A market segment is a group of consumers that have homogeneous and common characteristics to meet a need.
We could also say that it is the group of consumers that shows certain very similar buying habits, which help the marketing to plan strategies that allow it to better respond to the satisfaction of the need of the consumer.
Likewise, the homogeneity of a market segment can be determined either by the need they face or by the characteristics of how they hope to satisfy that need.
Therefore, choosing an appropriate market segment for a company is very important, as it becomes the target market group, to which it must direct its product proposals and the whole set of marketing strategies.
The process by which a company divides market segments is called market segmentation.
Segments in a market
Actually, in the market, in general, we find two large market segments:
- Price sensitive segment
Therefore, this group of consumers express a preference for low product prices, so that in general this group what they expect is a great performance of the satisfactory, usually, it is the largest number of people who are within the markets.
- Benefit sensitive segment
On the contrary, this other group of people what they hope to find in a product is the highest level of benefits. In fact, in this case, people give priority to the attributes and characteristics of the product, which respond better to the satisfaction of your need. Therefore, after they already consider, what is the appropriate price they expect to pay for the product.
Once the segments are identified, the companies can choose to focus on single segment marketing or the multi-segmented marketing
Single segment marketing
Since this strategy is taken when the company decides to focus on serving a single market segment, this has certain benefits, but also produces a risk.
Advantages of serving a single segment
- Easy to identify and satisfy
So for businesses, it is much easier and simple to identify the group of consumers in its segment, in the same way, it is feasible to achieve better satisfaction of the need of consumers, being able to focus on a
set features that allow them to develop more specific products
and attractions for a single group.
- Less competitors
Therefore, the company faces fewer competitors, because the segment is well defined and this allows it to have a better knowledge of this group and serve it better.
- Greater margin and participation
Attending to a single segment allows the company to focus in a very specialized way on the consumer, which makes it preferred among the other product options. Consequently, it can have a higher level of profits, and then in that way it has a greater market share.
Risk of the single segment
Finally, the main disadvantage of the single segment is that it ceases to be popular, that is, over time the consumer chooses another company or changes his preference for another market competitor, which is why this will severely affect the company’s profits because he has no other group of consumers to attend.
While this marketing strategy consists of serving several market segments, meeting the requirements demanded by each group.
Advantages of multi-segmented marketing
- It can be maintained in other segments
Consequently, if a company loses a group of consumers, you can continue to make a profit with the other groups that attend, so you do not lose your market share and your utilities.
- Leveraging the economy of scale
Either way, if you serve several market groups, must produce in large quantities, this allows you to take advantage of the benefits of the economy of scale, which favours its downward production costs and It makes it more profitable.
- Greater reach
On the other hand, as it serves a greater number of people, it has a greater reach and impact on the market in which it competes.
Different market groups
Actually, today thanks to technology the Market groups tend to be smaller and more specialized, for this can differentiate between segments, niches, market cells and Customer level marketing.
However, a market segment is a group relatively homogeneous and numerous consumers served by a company, to that is a source of opportunity for the company must gather certain features.
- Accessible: The company has appropriate communication and distribution strategies to access the group of consumers.
- Identifiable: To be identifiable, it will be possible for the company to differentiate one segment from another and know the responses of each group to the marketing strategies.
- Homogeneous: It must have sufficiently similar characteristics within the same group, but sufficiently different from the other segments.
- Measurable: To be measurable, the characteristics of the group of people that make up the segment must be accurately measured and identified.
- Substantial: The size of the group must be relatively large to ensure potential growth, as well as potential profitability.
On the other hand, a market niche It is defined as a smaller group of consumers, who have more specifically defined needs or a single combination of needs.
Of course, in a niche market, it is better known to the consumer, there is less competition and generates a greater profit margin.
So market cells are groups of consumers, even smaller, who share some characteristics specials that can become a market opportunity. The basis of data are very useful elements to establish market cells.
Example of market groups
For example; if we want to divide the travelling people into market groups, we can find three segments:
- People traveling by plane
- Those who travel by bus
- And those who travel by train
If we focus on the segment of people traveling by plane, we can find:
- A niche market in people who travel in first class, because it is a smaller group
In that same niche we can identify a market cell:
- A person who is willing to pay for a trip custom aeroplane
Finally It is important to mention that market segments are prepared based on the benefits that consumers seek and not based on the characteristics that they own the products.
Since yes we do it based on the product we would be forcing consumers to adapt to the products and it would not be the company that would be making the effort to generate products that adapt to the demands of consumers.
- It can be maintained in other segments