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Why Segmentation?: Introduction and Definition
Why Segmentation?: Introduction and Definition
Why Segmentation?
Since customer orientation of organizations is context, the elements of the loyalty ladder
growing, segmentation as the basis for model could be used as segmentation
establishing customer relationships and variables:
customer loyalty gains importance. In this
Supporter
Prospects
Suspects
Marketers have to choose those variables that confuse customers and would lead to
are relevant for segmenting the market for a cannibalization effects.
particular product. The basic rule is to focus on
a limited number of important variables. To Kotler mentions five criteria for an effective
segment the market into too many small, segmentation:
slightly distinct segments would require • Measurable: It has to be possible to
splitting up the marketing budget into too many determine the values of the variables used
ineffective chunks. Such varied marketing for segmentation with justifiable efforts. This
activities in the diverse segments could is important especially for demographic and
geographic variables. For an organization
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with direct sales (without intermediaries), there are target-group specific advertising
the own customer database could deliver media, as magazines or websites the target
valuable information on buying behavior audience likes to use.
(frequency, volume, product groups, mode • Distinguishable: The market segments have
of payment etc). to be that diverse that they show different
• Relevant: The size and profit potential of a reactions to different marketing mixes.
market segment have to be large enough to • Feasible: It has to be possible to approach
economically justify separate marketing each segment with a particular marketing
activities for this segment. program and to draw advantages from that.
• Accessible: The segment has to be
accessible and servable for the
organization. That means, for instance, that
model) offers the chance to attract new development of niche strategies. Thus
customers with starter products and to move marketing activities can be targeted at highly
these customers on to premium products. attractive market segments in the beginning.
Market leadership in selected segments
Sustainable customer relationships in all improves the competitive position of the whole
phases of customer life cycle organization in its relationship with suppliers,
Customers change their preferences and channel partners and customers. It strengthens
patterns of behavior over time. Organizations the brand and ensures profitability. On that
that serve different segments along a basis, organizations have better chances to
customer’s life cycle can guide their customers increase their market shares in the overall
from stage to stage by always offering them a market.
special solution for their particular needs.
For example, many car manufacturers offer a
product range that caters for the needs of all Summarizing all these advantages, the need
phases of a customer life cycle: first car for for market segmentation is closely related to
early twens, fun-car for young professionals, strategic decisions:
family car for young families, etc. Skin care
cosmetics brands often offer special series for Market segmentation is the basis for customer
babies, teens, normal skin, and elder skin. orientation and differentiation.