Reasons to Use Market Segmentation
Reasons why firms segment markets
There are many reasons why firms identify market segments, as outlined in the following table:
Reasons why market segmentation is used |
Rationale/discussion |
Target markets | Obviously the main reason is to help identify potential target markets |
Market understanding | Splitting the overall market into smaller groups helps managers have a much greater understanding of the marketplace, as they gain knowledge of differing consumer needs within the same market |
Marketing mix | It is then easier to develop a marketing mix is based upon the needs of a precise market |
Competitive position | It can be easier to compete against existing firms by focusing upon a smaller, more defined, group of consumers |
New opportunities | Creative approaches to market segmentation may generate new opportunities |
Avoid mass-marketing | In today’s environment, it is generally quite difficult to be successful as a mass-marketer |
More offerings | Firms are better able to position multiple products in the same overall market by defining and understanding multiple segments |
Niche marketing | Some firms find success as niche marketers (pursuing very narrowly defined segments) and this specialized approach becomes their basis of their competition advantage |