide the market into two segment and two,
actually pick the larger segment. Additional criteria used to select target markets include: market
size, expected growth, competitive position, cost of reaching the segment, and compatibility with
the organizations objectives and resources (Hartley, Kerin, & Rudelius, 2010). The combination
of criteria allows the marketer to develop realistic marketing actions to reach target markets.
The final step is to take marketing action to reach target markets. This step allows the
marketer to execute a plan of action to reach the segments developed in steps one through four.
Each step enabled the marketer to view what market to introduce and the most effective way to
reach the market. Marketing actions are developed to reach the segment in the most appealing
manner. Depending on the actions, the marketer is able to repeat, modify, or drop and add new
campaigns for other segments if the changes are worthwhile. Allowing flexibility to the
marketing actions allows a firm to adapt to the changes of customer preferences and competition
(Hartley, Kerin, & Rudelius, 2010).

Product Segmentation

Product positioning is a crucial part of step five of the segmentation process. Marketing
actions must include long-term success expectations in the marketing actions. Product
positioning refers to the place a product occupies in consumers minds on important attributes
relative to competitive products. Product repositioning refers to changing the place a product
occupies in a consumers mind relative to competitive products. The two main approaches to
positioning are head-to-head positioning and differentiation positioning. The approach must be
determined by the expected perceptions of the potential customers. Using perpetual maps,
marketers can visualize how consumers perceive competing products or brands. This will enable
a firm to execute actions to position or reposition a product in the ideal location based on the
perceptions of potential buyers (Hartley, Kerin, & Rudelius, 2010).
The actions of marketing determine the success of a new product. New products can be
the result of new development or new competition. Regardless the nature, the marketing actions
deliver the product to the market place. The market place is controlled by diverse preferences of
consumers that change rapidly. The steps of market segmentation allow marketing actions to
target a specific group of buyers. Once the target market is selected delivering product
information is determined by the bases of the market segments. Positioning then establishes a
location to deliver the product. The steps of the segmentation process are effective and efficient
by eliminating aimless or unrealistic segments of potential buyers.

Product Segmentation

References
Hartley, S, W., Kerin, R, A., & Rudelius, W. (2010). Marketing 10th ed. McGraw-Hill
Companies.
Market Segmentation (2010). Retrieved July 12, 2010 from
http://www.netmba.com/marketing/market/segmentation/