Advantages of target marketing: criteria for effective segmentation - Marketing Management

Engaging in target marketing:

  1. provides an understanding of competition;
  2. gives insights into competitive advantage, and how this can be best applied;
  3. allows the company to better appreciate of what customers need;
  4. enables the company to produce more effective marketing plans;
  5. uses company resources more effectively.

Salt of the Earth

Do all markets segment? Are there any markets where every customer wants the same thing i.e. demand is homogeneous?

When posed this question, people invariably suggest the market for salt is one where there are no different segments. After all, one salt is much the same as another. We put it in our food and apart from health issues think no more about it. The mention of health gives us a clue as to the existence of a distinct market segment within the overall market for salt. We are now aware that too much salt is bad for our health, but many people do not like the idea of cooking and eating without salt. As a result there are now healthier versions of salt available with different constituents targeted specifically at this segment. Once we recognize that there are different salt products aimed at different segments we find there is a whole range of different types of salt targeting the needs of different segments of the market e.g. ‘up-market’ sea salt, ‘hand dried’ crystals, basic salt products for price-conscious consumers, extra large packets for the catering trade and even rock salt for those who simply want to clear their paths of snow and ice. A bewildering range of salt products can by found by keying ‘salt’ into your search engine.

The fact that most markets are made up of heterogeneous demand clusters means companies have to decide which of these clusters to serve. Most companies recognize that they cannot effectively serve all the segments in a market. They must instead target their marketing efforts.

Imagine you are a part of the project team developing a new car. Should the proposed new model be a two, four or five-seater model? Should it have a 1000, 2000 or 3000cc engine? Should it have leather or fabric seats? In deciding these issues, the overriding factor is customer demand, i.e. what are the customers’ needs? Some customers (segments) may want a five-seater, 2000cc model with leather upholstery, while others may prefer a four-seater with a 1000cc engine and fabric seats. One solution is to compromise and produce a four-seater 1500cc model with leather seats and fabric trim. Clearly, such a model would go some way to meeting the requirements of both groups of buyers, but because the needs of neither market segment are precisely met and catered for, customers might prefer and purchase from suppliers who meet their requirements exactly.

In order to secure these advantages, the base(s) used for segmentation should fulfil the following criteria:

  1. Measurability/identifiability: The base(s) used to segment a market should lead to ease of identification (who is in each segment) and measurability (how large is each segment).
  2. Accessibility: The base(s) used should ideally lead to marketers being able to reach selected market targets with their marketing efforts.
  3. Substantiality: The base(s) used should ideally lead to segments that are sufficiently large to be worthwhile serving as distinct market targets.
  4. Meaningfulness: The base(s) used should lead to segments that have different preferences/needs and show clear variations in market behaviour and response to marketing efforts.

Of all requirements for effective segmentation, this last one is the most important. It is an essential prerequisite in identifying and selecting market targets. These criteria are examined later in this chapter when we discuss the variety of bases for segmenting markets. Of course target marketing is not without its disadvantages which are:

  1. It increases both production and marketing costs, i.e. economies of scale and the advantages of mass production are reduced and individual marketing campaigns need to be implemented for each market segment.
  2. Stuck for Choice

    Major car producers such as Ford, Chrysler and Fiat produce a model and variations on that model for virtually every segment of the market. The following is a list of the model range of passenger cars available from Ford in September 2009:

    Ka
    Fiesta
    Focus
    C-Max
    S-Max
    Kuga
    Galaxy

    Most of these main model variants are available with several engine options, several trim variants, a myriad of colours, and a huge range of accessories. Provided the customer wants a Ford they would be hard put not to find something that suited them. In short, the patterns of demand we referred to earlier require that marketers develop specific marketing mixes (i.e. products, prices, promotional appeals and distribution channels that are aimed or targeted at specific market segments). This ‘targeting’ vs. ‘mass marketing’ approach is referred to as using a ‘rifle approach’ as opposed to using a ‘shotgun approach’ to achieve market impact.

  3. It requires more marketing research and information than if we do not segment and target.
  4. There is a danger of brand proliferation and different company products competing against each other.
  5. Critics argue that some approaches to segmentation and targeting help reinforce prejudices and stereotypes and are a form of ‘customer abuse’ by the marketer (see Rotfeld).

We now examine steps in target marketing and how these steps work in practice.


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