About Market segmentation

Market Segmentation

Market segmentation is the process of dividing a market into sections so that it may be conveniently analyzed and interpreted. The nature of the market, certain people targeted, cultural consumer backgrounds, and infrastructure are all taken into account. It aids in the development of a viable company idea that will, in the end, result in the establishment of a well-founded business that is more likely to expand and grow. In my case study, I will use the fast food restaurants Delicacies and Aromas. This research paper will focus on the primary and secondary market segments for buying and selling shares. mode of transactions and how lifestyle and hobbies may affect business supplies and revenue in a particular segment.

Keywords: market, segmentation

Market Segmentation

In market segmentation potential and existing customers are divided into segments based on relevant considerations such as consumer incomes, consumer lifestyles, and everyday needs. The main logic behind market segmentation is to have an overview of markets so as to identify areas where much profits will are yielded. Sectors that are perceived to generate more profits are given special attention (Hollensen, 2015).

Market segmentations works under the idea that different markets have different needs, lifestyles and income levels thus local sales are also different regarding supply, prices, distribution methods and branding, this helps a business organization to get a better understanding of various sector needs (Hollensen, 2015).

Market segmentation helps an organization in developing the S-T-P (Segmentation-Targeting-Positioning) approach that provides an efficient method for marketing strategies, in an active segmented market, products are delivered in a manner that resonates with a target segment after sales researches are done (Hollensen, 2015).

Before a company adopts a particular approach, it has to consider some of the factors, i.e., company resources should be considered in that a strategy adopted should be able to be executed with no budget strains on the firm. When resources are restricted a real strategy may be useful. Product variability is also a factor i.e. differentiated and undifferentiated and product life cycles regarding perishability and market competitions (Hollensen, 2015).

Primary and Secondary Markets

Primary and secondary segmentation is the chief strategy carried in a business organization that separates the mode of business transactions. In the main markets, transactions are conducted between the company issuing products and the public with no intermediaries in between while in the secondary market company investor’s trade securities and products among themselves without involving the public.

Intermediaries are called brokers and buy securities from the primary markets and sell them again to the public. A particular kind of primary marketing is the Initial Purchase Order (IPO) where a private firm sells securities to the public for the first time mostly for capital raise (Becker & Victoria, 2015).

Primary Market

Primary market raises its capital in any of the four ways:

Public issue. The public issue technique is the most vital way of raising funds. It involves the selling of securities or products to the public at large.

Rights issue. Rights issue involves the selling of shares to present shareholders on a pro-rata basis hence the name.

Private placement. Private placement involves the selling of securities or products to special investors who are frequent, banks, and venture capital funds.

Preferential allotment. Preferential allotment involves offering selected investors equity shares at a price different from the market price (Becker & Victoria, 2015).

Secondary Market

The secondary market requires securities and products offered in the primary market bought and sold again. It includes intermediaries called brokers. Secondary markets bring an aspect of price discovery and is further divided into the following;

Auction market. Auction market involves a convention of buyers and sellers convene at a location and buying, and selling happens through a bidding process in which prices are shouted publicly hence there are no hidden ways of seeking profits as everything is open and public (Becker & Victoria).

Dealer market. Dealer markets don’t bring together buyers and sellers, but instead, trading activities happen via electronic media i.e. telephones. Sellers deliver their offer through the medias and buyers. The buyers buy and resale them to earn profits. Due to a lot of investors in this market, quality is a factor (Becker & Victoria, 2015).

Key Approaches to Market Segmentation

Priori Segmentation

Prior segmentation is an approach that incorporates a publicity scheme founded upon characteristics such as industry size to create different groups of customers in a particular market. This segmentation is prone to biases as companies within the same market of the same magnitude may have varying needs, such biases should be reduced to a minimum rate possible (Baker & Michael, 2014).

In a market segment where consumers tend to consume breakfast at fast-food restaurants, Delicacies would be efficient in such an area because they provide breakfast foods and services while Aromas will not invest in such an area because they do not offer breakfast foods nor services but only lunch and dinner.

Need Based Segmentation

Need-based segmentation line is founded on differentiated needs faced by customers on a service or a product. Needs are identified after running market research. After consumer needs are recognized, and resolutions found, solutions are driven via the available market segments and not through the industry as a whole (Baker & Michael, 2014).

Delicacies are likely to prosper and expand in areas where burger consumption is high while Aromas will probably flourish in a market segment of people who consume chicken at a high rate.Initial market research has proved that individuals who want burgers are most liable to go to Delicacies while those craving chicken visit Aromas.

Value Based Segmentation

Value-based segmentation involves dividing markets regarding customer incomes; value based segmentation equips the business with the know-how to the nature of products and services to supply to a particular segment based on prices. In a low-income consumer segment, affordable goods are provided while in a high-income segment and luxuries may be provided (Baker & Michael, 2014).

Aromas and Delicacies both have products viewed as expensive by the consumers and other products perceived affordable. In a low-income segment, they will tend to supply their cheap products and provide high priced products in a high-income segment. Aromas have high priced products as compared to Delicacies.

Lifestyle and culture also affect market segments in that in a section with posh estates and high incomes, children in the same sector are likely to practice and develop hobbies met by luxury activities and practices hence affecting the type and nature of business organizations venturing into such areas (Frank, 2015).

Demographical Factors Affecting Segmentation

Demographical factors such as age, gender, religion, race, income, and culture are some factors that have an impact on a segment, i.e., in a segment with Islams, companies venturing, in short, exposing clothes will not venture into such a segment as their services will not be in demand. A company producing feminine clothes will unlikely venture in a segment with males as the highest population as that will have an effect on demand.

Kids in low-income areas will rarely practice the kind of lifestyle demanding bicycles and bouncing castles etc. Culture effects come in when some communities consider practices like wearing short or brightly colored clothes a norm, such cultures will have an adverse impact on involved manufacturers.

Educational levels have an impact in a segment in that in a segment with educated fellows they are unlikely to be affected by social and cultural norms like viewing brightly colored or short clothes as a taboo, uneducated people who live by such norms may avoid some products limiting company profits.

Advantages of Market Segmentation

Market segmentation brings about benefits to a firm regarding marketing strategies, expansions, and supply knowledge. It also improves productivity by giving a clear idea of consumer needs in a particular segment. Market segmentation provides a better platform to stand as a company in meeting customer needs (Matt, 2016).

Segmentation also helps a company to focus on its marketing message by conducting market segments research that directs on customizing messages for each particular sector regarding characteristics which may incorporate incomes, cultures, populations, and consumption rates (Matt, 2016).

Segmentation helps a firm get high revenues as it helps in targeting sales to active segments regarding sector characteristics, product compatibility with particular parts are supplied to matching layers to reduce over production and products ending up in wrong incompatible market sections Matt, 2016).

In conclusion, it will be right to say that the approach of dividing markets is an important aspect of business and marketing and should be adopted to minimize losses and maximize organizational profits.

References

Baker, Michael J. (2014). Marketing strategy, and management. London, UK: Palgrave Macmillan.

Becker, B., & Ivashina, V. (2015). Reaching for yield in the bond market. The Journal of Finance, 70(5), 1863-1902.

Heinemann, M. (2016). Leveraging data mining and market segmentation to gain conservation opportunity intelligence (Doctoral dissertation). Texas State University.

Hollensen, S. (2015). Marketing management: A relationship approach. New Jersey, NJ: Pearson Education.

Rothaermel, F. T. (2015). Strategic management. New York, NY: McGraw-Hill.