What Is Differentiated Segmentation? Definition of Differentiated Segmentation, Differentiated Segmentation Meaning and Concept
Differentiated segmentation is a marketing strategy that uses a different mix for each of your products or product lines.
Undoubtedly, this strategy helps companies better define the way they should use to market their products successfully. Differentiated segmentation allows the company to have a product or product line for each market segment .
In fact, this segmentation considers the differences of each of the identified segments. Later. develops a specific product, product line or brand focused on each of the market segments. The variables used to segment are those commonly known: demographic , geographic , psychographic and behavioral .
In addition, differentiated segmentation makes it possible to reach a greater number of market segments or groups, which helps to cover a greater number of consumers. But, it requires a greater investment, because the adaptation to each segment requires more resources and is more expensive.
Why is it important to use differentiated segmentation?
Indeed, the use of differentiated segmentation discovers different market groups that can be served. Each segment will have specific needs and characteristics, which is why the company adapts and designs products focused on each group. This makes it give a better response to each specific segment.
In the same way, by offering a better response, the target group of each segment better satisfies their need. This generates more satisfied and loyal customers, since all marketing strategies are planned according to each market group.
Likewise, for differentiated segmentation to be successful, by dividing the market into different groups, parameters that add value must be taken. If these variables are not related to the preferences and interests of consumers, they are useless. The parameters should focus on the real needs of each group of people that make up a segment.
Variables used to segment
The main variables used for differentiated segmentation are:
- Demographic: The products are designed based on the age, sex, educational level and economic situation of the people who make up a segment.
- Geographic: The adaptation of products is carried out according to the geographical location of the segment, grouping people by regions, countries, states, municipalities, cities and neighborhoods.
- Psychographic: The most important psychographic parameters used to target products may be lifestyle, personality, and social class.
What problems does differentiated segmentation present?
Differentiated segmentation can present the following problems for the company:
1. It is more complex
Differentiated segmentation needs to use more resources, since both the research process and marketing planning process must be more intensive.
Similarly, sometimes you have to modify the product. In others, the same product can be used, but the image or the price is changed. In other cases, what is adapted or changed is the distribution channel or the marketing and advertising campaigns.
2. It is more expensive
The costs that must be considered in differentiated segmentation are:
to. Production costs
In the first place, for any company, it is more expensive to produce different products, since mass production can no longer be carried out, but different products must be made, with different presentations and sizes.
b. Modification costs
Second, if the company intends to better satisfy the needs of its consumers , it must make changes to the product. These modifications increase costs because each product will have to be adapted to each group of consumers.
c. inventory costs
Third, if the company targets one product for each segment, it must have a wide variety of products. This makes it necessary to maintain an inventory with many different products, which is more expensive than having a single product in storage.
d. Administrative costs
Fourth, all administrative costs go up, since if there are many products, each product requires a completely different planning, organization and control process. This requires the entire marketing process to become more complex and costly.
and. promotional costs
Finally, promotional costs are high, because the more segments have to be served, the more effort and money the promotional expenses represent for the company.
What does differentiated segmentation require?
To apply the differentiated segmentation strategy successfully, it is required:
- Create differentiated product offerings : Different products are created to satisfy customers or consumers who have different needs and characteristics.
- Add value to the customer : Products focused on the specific needs of each segment must add value to the consumer.
- Increase the profitability of the company : Although this strategy is very expensive, if applied correctly, it allows greater market coverage and consequently more profitability.
- Focus on the customer or consumer need: This strategy does not focus on the product or service offered by the company, but on the need that the consumer hopes to satisfy. Therefore, you need to better understand the needs of the target group and design an appropriate marketing mix.
As a conclusion, we can say that the application of differentiated segmentation requires the use of a greater amount of resources. All this raises the costs of the company, since it needs to have more information on each market group to give a better response, making the necessary modifications and adaptations to more specifically satisfy the needs of each segment.