The theoretical basis for market segmentation

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The theoretical basis for market segmentation

Initially it was produced only in black. The business historian, Richard S. Tedlowidentifies four stages in the evolution of market segmentation: The economy was characterised by small regional suppliers who sold goods on a local or regional basis Unification or mass marketing s—s: As transportation systems improved, the economy became unified.

Standardised, branded goods were distributed at a national level. Manufacturers tended to insist on strict standardisation in order to achieve scale economies with a view to penetrating markets in the early stages of a product's lifecycle.

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As market size increased, manufacturers were able to produce different models pitched at different quality points to meet the needs of various demographic and psychographic market segments.

This is the era of market differentiation based on demographic, socio-economic and lifestyle factors. Technological advancements, especially in the area of digital communications, allow marketers to communicate with individual consumers or very small groups.

This is sometimes known as one-to-one marketing. By the s, Ford was producing Deluxe models in a range of colours such as this Ford Deluxe Coupe The practice of market segmentation emerged well before marketers thought about it at a theoretical level.

Retailers, operating outside the major metropolitan cities, could not afford to serve one type of clientele exclusively, yet retailers needed to find ways to separate the wealthier clientele from the "riff raff".

One simple technique was to have a window opening out onto the street from which customers could be served.

Market segmentation is the activity of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared dividing or segmenting markets, researchers typically look for common characteristics such as shared needs, common interests, similar lifestyles or even. Oct 26,  · However different basis of market segmentation has their importance in different market but in today’s competing market only traditional basis as demographic, geographic, psychographic and behavioral are not. segmentation is an effective way of identifying portions of the market that may demand different product attributes or, through ‘product differentiation,’ may accept an existing product if promoted differently (Dickson & Ginter, ; Hunt, ; Smith, , ).

This allowed the sale of goods to the common people, without encouraging them to come inside. Another solution, that came into vogue from the late sixteenth century, was to invite favored customers into a back-room of the store, where goods were permanently on display.

Yet another technique that emerged around the same time was to hold a showcase of goods in the shopkeeper's private home for the benefit of wealthier clients. Samuel Pepys, for example, writing indescribes being invited to the home of a retailer to view a wooden jack. A study of the German book trade found examples of both product differentiation and market segmentation in the s.

Contemporary market segmentation emerged in the first decades of the twentieth century as marketers responded to two pressing issues.

Demographic and purchasing data were available for groups but rarely for individuals and secondly, advertising and distribution channels were available for groups, but rarely for single consumers.

Between andGeorge B Waldron, working at Mahin's Advertising Agency in the United States used tax registers, city directories and census data to show advertisers the proportion of educated vs illiterate consumers and the earning capacity of different occupations etc.

Thus, segmentation was essentially a brand-driven process. Smith is generally credited with being the first to introduce the concept of market segmentation into the marketing literature in with the publication of his article, "Product Differentiation and Market Segmentation as Alternative Marketing Strategies.

However, with the advent of digital communications and mass data storage, it has been possible for marketers to conceive of segmenting at the level of the individual consumer.

Extensive data is now available to support segmentation at very narrow groups or even for the single customer, allowing marketers to devise a customised offer with an individual price which can be disseminated via real-time communications.

But in spite of its limitations, market segmentation remains one of the enduring concepts in marketing and continues to be widely used in practice.

One American study, for example, suggested that almost 60 percent of senior executives had used market segmentation in the past two years. Niche market and Porter's generic strategies A key consideration for marketers is whether to segment or not to segment.

The theoretical basis for market segmentation

Depending on company philosophy, resources, product type or market characteristics, a business may develop an undifferentiated approach or differentiated approach.

In an undifferentiated approach, the marketer ignores segmentation and develops a product that meets the needs of the largest number of buyers. In consumer marketing, it is difficult to find examples of undifferentiated approaches. Even goods such as salt and sugarwhich were once treated as commodities, are now highly differentiated.

Consumers can purchase a variety of salt products; cooking salt, table salt, sea salt, rock salt, kosher salt, mineral salt, herbal or vegetable salts, iodised salt, salt substitutes and many more. Sugar also comes in many different types - cane sugar, beet sugar, raw sugar, white refined sugar, brown sugar, caster sugar, sugar lumps, icing sugar also known as milled sugarsugar syrup, invert sugar and a plethora of sugar substitutes including smart sugar which is essentially a blend of pure sugar and a sugar substitute.

Each of these product types is designed to meet the needs of specific market segments.

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Invert sugar and sugar syrups, for example, are marketed to food manufacturers where they are used in the production of conserves, chocolate, and baked goods. Sugars marketed to consumers appeal to different usage segments — refined sugar is primarily for use on the table, while caster sugar and icing sugar are primarily designed for use in home-baked goods.

Different types of sugar: White refined, unrefined, brown, unprocessed cane Main Strategic Approaches to Segmentation [30] Number of segments.G iven the rapid pace of globalization, turbulent economic and political changes, and the domi-nance of multinational corporations, values of global culture—such as a free market economy, democ-.

European Advances in Consumer Research Volume 1, Pages MARKET IMPACT OF A CONSUMPTION SUBCULTURE: THE HARLEY-DAVIDSON MYSTIQUE. John W. Schouten, University of Portland, U.S.A.. James H. McAlexander, Oregon State University, U.S.A. [We wish to thank the people of Harley-Davidson, Inc., especially Steve Piehl, Frank Cimermancic, Jim Paterson, and Willie .

The theoretical basis for market segmentation

of market segmentation strategy and identifies the characteristics that a theory of competition must possess if it is to provide a theoretical foundation for it. The criteria are argued to be that a grounding theory must (1) provide for the. Segmentation is the process of dividing potential markets or consumers into specific groups.

Market research analysis using segmentation is a basic component of any marketing effort. It provides a basis upon which business decision makers . Oct 26,  · However different basis of market segmentation has their importance in different market but in today’s competing market only traditional basis as demographic, geographic, psychographic and behavioral are not.

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