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The Strategy of Market Segmentation

13 May, 2016 - 13:23

During the last two decades, a more complete and concise understanding of market segmentation has emerged. This is not to say that there are not still unsettled issues, measurement problems, and other issues to consider. The most severe problem remains the difficulty of defining precisely the basis for segmentation. A great deal of knowledge about the market and considerable experience with it are highly desirable. Research into consumer motivation is essential. This does not mean that historical, descriptive data about consumers are no longer important. Nevertheless, the ultimate purpose of going through the process of delineating market segments is to select a target market or markets: otherwise, the segmentation process is worthless.

The segmental approach will be described throughout the text in greater detail. At this point, it is sufficient to know that the segmentation strategy is the primary marketing approach used by a majority of producers. Combined with product differentiation, it is the essence of a contemporary marketing strategy. The activity of selecting a target market involves five steps:

  • Identify relevant person/organization and purchase situation variables beyond the core product variable. (For Minolta's Maxxum SLR Camera, the core product variable would be fool-proof photographs, and other relevant variables might be age, income, family composition, occasion for use, and photographic experience.)
  • Collect and analyze other related data about potential segments (e.g. characteristics of neophyte camera users, price perceptions of these potential users, size of group, trends, minimum product features).
  • Apply criteria of a good segment.
  • Select one or more segments as target markets (e.g. neophyte photographers, frustrated with necessary adjustments for a 35mm camera, income of USD 35,000 or more, family, between 25-45 years of age, male).
  • Develop appropriate action programs to reach target segment(s) (e.g. price at USD 350; distribute through discount stores, camera stores, and department stores; promote through TV and magazine ads). This type of effective action program is demonstrated in the Newsline that follows.

Newsline: Youth segments

It takes more than just traditional advertising to appeal to the ever elusive teenage market. One company that has discovered the right formula to reach this group is High Frequency Marketing (HFM), a youth marketing firm founded by Ron Vos. Since its inception in 1995, HFM has grown significantly in terms of cross-industry reach, marketing network, and revenue (which has tripled in the past two years). Vos attributes the company's success to its unconventional promotional campaigns.
As a youth marketing start-up, Vos's energies were initially focused on the music industry. He appealed to his target market of 12 to 26 year-olds by using grassroots marketing efforts and specializing in "takin' it to the streets". Back in 1995, street marketing had not become the cliche that it is now. Yet. Vos's key to success is the adaptability of his firm to youth culture and technology. As he likes to say, "As soon as a marketing concept becomes mainstream, it's history."
When asked to pinpoint a breakthrough campaign for his company, Vos immediately mentions The Wedding Singer. Hired by New Line Cinema in 1998 to promote the film, HFM developed the concept of a "karaoke jam contest" in the malls of 24 cities. The campaign was immensely successful, opening doors for HFM to the whole entertainment industry.
Another successful campaign took place in 2000, when approached HFM with the concept of partnering with Second Harvest (a national food bank) to sponsor a national food drive on college campuses, using the incentive of awarding the campus that collected the most food at a big concert. HFM had to go back to the company and say that "you can put a carrot on the end of a stick, but the stick can't be too long". In other words, needed a more tangible campaign, something with instant feedback to "show (the students) that it is real, that it is there." Vos and his creative marketing team came up with a compilation CD entitled "Music 4 Food," which was distributed free of charge to students who donated food (they also received a ticket to a nearby concert). 1