Market segmentation is the process of dividing a large, heterogeneous market into more homogeneous groups of people, who have similar wants, needs, or demographic profiles, to whom a product may be targeted.
Segment identification: some segments may be difficult or prohibitively expensive to identify. Examples: professional baseball clubs did not spend time in the last decade trying to determine the size or strength of the market for a Beanie baby or bobble head doll promotion. The ranging success in other markets was enough for them to go with a gut instinct that the items were hot everywhere, at least for the moment.
A Golf course Developer, however, would want to research a local or regional market before making a $15 million investment.
Segment Access: can the marketer access the segment? Is it possible to gain access to these groups of consumers individually without upsetting marketing efforts aimed at other segments? Our Beanie Baby and bobble head promotes had no problem with this. S few weeks of promotional ads brought out more than enough Beanie baby collectors. Things are not so easy, however, for a state high school association trying to promote its championship games, especially in “minor” sports. The time between play-off rounds is often short, upsets happen with regularity, and fan bases are segmented by community identify. It is not feasible for most state associations to prepare special contingency plans for each team that might advance. Hence, campaigns tend to be broad-based promotions is high school sports.
Segment responsiveness: will the segment be responsive? Two questions need to be answered here. The first is whether the product will match the wants of the chosen segment. The second concerns the significance of the segment. Is it worthwhile (given segment size and response) to break down product characteristics and promotional efforts sufficiently to reach a segment? The marketer must address all of these factors in deciding whether (and to what extent) to pursue segmentation.
Heavy users buy more, and buy often, and buy more different brands. Some researches have shown that 80 % of company profits are generated from 20 % of the company’s customers (heavy users). Heavy users may constitute a small portion of the market but a major percentage of sales volume. Many companies, through examining their records, are discovering this small group of loyal consumers is generating the main group of sales. As a matter of fact, with new customers being harder and more expensive to track, efficient marketing strategy has shifted toward keeping this small group happy. Heavy- users represent a large lifetime value for companies, so they have to make sure to reach its needs and wants because