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“Today s lecture. We re going to talk about the importance of market segmentation and and market segmentation is something that s done by businesses to get a more ideal of characteristics for who ultimately their consumers are we know that businesses simply can t target everyone in their marketing efforts. Because basically or very simply their products don t mean the same things to all people originally there was this thought process that you can do what s called mass market. Which means take your existing product and we want to target.
Everyone we think everyone should buy this but unfortunately in targeting everyone you re essentially diluting your message. Because our messages. Mean different things to different people. Now what someone who is maybe in their early 20s might find is interesting someone maybe in their 50s or 60s is gonna find little relevance in terms of the impact of their daily lives and so for marketers.
What we do is we gave engage in this process called market segmentation and that allows businesses to better satisfy. The needs of their customers you see by targeting everyone oh. It s very difficult to determine what the needs of everyone are because a lot of times. They re in direct conflict one another.
But through market segmentation. We can identify a specific group. A specific customer base that all have shared characteristics and then we can develop a message that is much more powerful in reaching that particular group and so that s the the purpose of market segmentation. The goal is to develop what we call a target market.
Which is a group of people who are most likely to purchase your particular product and then focusing on this particular group and there are a number of different ways than we can actually segment an overall market. We can do what we call demographic segmentation and demographic segmentation is simply dividing the market into segments based upon certain characteristics and those characteristics can include everything from age to gender to ethnicity to income levels. Marital status education. A number of different variables that we can accomplish in segmenting that market and the goal with demographic segmentation.
Once again is to cater to specific groups. If we have a particular product that we know maybe we sell clothing and we know the clothing is designed for young adults ages. 17 to 25 well. We know that those people are most likely to purchase our products and so we of course want to develop our promotional strategies for them we don t want to market to everyone because we know ultimately we design the clothing.
We know who it s for so let s target that specific group and so we would focus on that particular age group now what happens is marketers usually don t simply focus on just. One particular source of segmentation and so if you take an overall market. You know obviously. It s very very large you know take the clothing market for example.
And so what we have to do is we really have to kind of split this up into smaller chunks. If you will that we can actually target because as smaller companies. We may not have the resources to really go after everyone specifically. But through segmentation.
We can identify a smaller subset of that particular market for the purpose of actually targeting them and we can do this a number of different ways you know first let s say we engage in demographic segmentation. So we go ahead and we take a look at things like income age gender marital status education right there are certain products that maybe people are more inclined to purchase best upon education levels based upon income levels. Right certain classes of cars certain types of homes for example are usually reserved people with certain incomes. So obviously you wouldn t want to target someone who s not in that particular income level.
But in addition to that let s say you segment based upon age even within that group. Let s say you take for example thirteen to seventeen year olds. And you re targeting that particular group in your particular product or for your product. I should say within the thirteen a 17 year olds you can then focus on different different segments within that overall group so once again we re getting more focused and more find for the purpose of developing a specific segment.
So when we focus on 13 and 17 year olds that have parents with incomes that are greater than 100000. Because we know that they re gonna have more disposable income. We know that 13 to 17 year olds are very good at persuading parents and purchasing decisions. They are large influencers in households.
And so let s focus on people with more disposable incomes and also with 13 to 17 year olds. Who historically are good influencers in terms of family purchase. Decisions things like vacations and different things. And so we once again get more and more specific.
So that ultimately we develop a very effective message for reaching this particular group now outside of simply just demographic segmentation marketers do a number of different things just outside of that form of segmentation so another form of segmentation that can be used is what we call geographic segmentation and this is simply looking at the places that people live and focusing on people that reside in certain areas. And so a geographic segmentation. We may divide the market into segments based upon. Where consumers live and so we ll look at things based upon urban versus rural areas because obviously people that live in urban areas may have a different need than someone who lives in a rural area look at transportation and we wouldn t focus on selling big trucks in a urban area similar to san francisco because the roads are a lot smaller.
They re very congested difficult to parallel park and so we wouldn t focus on selling that type of vehicle. There maybe in a rural area. We would ramp up our marketing efforts in that area because we realized there is a need you also look at locations in the globe. Not just simply rural versus urban areas and you can also look at population density of course you can look at specific areas.
Where you have to deal with climate so for example in certain areas. The united states we get a lot of sun of course and you see a larger percentage of solar companies locating in those particular areas because obviously it wouldn t make sense to locate in an area like cleveland for example. Which gets very very number of sunny days per year. And so why would you try and sell solar equipment and solar panels in a location.
Where ultimately they re not going to use them similar to selling snow equipment in someplace. Like arizona. And so you would want to segment your market and focus ultimately not only on where you can find the most customers. But ultimately on where your message is going to be the most impactful of course.
Very very important thing now outside of demographics and geographics the problem with them is that we re focusing on essentially the makeup and location of people you know we re essentially stating that if you re between the ages of 18 and 25. If you make a certain income. If you re a certain gender and if you have a certain education level you re probably going to buy our products. Which may or may not be the case right we rarely do we fall into certain groups.
It used to be that you can target someone simply based on their job title. And so you d say well people are if you re a teacher. You have certain needs and so you we can target you based upon that but really there s such a wide variety of interest even within job titles. Now you know you have teachers that range widely in age for example you have some that are in maybe mid to late 20s.
Some that are in potentially 6070 years old and so there s a wide variety of needs within those groups and so as a result you can t just target specific jobs. But you also can t target your specific characteristics like simply demographic segmentation. So one of the things that we can do or that marketers do to kind of set themselves apart and ultimately focus on a more impactful market is engage in what we call psychographic segmentation and psychographic segmentation. Really goes a little bit further than simply demographic or geographic segmentation with psychographic segmentation.
We are focusing on things like lifestyles and even interests and also attitudes essentially things that have more to do with ultimately the end purchase then simply just your race ethnicity marital status education income level and those different things because those can be misleading so why not focus ultimately on your lifestyle or what are your interests. What are your hobbies. What are your attitudes it addresses the problems with geographic and demographic segmentation by looking at characteristics that may actually predict purchasing decisions and so there s a great deal of variability obviously in terms of lifestyles and interests you can have for example college students is a certain lifestyle right. But even within that you can have college students with certain incomes of course college students attending a certain type of university versus another and so there s a lot of variability but the purpose is by focusing on college students.
I m focusing on a more specific group than simply men and women ages. 17. To maybe. 23.
24. Which is kind of that general college range as a whole for the most part now by focusing on college students. Though i instantly know that if you re a college student. Usually you have similar needs to one another.
Typically you re not making a great deal of money typically you live on campus housing. Possibly or clothes. Nearby and so you have similar needs of course versus simply just females and males ages. 17 to 23 or 24.
Or there s a lot of variability. There s a lot of change within that one group so focusing on lifestyles and interests is very very important facebook. Which we all probably know does a great job of focusing on lifestyles and attitudes and interests because when you have a facebook account obviously they are free but facebook gathers a lot of information on us for the purpose of selling advertising and so one of the things. That keeps track of is all the things that we like that we post about in different things of that nature.
And then it sells us targeted ads or not sells us. But sells verte eyes errs targeted ads and it shows them on our facebook walls or pages. Based upon things that we ve liked because it s assuming that if you have an interest in a certain type of music maybe you ll be more inclined to purchase a or download music related to a certain band that falls under that category. If you will if you have an interest in sports.
You may see certain advertisements related to sports. Because you ve identified an interest with that and so they feel like if you re interested then of course. Why wouldn t you be more inclined to purchase something related to that so you can argue that psychographic segmentation is much more effective than simply demographic and geographic segmentation. Because you re not just looking at the actual makeup and characteristics of people you re looking more at what they actually are interested in for the purpose of predicting purchasing decisions.
Now there obviously is a flaw with regards to psychographic segmentation and that is we re making an assumption and assuming that if you have a certain lifestyle. If you are between you know have children and live in the suburbs that you are more inclined to make purchasing decisions. Which you are of course. Most likely.
However it s not a guaranteed thing and so marketers ultimately want to make sure that the money that is spent on those things is done so in an effective manner right no one wants to you know throw money away for for not any reason. We want to make sure that we re using it very effectively and so one of the things that marketers. Do is they actually can engage in what we call behavioral segmentation and behavioral segmentation is going beyond. What are the lifestyles.
What are the interests attitudes of a particular market you know what are those shared lifestyles and interests and attitudes and they re looking specifically at consumers behavior towards various products. They re looking at dividing a market into smaller segments. Based upon how consumers behave with regards to various products and one company. That does a really good job and for the most part was one of the the pioneers in terms of behavioral.
Imitation is amazon and most of you are most likely familiar with amazon the different services. They offer different products they sell a wide variety of course obviously involved in developing hardware like the kindle and selling books and those different types of things and they ve branched out into a lot of different services. But one of the things that made amazon so successful is they engaged in behavioral segmentation. If you think of when you purchase something via amazon do you notice that the second that you log back in in a few day a few days few weeks later on at some point in time you ll notice that they offer you similar products based upon your purchasing behavior.
Which is much more effective because you re targeting people ultimately based upon what they do rather than what they say they will do and there s a lot of difference between what people actually do or engage in as compared to what they actually say or what their lifestyle or interests are so to speak and so if you target people based upon their ultimate behavior. It s much more effective because behavior is indicative of what i truly want what i m truly interested in and so if i purchase books for example related to a certain discipline say. I purchased books that are related to the field of economics and amazon sees this and all of a sudden now when i log in there are similar books being advertised that i have a background in economics in some way shape or form because they feel that if i purchase something before related to that field. I m probably interested in that and so i m probably going to purchase things again.
Which is a little frustrating when you purchase things that are gifts for example. So like my wife. We have a daughter and my wife ended up using. We have separate accounts usually what sometimes she uses mine and so she used my account to purchase some goods and items for our daughter like diapers and different things like that and so now when i log on in amazon.
Because they said hey you purchased things that are related to baby type products now whenever i log on it s all baby type products and so you know for me personally that probably isn t targeted directly towards me. But once again they re looking at past behavior and so if you purchase things for if that aren t necessary for yourself. Then you can t make the argument that maybe it s not effective because you re gonna get advertisements and recommendations that weren t in your interest. You just purchase things related to that of course.
So that is obviously a criticism. But overall. It is much more effective to target people based upon what they ultimately do rather than what they say they will do there. And that is truly one of the ” .
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