Market Segmentation: Definition, Types, Benefits, And More
Marketing is only successful for a company when the company markets to the right people in the right way at the right time. This is where market segmentation comes into play. It helps businesses tailor their sales campaigns and marketing plans to target niche customers while making the promotion engaging and the product appealing. Businesses do market segmentation to narrow down their target market.
In this article, you will learn about market segmentation and how it works for businesses. Next, you will also learn about the major types of market segmentation that marketers use for promoting products and services. Finally, we will also look at some of the major benefits and limitations of market segmentation. Hence, to learn more about this marketing strategy, read on through to the end of the article.
What Is Market Segmentation?
According to Investopedia,
“Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.”
Here, the marketers of a company first find out the target market and then divide the market into small groups and subgroups. In this case, consumers in the small market segments share similar interests, needs, and characteristics. As a marketer, if you target a small group of a large market, you will be able to connect with consumers who are more likely to pay for products that appeal to them directly.
Basically, if you use market segmentation, it will be easier to manage a large audience and segment them to create a personalized and targeted market experience. With market segmentation, as a marketer, you will be able to focus more on your marketing efforts towards your individual customer segments. This will help you to cater to the specific desires and needs of your target customers.
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How Does Market Segmentation Work?
According to G2.com,
“Market segmentation aims to introduce a tailored message that will be received successfully. This is advantageous for companies with a product or service in the marketplace that boasts multiple benefits or uses for different types of customers. Accept the fact that you can’t be everything to everybody, and as a marketer, you can’t solve everyone’s problem or appeal to every single person.”
Hence, market segmentation is a useful and effective growth strategy that marketers implement to reach strongly with their offerings to the target audience. To identify different market segments within a market, companies use three criteria –
- The segment’s common needs (Homogeneity)
- The uniqueness of the group from others (Distinction)
- A similar response to the market (Reaction)
Let’s take an example of an apparel store having different market segments for football players and basketball players. Being part of different groups, football players and basketball players respond to different advertisements. If the apparel company understands the uniqueness of these two different market segments, branding will be easier for them.
What Are The Types Of Market Segmentation?
The following are some of the major types of market segmentation that marketers implement to find out their niche market:
1. Demographic Segmentation
Here, companies break the market segment into common demographics based on gender, age, income, race, education, occupation, and more factors. With this segmentation, companies assume that individuals belonging to similar demographics have similar needs. This is one of the most common methods of market segmentation.
2. Geographic Segmentation
Here, the marketers segment a particular population based on factors like physical location. In this case, they assume that people living within a given geographical area have similar needs. It is a great strategy that larger companies use if they want to open new branches in a new place or want to expand their operations.
3. Psychographic Segmentation
Here, the company tries to segment a population based on personality, lifestyle, opinions, and interests. This makes it one of the most difficult market segmentation approaches. This is because these are difficult to achieve since objective data are not available on these traits, and these traits change easily. However, if done properly, these provide the strongest results.
4. Behavioral Segmentation
In this case, marketers depend a lot on consumer actions, market data, and the consumers’ decision-making patterns. Here, the grouping of the consumers is done based on how they have previously interacted with markets and products. The previous spending habits of the consumers show what they actually want.
What Are The Benefits Of Market Segmentation?
According to Shopify.com,
“It’s easier to reach, target, and engage customers with a niche business that specifically appeals to a segment of the market. Use this strategy to identify the most profitable segments for your business. Remember, market segmentation isn’t a one-off activity, as consumer preferences change and new competitors emerge.”
The following are the major benefits of market segmentation:
- Better resource efficiency
- The brand image gets stronger
- It creates a higher potential for brand loyalty
- Targeted advertising is better
- Market differentiation is more effective
What Are The Limitations Of Market Segmentation?
The following are a few limitations of market segmentation that you need to be aware of:
- The upfront marketing expenses are higher, as companies spend a lot on gaining data.
- Since a large market is under consideration, the product-line complexity increases as a result.
- Misassumptions are common, and this creates a lot of risk for marketers.
- The process of market segmentation can only be done if the data is reliable. Hence, it depends a lot on the source of data.
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Wrapping Up
With the help of market segmentation, marketers try to identify targeted groups of consumers so as to tailor their own products and services to make them attractive to the customer group. The segmentation is done in four main ways – demographically, geographically, psychographically, and behaviorally.
With the help of market segmentation, companies can minimize their risks by finding out which products are the ones that are most likely to earn the attention of the target market. What do you think is the most important benefit of market segmentation? Share your opinions with us in the comments section below.
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Market Cannibalization – Definition, How Does It Work, Example, And More
Market cannibalization is one of the worst things that a business can face with its products and services. It mostly happens when a company comes in with a new product for the market, and because of this, the demand for its original product starts to decline. This leads to the business experiencing losses not only in sales but also in revenue and market share. Hence, due to this fear, many companies hesitate to develop new products. In this article, you will also learn about market cannibalization, how it works for businesses, and the ways in which it affects a business’s market as well as its product line. We will take a look at the phenomenon with the help of a simple example. Finally, we will provide you with tried-and-tested steps to prevent market cannibalization in business. Hence, to learn more, read on through to the end of the article. What Is Market Cannibalization? According to Investopedia, “Market cannibalization is a loss in sales caused by a company's introduction of a new product that displaces one of its own older products. The cannibalization of existing products leads to no increase in the company's market share despite sales growth for the new product.” It works in most cases where the earlier product, as well as the new product of the business, share a common base of customers. It can also happen when a fast food outlet or chain store loses its customers after a store of the same brand starts operating nearby. It also happens when the new product is almost the same as the product that is already existing. Both these products have the same target audience. However, the introduction of the new product in the market puts the existing products of the business out of the market. This, in turn, affects the business a lot, as the business faces stagnant growth in the market despite an increase in sales of the new product it launched. Despite enticing new customers with the new products, the phenomenon results in attracting the already existing customers towards the new product as well. As an outcome, the sales and growth of the company get a major hit. Read More: Market Orientation – What Is It, And How Does It Work? How Does Market Cannibalization Work? According to Indeed.com, “Even with a detailed marketing plan, cannibalization may occur depending on how the general customer base reacts to the new product. Whether or not the products are competitive, customers may prefer the new one. A common reason why this happens is that two products may be too similar.” Let’s say a technology company sells smartphones. And they introduce a new one which is similar to the old one. The customers that were attracted to the old one now start liking the new one and purchase it. Hence, the new product was sold at the cost of the sales of the old one. Therefore, although the new product got major sales, the sales of the old product were affected. Hence, there is no increase in sales of the company. In fact, considering a new product was launched, the sales actually got affected. In various marketing campaigns, companies unintentionally, however, discourage their existing customers from using previous products. The tone of the marketing here suggests that the product has become obsolete as compared to the new one. Example Of Market Cannibalization Corporate Finance Institute gives a simple explanation of market cannibalization - “There are certain situations where market cannibalization cannot be avoided. For example, we now see tons of department stores that operate as online businesses as well. The store owners already understand the risk that its online sales can jeopardize those of its brick-and-mortar stores.” Let’s take an example of a well-known company - Apple Inc. When Apple releases a new iPhone with new features, it never shies away from explaining why the product is better than before. Furthermore, the company also ensures that the new iPhone reaches all Apple stores throughout the world. Hence, many people are attracted to the new one since they know that the latest one is better than the previous one, despite it being more expensive. As a result, the sales of the older iPhones start dropping. However, Apple makes up for this loss amazingly. It increases the price of the new one and also captures the current customers of its competitors. This helps in increasing Apple’s customer base. How To Prevent Market Cannibalization? - Steps To Follow The following are some of the major steps that you will need to take if you want to prevent market cannibalization in your company: 1. Determine Your Market Goals Before launching a product, have a clear idea of what are your goals with that. What do you want to achieve - customer loyalty? eliminate competition? filling a market-gap? - Find out through research. 2. Analyze Your Market Never ever launch a product without properly understanding your customers’ behavior and market dynamics. Always research the performance of your existing products and how much do customers like them. 3. Test Your Customers Before Extending The Product Find out your potential customers, and test the product beforehand. Ask for genuine feedback from the customers. You can do so by surveys, interviews, experiments, etc. Validate your assumptions based on results. 4. Monitor The Product’s Performance Monitor the performance of the product after its initial launch. You can use various metrics like - customer satisfaction, market share, profit, sales, etc., to evaluate the product’s extension. 5. Focus On Innovation Constant innovation and differentiation are required for your products if you want to avoid cannibalization. Keeping up with the needs and demands of customers might help. Read More: Matrix Organizational Structure – What Are Its Pros And Cons? Summing Up Hope this article was helpful for you in understanding the phenomenon of market cannibalization and how it affects businesses. In many cases, companies use it as a deliberate strategy to blow out competition, while sometimes, it results in the failure of the company itself to reach its target market. To stop market cannibalization from happening, consider following the aforementioned steps in the previous section. What is your opinion on market cannibalization, and do you have any recommendations to stop the same? Share your insights on the matter with us in the comments section below. Read Also: Matrix Organizational Structure – What Are Its Pros And Cons? Business Continuity Plan – What Is It, And How Does It Work? What Is Continuity In Business, And Why Is It Important?
Sep 14, 2023
Push Vs Pull Marketing: Understanding The Dynamics
Push Marketing and Pull Marketing represent distinct methodologies, each with its set of dynamics and implications for businesses seeking to capture and retain the attention of their target audience. Take a look as we dive into the intricacies of these marketing strategies and explore facts and recommendations that can shape your marketing endeavors. Understanding Push Marketing Push Marketing is a traditional promotional strategy where businesses proactively push their products or services toward the audience. It involves a company taking its message directly to the consumer, often interrupting their experience to convey the value proposition. Common tactics include advertising through television, radio, print media, and direct sales efforts. High Visibility, Limited Engagement: Push Marketing aims for high visibility by reaching a broad audience. However, the challenge lies in the limited engagement it fosters. The audience may be exposed to the message, but active interest or interaction is not guaranteed. Intrusiveness and Consumer Perception: Push Marketing, particularly aggressive tactics, can be perceived as intrusive by consumers. Bombarding audiences with unsolicited messages may lead to a negative perception of the brand. Understanding the fine line between visibility and intrusion is crucial. Short-Term Impact: Push Marketing often generates short-term impacts, especially in terms of immediate sales or brand recall. Sustaining long-term relationships and loyalty requires additional strategies beyond the initial push. Recommendations For Push Marketing Psychological Targeting for Effective Push: Utilize psychological principles in message crafting to make push marketing more effective. Understanding the psychological triggers that resonate with your target audience can enhance the impact of your push strategies. Strategic Timing and Frequency: Instead of persistent and continuous pushing, strategize the timing and frequency of your push efforts. Implementing well-timed, occasional pushes can create a sense of exclusivity and urgency. Integrated Campaigns for Holistic Push: Integrate your push marketing efforts with other channels. Combine traditional advertising with digital strategies to create a holistic approach that maximizes reach and engagement. Emotional Resonance in Push Messaging: Beyond psychological targeting, infuse emotional resonance into your push messages. Connecting with consumers on an emotional level can elevate the effectiveness of push strategies, creating a lasting impact beyond immediate visibility. Geo-Targeted Push Campaigns: Incorporate geo-targeting into your push campaigns to enhance relevance. Tailoring push messages based on the geographic location of the audience can make the content more relatable and impactful, increasing the chances of engagement. Understanding Pull Marketing Pull Marketing, on the other hand, involves creating content or experiences that naturally attract the audience towards a product or service. It relies on building brand equity, creating valuable content, and establishing a strong online presence. Pull Marketing aims to make the brand or product so compelling that consumers seek it out willingly. Builds Brand Loyalty and Trust: Pull Marketing is instrumental in building brand loyalty and trust over time. By providing valuable content and focusing on customer experience, brands can create a connection that goes beyond transactional relationships. Long-Term Relationship Building: Pull Marketing is inherently geared towards long-term relationship building. It focuses on creating a brand image that resonates with the values and aspirations of the target audience, fostering lasting connections. Authenticity and Transparency: Successful Pull Marketing thrives on authenticity and transparency. Consumers today value brands that are genuine and open about their values, practices, and impact on society. Recommendations For Pull Marketing Interactive Content for Engagement: Incorporate interactive content strategies within your pull marketing efforts. Quizzes, polls, and interactive storytelling can enhance user engagement and make your brand more memorable. Community Building for Pull: Establish and nurture online communities around your brand. Pull Marketing can benefit significantly from the organic advocacy and word-of-mouth generated within a community of engaged consumers. Strategic Alliances for Mutual Pull: Explore strategic alliances with influencers, complementary brands, or industry thought leaders. Collaborative efforts can amplify the pull effect by tapping into existing audiences and cross-promotion. Immersive Storytelling Experiences: Elevate pull strategies with immersive storytelling experiences. Beyond traditional content, create narratives that immerse the audience, making them active participants. Virtual reality, interactive web experiences, and augmented reality can be powerful tools for achieving this. User-Generated Content Amplification: Harness the power of user-generated content within pull strategies. Amplify user-generated content through various channels to showcase authentic experiences and testimonials. This not only fosters community engagement but also builds trust through real-life narratives. Purpose-Driven Pull Marketing: Infuse purpose-driven elements into pull marketing. Consumers increasingly align with brands that stand for a cause. Integrating social responsibility into pull strategies can create a compelling narrative that resonates with socially conscious audiences. Navigating The Dynamics: Striking The Balance While Push and Pull Marketing are often presented as distinct strategies, the reality is that a balanced approach can yield optimal results. 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Blog Posts: Blogging is one of the most popular types of content marketing, and it can be a great way to attract and engage with an audience. Blogs can be used to share industry news, insights, and tips, as well as to promote products and services. Infographics: Infographics are a visually appealing way to present complex information in an easy-to-understand format. They can be used to educate and inform an audience about a particular topic. Videos: Video content is becoming increasingly popular and can be used to share product demos, tutorials, and other types of content. You can create an engaging video content for your platforms with the help of a web video editor, which contains pre-made templates to make it easy to create product demo videos. Webinars: Webinars are live or recorded presentations that can be used to educate an audience about a particular topic. They can also be used to promote products and services. Case studies: Case studies are a great way to showcase the success of a particular product or service. They can be used to demonstrate how a business has helped its customers solve a specific problem. E-books: E-books can be used to provide in-depth information about a particular topic. They are a great way to demonstrate thought leadership and establish a business as an authority in its industry. White papers: White papers are similar to e-books, but they tend to focus on a specific problem or solution. They can be used to provide detailed information about a particular product or service. Social Media Posts: Social media platforms like Facebook, Instagram, Twitter, and LinkedIn can be used to share all types of content, including blog posts, videos, and infographics. Podcasts: Podcasts are audio recordings that can be used to share information about a particular topic. They can be used to provide interviews and other types of content to an audience. Interactive content: Interactive content like quizzes, polls, and surveys can be used to engage an audience and gather valuable data and feedback. These are just a few examples of the types of content marketing that businesses can use to attract and engage with an audience. The key is to find the content formats that work best for your business and your target audience. In conclusion, content marketing is a powerful tool for businesses looking to attract and engage with their target audience. There are many different types of content marketing that businesses can use, including blog posts, infographics, videos, webinars, case studies, e-books, white papers, social media posts, podcasts, and interactive content. By finding the right mix of content formats and topics, businesses can effectively communicate their message and establish themselves as thought leaders in their industry. Ultimately, effective content marketing can help businesses to generate leads, increase conversions, and drive revenue growth. Additional: How To Find The Best Content Creators To Work With What Is Network Marketing And How To Do It In 2021 Top 7 Best Types Of Marketing On Which You Should Focus In 2021 Top 5 Best B2B Marketing Strategies For The Entrepreneurs In 2021
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Realtor Postcards An Effective Marketing Tool: Debunking Common Myths
Real estate agents always look for ways to get their name out there and attract new clients. Realtor postcards are a marketing tool that has been around for a while. However, there are some common myths surrounding the use of postcards in real estate marketing. This article will debunk these myths and explore why real estate postcards can be an effective marketing tool. Myth #1: Postcards are outdated: Some believe postcards are outdated and ineffective in today's digital age. However, this is not true. Postcards are a tangible marketing tool that allows real estate agents to connect with potential clients in a way that digital marketing cannot. When potential clients receive a postcard in the mail, they are more likely to notice it than they would with an email or social media post. Postcards also have a longer shelf life than digital marketing, as they can be displayed on a refrigerator or bulletin board for weeks or months. Myth #2: Postcards are expensive: Another common myth about realtor postcards is that they are expensive to produce and distribute. While it is true that postcards can be more expensive than digital marketing, they can also be more effective. Postcards are a targeted marketing tool, allowing real estate agents to reach potential clients in a specific area or demographic. By targeting their marketing efforts, agents can increase their chances of attracting new clients and closing more deals. In addition, there are many cost-effective printing and mailing options available today. Many online realtor postcard suppliers offer affordable postcard printing and mailing services at reduced costs. Myth #3: Postcards are not customizable: Some people believe that postcards are a one-size-fits-all marketing tool and are not customizable to the individual agent's brand or message. However, this is not true. With online realtor postcard suppliers, real estate agents can create custom postcards that showcase their brand and message. Agents can choose from various designs, colors, and layouts to create a postcard that reflects their unique style and message. In addition, agents can personalize their postcards by including their photos and personalized messages. By creating a unique postcard for their brand, agents can increase their chances of standing out from the competition and attracting new clients. Myth #4: Postcards are ineffective: The most common myth surrounding realtor postcards is that they are ineffective at attracting new clients. However, this is not true. Postcards are a proven marketing tool that can help real estate agents generate leads and close deals. Many studies show that direct mail, including postcards, can have a response rate compared to email marketing's response rate. Tips for Creating Effective Postcards: Personalize it: Personalize your postcard by including photos and a personalized message. This will help create a personal connection with potential clients and increase the chances of generating a lead. Target your audience: Use postcards to target a specific audience or geographic area. By tailoring your message to a specific audience, you can increase your chances of attracting new clients. Include a call-to-action: Include a call-to-action on your postcard, such as visiting your website or calling for more information. This will encourage potential clients to take action and contact you. Conclusion: Real estate postcards are a proven and effective marketing tool to help agents generate leads and close deals. While there are some common myths surrounding using postcards in real estate marketing, these myths have been debunked, and postcards can be an excellent way to connect with potential clients and showcase your brand and message. Read Also: Digital PR: The Gamechanger Of The Marketing Landscape Top 10 Strategies For Hosting A Successful Live Streaming Event How To Run A Social Media Campaign At A Low Budget For An Aspiring Entrepreneur?
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