Market Segmenetion

Market segmentation

When the company has successfully identified the segments within a market, the next step is to target these segments with products that closely match the needs of the customers. There are three main targeting strategies:

пЂ­ Concentrated

пЂ­ Mass

пЂ­ Differentiated

Concentrated (Niche or Focused) strategy is concerned with targeting one particular, well-defined, specific segment of customers within the market.

There are several different niche marketing strategies :

пЂ­ End user strategy: serving only one type of end user customer.

пЂ­ Vertical level strategy: specializing in one level of the production-distribution cycle.

пЂ­ Customer size strategy: selling products designed for only one size customer, such as petite or extra large clothes.

пЂ­ Service strategy: offering a service not available from any other company.

пЂ­ Geographic strategy: selling only in one geographic area.

Advantages:

пЂ­ Focused markets may be profitably by small companies that have relatively small overheads and, therefore, do not need to achieve the volume of sales required by larger competitors.

пЂ­ The organization with focused marketing strategy could be seen as specialist that is able to offer the high quality products.

пЂ­ Niche companies offer products for customers who look for original item that could stress individual traits of the buyer.

пЂ­ The customers in the niche have a distinct set of needs and they will pay a premium to the firm that best satisfies their expectations.

пЂ­ Concentrated strategy enables small firms to concentrate their marketing and allows only one specific mix to be developed.

Disadvantages:

пЂ­ On concentrated markets the potential for sales growth and economies of scale may be limited.

пЂ­ The survival of the niche companies may be seriously affected if sales begin to decline. If the selected segment failed, the company has no fallback position.

пЂ­ If competitors noticed a rival establishing and succeeding in a particular segment, they could try to take some of it.

пЂ­ Niche strategy ignores other areas of the market. It can cause problems in future as may make it more difficult for company to expand to other segments.

Example:

The good example of the niche company could be Ferrari. This Italian car manufacturer produces very expensive, hand-made sports vehicles in limited series for premium customers. It sells yearly only about 4000 cars, but brings huge profits. Ferrari's cars are among the most desirable of vehicles to own and drive, and are one of the ultimate status symbols of wealth in the world.

Mass/undifferentiated targeting strategy is concerned with selling a single product to the whole market. This strategy is based on the assumption that buyers’ needs are very similar if not identical.

Advantages:

пЂ­ Undifferentiated markets are cost effective. There is only one product line to be manufactured, inventoried, distributed, and advertised. The Mass companies can produce on a large scale, benefiting from low unit production costs via economies of scale. Also the absence of segmented market research lowers the costs of consumer research and product management.

пЂ­ Low marketing complexity. Only a single marketing mix is required to serves the need of entire market.

Disadvantages:

 Ignores customer differentiation. It is naive to hope that one product could please everyone. In today’s markets, consumers are less interested in �regular’ products and often prepared to pay more for items that cater for their specific needs.

пЂ­ The mass products are seen as the one with medium or low quality.

пЂ­ High competition. Due the fact that mass products have not been tailored to particular segment, any competitor who does target the segment more closely will attract customers.

Example:

The most widely recognized example of mass strategy