Importance of defining market segments
A market segment is a subgroup of organisations or people who have on or more characteristics in common which causes them to a need for the same products or services. Markets segmented by the following subgroups; age, gender, religion, culture, income and lifestyle. Marketing strategies combine all marketing goals of an organisation into one comprehensive plan, in order to further develop and achieve marketing strategies it is important to define market segments because it enables the marketing team of an organisation to create a customised marketing plan that is specific to that group of people, this will then enable the organisation to effectively target and communicate with their target customers.
Difference between market segments and customer classification
Market segments is the process where a market if potential customers are divided into groups based on the similar characteristics which they share, these can be thing based on their age, gender, religion, culture, income, lifestyle as well as location. On the other hand, customer classification looks at the buyer behaviour and type of customer the business will be dealing with, they can be classified as business or leisure customers. Business customers is when a business enters in a purchasing agreement with another business while a leisure customer is a person that uses a product or service and is also referred to as an end user.
How the characteristics, motivations and behaviours of potential target customers are identified
The first step to identify the characteristics, motivations and behaviours of potential target customers is to first identify the reasons why a customer will want to buy your product or service, which includes find out the main features and benefits of your product or service as well as your unique selling point.
The next step is to carry out a market segmentation to identify your potential customers, there are 4 types of market segmentation and these are geographic, demographic, psychographic and behavioural.
Geographic segmentation
This enables to identify the potential customers within the locational boundaries within which you will do business, this can be local, regional, national or at an international level. For instance, if your business is based in a single location retail store, then location will be a significant consideration.
Demographic segmentation
This allows you to pick out the characteristics of your demographic target market that relates to the interest, need and ability of the customer to purchase your product or service. You can identify your potential customers through traits such as age, gender, ethnicity, income level, profession, education level and marital status.
Psychographic variables / segmentation
This allows you to identify your target customers based on their interests, personalities, values, emotions and beliefs, then you can offer your products and services based on these. For instance, somebody that sells items of luxury would appeal to a potentials customer desire for status symbols.
Behavioural segmentation
This enables you to understand the buying patterns and habits of your potential customers as well as find out the likelihood of developing a strong relationship with potential customers. You can also find out the reasons behind purchases which can include loyalty, cost and brand.
