What is the role of market segmentation in marketing?

What problems arise in segmenting

markets? How has segmentation changed in the digital age? Give practical examples
For a brand to satisfy all needs of every individual in the whole market, if a company tries to do
that, they end up being nothing to no-one. There is no single product or service that satisfies
everyone in the world. For example, a group of people say that they love a product with a blue
color. While another group of people say that they love a product with red color. Therefore, if
we combine all they want by producing a product with a purple color, none of them would be
satisfied. This is where market segmentation comes into use, as without segmentation, it will be
near impossible for marketers to understand the needs and wants of the customers and
thereby will face difficulties in capturing market share.
Market segmentation divides a market into well-defined slices. A market segment consists of a
group of customers who share a similar set of needs and wants. The marketer’s task is to
identify the appropriate number and nature of market segments and decide which one(s) to
target. Once segmented, marketers are then able to focus their resources on these segments,
which will be more effective than trying to capture the whole market. This is particularly
important for new entries in the market as it will be very difficult to compete with the existing
big players in the market. So, the new entry to segment the market and try to find the ‘blue
ocean’ (An unexplored segment of the market) whereby they can position themselves
distinctively and therefore reap the benefits by serving the needs of customers in the segment.
There are several problems that may arise in segmenting markets, Firstly, marketers may fail to
realize that consumers may fluctuate between segments during a given time frame (it can be as
quickly as a few times a day) so this will make segmenting a little more complicated. Another
pitfall of segmentation that many marketers face is that they do not know how many segments
they should create for the product or service. Should the marketers under segment the market,
it could cause potential conflict of brand meaning as a good message for one group of people
may not be considered bad and ineffective to other groups of potential customers. On the flip
side, if marketers over segment the market, they will be leaving a chunk of the market
unattended to and therefore are foregoing potential sales. Another problem brands may face
due to segmentation is when the marketer imitates and ties to penetrate the segments of a
competitor, this will prove to be ineffective as they will be competing with a brand that has an
early start and has already captured the market, some marketers call this strategy, entering the
‘red ocean’. Lastly, a common problem with market segmentation is that companies often try
to target the largest segment, which often will not produce any positive results, this is because,
the company is not able to leverage its comparative advantage to the group of consumers who
truly value them and therefore are not able to achieve sales targets.
During recent years, with the introduction of technology in the digital age, brands and
companies are able to further segment the market due to the introduction of social media,
cookies on websites, CRM tools, etc. Market segmentation is more inclined towards behavioral
segmentation of the market, as now brands can get information of very detailed and intimate
behavior patterns of the consumers with the help of social media. Facebook, for example, will
also analyze how much time a potential customer spends on each post and how the engage
with the post, it then allows provides the brands with this analysis and therefore will enable the
brand to better understand the consumer’s needs and wants. There are also more consumer
touch points than ever before in the customer journey’s path to conversion. This enables
marketers to capture data at each drop off point and allows for retargeting to specific segments
as well. With the help of tools such as Google analytics and Facebook insights, marketers can
also analyze in depth data regarding their website visitors or social media fans. This very
different from traditional segmentations like segmenting by just demographic or geographic
attributes. With the help of technology, we are able to segment the market to even small slices
and further personalize and customize our marketing message to ultimately create brand
loyalty and conversions.

Example is Alibaba Group. It has three different websites to target 3 different group of
customers. On the backend, the three portals are powered by the same software. They also
offer various overlapping products. However, the way the products are presented and
packaged in the three portals satisfy the needs of three different markets.

1. Alibaba is for B2B Sales. Its aim is to connect Chinese manufacturers with international
businesses. 

2. Taobao is for small business to consumer (B2C) and consumer to consumer (C2C). It is similar
to eBay. However, it does not make money from the sales transaction, but on advertising.
Sellers would buy ads to increase visibility of their particular products.

3. Tmall is for business to consumer (B2C) sales. Consumers are expected to find merchandise
from large brands such as Nike or Ray-Ban. They are also guaranteed to get authentic items
rather than imitations that are common in China. For this particular platform, entry fee and per-
transaction fee are collected.

Marketing is all about finding out what the customer wants and making sure they get it” Is
this true? Use examples from B2B (business to business) and B2C (business to consumer)
marketing.

The above statement is not true, as for a brand to be successful in today’s world, the brand
must be market driving (creating new and innovative products and services; disruptive) as
opposed to being market driven (providing what the customers wants). This is because, more
often than not, customers do not even know what they want (building a better mouse trap
case). Additionally, sometimes what they want is too ambitious and not feasible, so in cases like
these a market driven brand will most likely fail as they are not able to provide such products or
think outside the box. The whole game of marketing is to understand what drives these wants
and desires of the consumers and try to come up with revolutionary products that provides
higher value and disrupt the market. Marketing is also about making a promise to the
consumers. The brand must deliver their claims to be sustainable and have a better position in
the minds of the consumers. So even if the marketing activities of a brand is very effective, it is
vital that the product or service lives up to the standards set in the marketing campaign.

A good example of this concept in a B2C context would be what Apple did. Apple and its CEO at
the time (Steve Jobs) spent a lot of time and resources in understanding what the consumers
needed and understanding them even before the consumers knew they had such needs. So
they came up with the iPhone. People were already using mobile phones prior to the iPhone,
but mostly only for calling, the consumer would then move to their desktop or laptop to carry
out other functions. Apple saw this behavior and decided to merge the phone and laptop to
create a smart phone for the consumers. This was a revolutionary product and took the whole
market by surprise. They provided value and benefits that the consumers needed and by doing
so made it easier and more convenient for the consumers (what’s in it for me). Apple is a true
market driving brand as they saw a need that could be fulfilled, acted it on it, and delivered
their promise to the customers.

An example from a B2B point of view is from Lenovo Think pad laptop. Lenovo found that large
corporates that provide laptops for all their employees were not getting the right product and
after sales service as they wanted. So, Lenovo came up with the think pad whereby they placed
themselves at an affordable price and can do anything that an employee would require in a
work place. Although there are many other laptop manufacturers in the market, none of them
tried to capture this segment and fulfill this need. So the think pad proved to be a success as it
provided value to the businesses and fulfilled the needs of the business before they even
realized that a product like this would ease their operations and benefited the company as a
whole. This is also a great example of market driving, as Lenovo did not just stick to the status
quo and ask companies to buy individual laptops for their employees, but provided a bundle
service whereby corporates could purchase standardized laptops that could be used easily by
everyone in the organization.

Some marketers believe that the best marketing program for a product changes over time.
Other marketers think: “there are not mature markets, only mature marketers’. Please
discuss with examples contrasting the marketing of newly introduced products and products
that have been on the market for many years.

Introduction phase: When products are newly introduced in the market, brands must allocate a
large chunk of resources towards the marketing of the product, as to get more awareness. It is
during this period that profits are the lowest, brands will need to target its marketing mainly to
early adopters or consumers who are willing to try new things. In the phase, marketing
activities are at the highest levels since the product is new.

Growth Phase: In this phase, sales will start to rapidly increase as more people are aware of the
product and the early adopters have begun to spread the message of the product. Brands will
still need to heavily invest in marketing activities as to streamline their distribution channels
and promotional campaigns. It is during this phase that the product starts to make some profits
as more people are buying the product.
Maturity phase: This phase is when the product’s sales stabilizes and therefore the brand can
slow down on the marketing activities as the product sales have already peaked. Now is just a
matter of maintaining this level of sales for the longest possible time.

Decline phase: This is the phase where perhaps other competing products have been launched
into the market and consumers are slowly shifting away from buying this product. Brands will
almost invest nothing in the marketing at this phase and slowly just let the product die out.

This is how marketing changes over the product’s life cycle, although this tactic may be
discouraged by many companies as during the mature and decline stage, there are several
things a marketer can do in order to save the product from dying. Hence many companies
forbid the use of product life cycle to predict sales and marketing programs. When the product
is in decline, a marketer can start into looking at developing new products to cannibalize the
existing one, so consumers are still buying from the same company, although it might be under
a different brand or sub brand. A marketer can also try to re segment the product to different
market segments. By doing these activities, marketers can extend the life of the product.

An example for this would be electric cars and shampoo. The introduction and growth phase
will be quite similar for both the products as both will try to invest heavily in marketing and
trying to obtain the appropriate distribution channels. But once in the maturity phase, the
electric car brand may start to consider coming up with new models or perhaps even introduce
a pure electric car model. This will be true for most technology cases as the life cycle for
technology is shrinking faster. So brands will have to find different ways to adapt and cope with
the changes. While on the other hand, shampoo brands at the maturity stage, will try to extend
the product life cycle by perhaps giving out more promotions and investing on marketing
campaigns that remind consumers of their products rather than brand awareness. This
behavior is true for most consumer goods or commodities as there is little scope for branding
and disruptive changes in the market. For example, Sunsilk shampoo has been on the market
for decades and it is essentially still the same product, granted that the packaging might have
slightly changed over the years, but the fundamental product and look have been similar
throughout.