What Is Market Segment? Definition of Market Segment, Market Segment Meaning and Concept
A market segment is a group of consumers that have homogeneous and common characteristics to satisfy a need.
We could also say that it is the group of consumers that shows certain very similar purchasing habits, which help marketing to plan strategies that allow it to better respond to the satisfaction of consumer needs.
Likewise, the homogeneity of a market segment can be determined either by the need they face or by the characteristics of how they expect to satisfy that need .
Therefore, choosing a suitable market segment for a company is very important, since it becomes the target market group, to which it must direct its product proposals and the entire set of marketing strategies.
The process by which a company divides market segments is called market segmentation .
Types of market segment
Actually, in the market in general we find two large market segments:
1. Price sensitive segment
Therefore, this group of consumers expresses a preference for the low prices of the product, so that in general what this group expects is a great performance of the satisfier, usually it is the largest number of people who are within the markets. .
2. Profit sensitive segment
On the contrary, what this other group of people expect to find in a product is the highest level of benefits. Indeed, in this case, people give priority to the attributes and characteristics of the product, which best respond to the satisfaction of their needs. Therefore, after that, they already consider what is the appropriate price they expect to pay for the product.
Segment ID
Once segments are identified, companies can choose to focus on single-segment marketing or multi-segment marketing.
single segment marketing
Since this strategy is taken when the company decides to focus on serving a single market segment, this has certain benefits, but also carries a risk.
1. Advantages of serving a single segment
A) Easy to identify and satisfy
So that for companies it is much easier and simpler to identify the set of consumers in their segment, in the same way it is feasible to achieve a better satisfaction of the needs of consumers, by being able to focus on a set of characteristics that It allows the elaboration of more specific and attractive products for a single group.
B) Fewer competitors
Therefore, the company faces fewer competitors, because the segment is well defined and this allows it to have a better understanding of this group and serve it better.
C) Higher margin and participation
Serving a single segment allows the company to focus very nichely on the consumer, making it preferred over other product options. Consequently, it can have a higher level of profits, and thus it gets to have a higher market share.
2. Single Segment Risk
Finally, the main disadvantage of the single segment is that it ceases to be popular, that is, over time the consumer chooses another company or changes his preference for another market competitor, which is why this will severely affect the company's profits. because it has no other group of consumers to serve.
single segment marketing
Multi-segmented marketing
While this marketing strategy consists of serving various market segments, meeting the requirements demanded by each group.
1. Advantages of multi-segmented marketing
A) Can be kept in other segments
Consequently, if a company loses one group of consumers, it can continue to make profits with the other groups it serves, so it does not completely lose its market share and profits.
B) Taking advantage of economies of scale
In any case, if you serve several market groups, you must produce in large quantities, this allows you to take advantage of the benefits of economies of scale, which favors your production costs down and makes you more profitable.
C) Greater range
On the other hand, as it serves a greater number of people, it has a greater reach and impact in the market in which it competes.
Multi-segmented marketing
different market groups
In reality, thanks to technology today, market groups tend to be smaller and more specialized, which is why we can differentiate between segments, niches, market cells and customer-level marketing.
1. Market segment
However, a market segment is a relatively homogeneous and numerous group of consumers that a company attends. In order for it to be a source of opportunity for the company, it must have certain characteristics.
Characteristics of the segments
- Accessible: The company has appropriate communication and distribution strategies to be able to access the group of consumers.
- Identifiable: For it to be identifiable, it will be possible for the company to differentiate one segment from another and to know the responses of each group to marketing strategies.
- Homogeneous: It must have sufficiently similar characteristics within the same group, but sufficiently different from the other segments.
- Measurable: To be measurable, it must be possible to accurately measure and identify the characteristics of the group of people that make up the segment.
- Substantial: The size of the group must be relatively large to ensure potential growth as well as potential profitability.
2. Niche market
On the other hand, a market niche is defined as a smaller group of consumers, who have more specifically defined needs or a unique combination of needs.
Of course, in a market niche the consumer is better known, there is less competition and it generates a higher profit margin.
3. Market cell
So market cells are even smaller groups of consumers who share some special characteristics that can be turned into a market opportunity. Databases are very useful elements to be able to establish market cells.
Example of market groups
For example; If we want to divide people who travel into market groups, we can find three segments:
- People who travel by plane.
- Those who travel by bus.
- And those who travel by train.
If we focus on the segment of people who travel by plane, we can find:
- A market niche in people who travel in first class, because it is a smaller group.
In that same niche we can identify a market cell:
- A person who is willing to pay for a personalized plane trip.
Finally, it is important to mention that the market segments are made based on the benefits that consumers seek and not based on the characteristics of the products.
Since if we do it based on the product we would be forcing consumers to adapt to the products and it would not be the company that would be making the effort to generate products that adapt to the demands of consumers.
