Core Concepts of Marketing

APPROACHINGTHEMARKET 35

businessinpracticerequiresthemarketertofindcommondimensions that willallowhim

toviewtheseindividualsaslarger,profitablesegments.Thus, marketsegmentationis a two-

foldprocessthatincludes:(1)identifyingandclassifyingpeopleintohomogeneousgroup-

ings,calledsegments,and(2)determin~ngwhichofthesesegmentsareviabletargetmarkets.

Inessence, themarketingobjec~ivesofsegmentationanalysisare:

1. Toreduceriskindecidingwhere, when, how, andtowhoma product,service,or
   brandwillbemarketed


2. Toincreasemarketingefficiencybydirectingeffortspecificallytowardthedes-
   ignatedsegmentina mannerconsistentwiththatsegment'scharacteristics

SegmentationStrategies

Therearetwomajorsegmentationstrategiesfollowedbymarketingorganizations:a con-

centrationstrategyanda multisegmentstrategy.

Anorganizationthatadoptsaconcentrationstrategychoosestofocusits marketing

effortsononlyonemarketsegment. Onlyonemarketing mixisdeveloped.Forexample,

themanufacturerofRolexwatcheshas chosentoconcentrateontheluxurysegmentofthe

watchmarket.Anorganizationthatadoptsa concentrationstrategygainsanadvantageby

beingabletoanalyzetheneedsand wantsofonlyonesegmenta,ldthenfocusing allits

effortsonth atsegment.This canprovidea differential advantageoverotherorganizations

thatmarkettothissegmentbutdonotconcentratealltheireffortsonit.Theprimarydis-

advantageofconcentrationis relatedtothedemandof thesegment.Aslongasdemandis

strong,theorganization'sfinancialpositionwillbestrong.Butifdemanddeclines,theorga-

nization'sfinancial position willalsodecline.

Theothersegmentationstrategyisamultisegmentstrategy.Whenanorganization

adoptsthisst~ategy,it focusesitsmarketingeffortsontwoormoredistinctmarketsegments.

Theorganizationdoessobydevelopinga distinctmarketingmixforeachsegment.They

thendevelopmarketingprogramstailoredtoeachofthesesegments.Organizations thatfol-

Iowa multisegmentstrategyusuallyrealizeanincreaseinto talsalesasmoremarketing

programsarefocusedat morecustomers.However, theorganizationwillmostlikelyexpe-

ri encehighercosts becauseoftheneedformorethano~emarketingprogram.^6

BasesofSegmentation

Therearemanydifferentwaysbywhicha companycansegmentits:narket,andthecho-

senprocessvariesfromoneproducttoanother.Further, thesegmentationpl'Oces~should

beanongoingactivity.Sincemarketsare verydynamic,andproductschangeovertime,

thebasesforsegmentationmustlikewisechange. (SeeFigure2.2.)

MARKETING CAPSULE •

1.Definingthemarket

a. Themarketis people

b. Themarketisa place

c. Themarketisaneconomicentity

2.Typesofmarkets

a. Consumermarkets

b. Industrialmarkets

c. Institutionalmarkets

d. Resellermarke ts

3.Approaching themarket

a. Theundifferentiatedmarket(marl~etaggregation)

b. Productdifferentiation

c. Thesegmentedmarket

1.Strategies: concentration,multisegment