The market segment strategy is used when the company focuses on serving a limited group of customers, either by geographic location of the market, by type of customer or by product line segment.
First, when a company uses this strategy it has to have a deep understanding of the needs of that particular group of customers. He then directs all his marketing efforts to specialize in serving that market group .
Because the company focuses all its efforts to understand the specific needs and motives of that group of customers, you can come up with a marketing mix that fully satisfies you. Which allows you to maintain a favorable level of profit.
Likewise, the objective of the company when applying these strategies is to serve this segment more efficiently , compared to other companies that compete in the market. But they do it more generally.
Forms of concentration
The most common ways a company can focus on a single market group are:
1. Geographical market segment
On the one hand, the geographic market segment is carried out when the company decides to serve a group of clients that is located in a certain region. This region can be a city, an urban area, or a rural area. The criterion is based on serving and selling its products to a group of clients who are concentrated in a well-defined geographical area.
2. Segment of a product line
As for this type of segment, what the company intends is to offer a certain product to a specific market group. What is sought is to obtain a level of sales that is maintained continuously and growing in the chosen market group.
3. Segment by type of customer
Consequently, the segment by type of customer implies that the company manages to satisfy the needs of its customers in a superior way compared to the other competitors that serve the market in a general way. This allows the company to achieve a high share in the selected segment, but a very low share in the market overall and in general.
Market segment strategy
Benefits of the segment strategy
Companies that apply a segment strategy obtain the following benefits:
Certainly, the company specializes in a single segment so it manages to serve you and serve you more efficiently. Therefore, it acquires a relevant position in the competitive environment.
In addition, it manages to differentiate itself from competitors, by meeting the needs of the target market in a superior way.
3. Reduce costs
As a result, it reduces costs by focusing on meeting the needs of a single market segment, which is why it is a strategy that is used especially by companies that do not have the ability to face large market competitors. Therefore, they focus on small groups that are not attractive to large companies, but that favor the performance and strategy of small or medium-sized companies.
4. Concentration of efforts
Above all, the company concentrates all its efforts on satisfying the needs of the customers in the segment it serves. So the company optimizes and maximizes the use of its resources and this is favorable and economic for it.
Market segment strategy
Segment strategy risks
The risks that a company that applies a segment strategy may face are:
1. Uncompetitive prices
Undoubtedly, the company sometimes has higher sales prices than the competition. This situation may arise because the company serves only one segment and has to specialize in delivering the products and services it offers.
2. Decrease or disappearance of the segment being served
In fact, another risk may arise if the segment being served begins to decline and this no longer allows the level of profitability of the company to be maintained.
Of course, the most severe case would be for the segment to disappear completely due to the changes that may arise in consumer tastes and preferences. The extinction of the segment could also be produced by the evolution of technological means. Whatever the case, the company would be seriously affected, it could even disappear completely from the market.
3. Little flexibility
In the same way, the application of segment strategies allows the company little flexibility to be able to change the product or segment, because this decision can be extremely difficult and dangerous.