"Segment" is a word with a huge number of meanings. It is quite widely used in the world of economics and marketing. How important are segments and segmentation and why does the process of bringing a product or service to the market begin with this?
Market segmentation
In order to occupy the right position in the market, the company must first determine the product and find the category of customers to whom it will be most interesting. In order to minimize risks and increase the chances of success, it is necessary to carefully analyze the market and determine the optimal market segment.
That is, one that combines a sufficient group of buyers with similar needs. The ultimate goal of such a separation and subsequent analysis is to identify a specific market niche in which the promotion of your product will be optimal. Then you need to conduct a more focused study of this niche for successful positioning and promotion of the product. In addition, you will need to study competitors and develop a strategy to deal with them.
What is good market segmentation
The analysis allows you to determine which product will be most appropriate. That is, the study of customer needs is primary. A market segment appears that is not yet saturated with a large number of similar products and can be occupied with less loss.
Another important advantage is a fairly detailed study of the competitive environment. You can analyze the strengths and weaknesses of products of other companies.
In addition, segmentation allows you to evaluate and work out the best steps to promote the product and stimulate demand.
In the process of analysis, it is possible to determine the target segment of the company, which combines in the best way the number of potential consumers and the final cost of the product.
Disadvantages of Market Segmentation
With all the visible advantages of dividing and studying the market and its needs, there are certain disadvantages that should not be forgotten. For example, it is necessary to take into account a rather large error in the results, since the analysis reveals an averaged model of consumer behavior.
In addition, due to the large number of opportunities and offers that have appeared in people's lives over the past several decades, it has become difficult to group them according to their uniform needs and interests. There are markets where, while grouping people according to needs, it is possible to isolate too narrow a segment. This greatly complicates the analysis and reduces the prospects of work.
You need to know that market segmentation is not an absolute guarantee of success. In addition to it, an assortment strategy, a competent product promotion program, and adequate pricing are very important.
Defining a Sales Strategy
To achieve effectiveness, you cannot bring a product to the market without first working out how and to whom to sell it. Therefore, in order not to go broke, it is necessary to decide for which target category of citizens it is intended, how much it is necessary for specific consumers. And also it is necessary to determine the price segment.
It is customary to distinguish three main segments:
- high price;
- average;
- low price.
Moreover, the amount of cheap goods sold is usually much more than expensive. On the other hand, in order to buy cheap goods, you have to be content with a minimum mark-up, so you can make a profit only with a large volume of sales.There is a narrower segmentation with the definition of price boundaries. The most profitable is considered to be "lakshari", which sells very expensive and exclusive products. In this segment, sales are minimal, but it is possible to make high profits.
Making changes to the pricing strategy is quite dangerous. In this case, there is a transition to a different price segment. This can add to the difficulties associated with the need to change the entire strategy of product promotion. In addition to the additional costs of various resources, there is a risk of making a mistake with the choice of a target group of consumers.
Suitable segment specifications
There are several indicators that allow you to understand how successfully segmentation is performed. It doesn’t matter which sales segment is considered - B2B or B2C. A promising segment has the following characteristics:
- Sufficient capacity. That is, potential demand is comparable with the volume of manufactured (sold) products.
- Absence or minimal presence of competitors with similar products. It is obvious that with great pleasure they will buy goods that are not represented in this segment than when the range offers dozens of similar products.
- Good potential demand for products from a specific manufacturer. This is more likely an image aspect when consumers do not pay attention to competitors' products, even if they have advantages.
- Minimum additional investment in product promotion and demand stimulation.
- The presence of quite serious differences between the segments.
Segmentation criteria
Before segmentation is necessary to understand what criteria it should be. Speaking of the retail market, when every customer is important, they divide according to certain factors:
- Why does a person need a specific product, what is his motive for buying.
- User status - whether the consumer had experience with the use of a particular product or not, what are his feelings from this, would he like to continue using it or has a persistent hostility.
- Willingness to buy - segmentation on this basis allows you to find out what the potential buyers are aware of the product, how much they want to buy it.
- Relation to a specific manufacturer. The company's image can seriously expand or narrow the segment. It is rather a desire to buy (not buy) not a specific product, but a specific brand.
- The solvency factor ranks first in Russian reality.
Starting a new project or launching a new product on the market can be successful if it is properly positioned and designed for those consumers who are interested in it. Often in the right segment is success.
