Customer Segmentation
Customer/Market segmentation is the process of dividing up bigger markets into smaller groups based on certain shared characteristics1. The demand function of these smaller groups would be then different and competitive advantage could be gained if segments of customers can be identified to serve. Lifestyles, attitudes, values, beliefs and culture can be all explored to create a basis for segmentation of markets.
Porters generic strategies are Cost leadership , differentiation and focus2. According to Porter, choosing more than one strategy will lead to waste of resources. Differentiation is developing different products/services for more than one segment while focus is choosing to choosing to serve only one segment. An undifferentiated approach is where a product is developed that needs of the largest number of buyers, which can lead to cost leadership strategy.
Hyper segmentation is the practice of breaking down target market into a very granular level3. Digital communications , social media and internet, has enabled segmenting to the level of the individual consumer.
A market segment becomes a target market when its targeted with a marketing mix4.
Marketing Mix - Old 4 P's and New C's
Product - An item that satisfies the consumers wants.
Customer - A customer want that needs to be satisfied.
Price - amount a customer pays for a product / service.
Cost - Price is only part of the total cost of procurement to the consumer.
Place - Direct or Indirect channels of marketing. A franchise outlet, retail outlet or a website.
Channels - Channels of Marketing.
Promotion - Tailored marketing communications.
Communication - Promotion could be manipulative . It should be a co-operation and a dialogue between consumer based on their wants.