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Segmentation and Market Driven Strategy

Segmentation and Market Driven Strategy

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Published by: haseela on Apr 12, 2010
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12/05/2012

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Segmentation and Market drivenstrategy
 This is the first of three lessons based upon SEGMENT- TARGET - POSITION.To get a product or service to the right person or company, a marketer would firstly
segment
the market, then
target
a single segment or series of segments, andfinally
position
within the segmentMarket Segmentation is the process of placing of subsets of buyers within a marketthat share similar needs and demonstrate similar buyer behavior. The world is madeup of billions of buyers with their own sets of needs and behavior. Segmentationaims to match groups of purchasers with the same set of needs and buyer behavior.Such a group is known as a 'segmentSegmentations identifies customer groups within a product –market, eachcontaining buyers with similar value requirement’s concerning specific products/brands attributes.A segment is a possible market target for an organization competing in the market.Segmentation offers a company an opportunity to better match its products and itscapabilities to buyer’s value requirements.Customer satisfaction providing a value offering that matches the value propositionconsidered important by the buyers in a segment.
Segmentation is a form of critical evaluation rather than a prescribed processor system, and hence no two markets are defined and segmented in thesame way. However there are a number of underpinning criteria that assistus with segmentation:
Is the segment viable? Can we make a profit from it?
Is the segment accessible? How easy is it for us to get into thesegment?
Is the segment measurable? Can we obtain realistic data to consider itspotential? There are many ways that a segment can be considered. For example, theauto market could be segmented by: driver age, engine size, model type,cost, and so on. However the more general bases include:
By geography - such as where in the world was the product bought.
By psychographics - such as lifestyle or beliefs.
By socio-cultural factors - such as class.
By demography - such as age, sex, and so on.
 
A company will evaluate each segment based upon potential businesssuccess. Opportunities will depend upon factors such as: the potentialgrowth of the segment the state of competitive rivalry within the segmenthow much profit the segment will deliver how big the segment is how thesegment fits with the current direction of the company and its vision.
Market Driven strategy
Firm's policyorstrategyguided bymarket trendsandcustomer needsinstead of  the firm'sproductive capacityorcurrent products. Process:-1. Segments2. Value opportunities3. Capabilities/segment match4. Target5. Positioning
Creating New Market Space
Market analysis may identify segments which are not recognized or servedeffectively by the competitors. There may be opportunities to tap into new areasand create a unique space in the market.For example, in France Accor has established the highly successful formula 1 hotelchain by building a new market segment in between the traditional strategic groupsin the hotel market.In general one –star hotels offer low prices; on the other hand two-star hotels offermore amenities and charge higher prices.Accor analysis of customer need found that customer choose the one star hotelbecause it is cheap, but trade up from the one star hotel to the two star hotel forthe “sleeping environment “that is clean ,quiet rooms with more comfortable beds –not all the other amenities that are offered.While formula 1 provides the superior “sleeping environment” of the two star hotel,but not the other facilities, which allows it to offer this at the price of the one starhotel. Formula1 had built a market share larger than sum of the next five largestcompetitors.
 
Matching value opportunities and capabilities
Broad competitive comparisons can be made for the entire product-market, morepenetrating insights about competitive advantage and market opportunity resultfrom market segment analyses.Examining specific market segments helps identify how to -:1. Attain a closer match between buyer’s value preference’s and the organization’scapabilities.2. Compare the organizations strengths and weakness to the key competitors inthat particular segment.For example –Atlas air Inc. ., a transportation company that offers outsourcingfreight services for global air carriers which came up in 1992, the founder identifiesan emerging customer need because carriers were replacing older aircrafts withfuel efficient planes having half the cargo space of those being replaced. Atlascustomers include British airways, china airlines, KLM Lufthansa, Swissair, and SAS,all attracted by low cost and reliable services.Atlas carriers’ flowers and shoes from Amsterdam to Singapore for KLM and fishcattle, and horses from Taipei to Europe for china air.
Market targeting and strategic positioning
 There was a time when finding the best customers were like throwing darts in thedark. Target marketing changed all that. Today’s savvy marketers know that findingtheir best prospects and customers hinges on well thought out targeted marketingstrategies.Defining a target market requires market segmentation, the process of pulling apartthe entire market as a whole and separating it into manageable, disparate unitsbased on demographics.
Target market
is a business term meaning the market segment to which aparticular good or service is marketed. It is mainly defined by age, gender,geography, socio-economic grouping, or any other combination of demographics. Itis generally studied and mapped by an organization through lists and reportscontaining demographic information that may have an effect on the marketing of key products or services.
Target Marketing
involves breaking a market into segments and thenconcentrating your marketing efforts on one or a few key segments.

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