Entrepreneur's Handbook
MARKET SEGMENTATION
In the explanations so far in terms of the marketing management process, the studies on the determination of market opportunities and the level of demand brought by these opportunities were mentioned. After this point, the entrepreneur should determine which market segment he / she should be in and develop appropriate strategies.
Depending on the economic and socio-cultural development, there are significant differences in the demands and needs of consumers living in a certain geography. In this case, businesses become unable to meet both increasing and diverse consumer demands and needs with a single product. For example, the feature of home, car and telephone demanded by each consumer is gradually different from each other. For this reason, a successful entrepreneur should create meaningful sections by homogeneously grouping these consumers whose demands differ, and then produce products / services that will meet the demands of these meaningful consumer sections and meet these requests. Accordingly, segmentation of consumers with different requests and needs into groups that need similar products is called market segmentation. For example, a bicycle is a product that defines a general market. However, the expectations of those who want to use the bicycle for racing and those who want to use it for touring will be very different. Therefore, it is not possible to meet the expectations of these two groups of consumers with a single bicycle. Therefore, instead of meeting a generic need, the entrepreneur should try to satisfy his customers by dividing the market into consumer groups with homogeneous expectations and by introducing special products for each group.
In the market segmentation process, first the structure of the total market should be examined and how to determine the consumer groups with similar needs should be revealed. The following figure shows examples of segmentation. (Tek and Özgül, 2013).
The first figure shows a situation where no market segmentation is made. The other shows the situation in which full market segmentation is made. A market can theoretically be divided until there is only one customer in the market. Aircraft, shipbuilders or an enterprise that accepts customer-specific orders makes such a segmentation and realizes special production for each customer. However, for many sectors, this does not create an economic market size. For this reason, the business should create meaningful groups of consumers who can react similarly to marketing efforts, expressing an economic size. Figures 3 and 4 show the number and revenue volumes of the segmented market groups calculated in line with the current statistics.
A marketer who wants to segment his market can choose one or more of four different segmentation alternatives. These alternatives are;
- Geographic segmentation
- Demographic segmentation
- Psychographic segmentation
- Segmentation according to buyer behavior
If the entrepreneur can create a user group that will react similarly to his product using which factor or factor group according to the resources he has, the entrepreneur must make the appropriate choice.
Geographic segmentation; It is the division of the market into groups according to geographical variables such as country, region, city, settlement characteristics and climate. Many businesses are trying to adapt their products to the demands of the region where they operate. For example, even companies operating in many countries such as McDonalds localize their products. In addition, many small enterprises also use this segmentation in addition to other factors to limit the geography they address due to insufficient resources. Geographic segmentation is useful as it also brings together people who share a particular culture. For example, turnip in Adana and boyoz in Izmir are the most consumed products. Sports and health products are in higher demand in settlements with high income levels. Therefore, geography can bring people who use the same culture and consumption patterns together. It is an important issue for the entrepreneur to know very well the region where he / she operates and to know the consumption structure and characteristics of the region.
Demographic segmentation covers segmentation criteria related to population structure in general. These are often preferred because they are closely related to the consumption style. Consumers in the market are divided into segments based on age, gender, income level, family structure, marital status, child ownership, profession, education, and nationality. Here, the entrepreneur should decide which demographic factors are meaningful for his product and make segmentation accordingly. For example, gender and income level may be significant factors for an entrepreneur operating in the cosmetics or textile industry. However, the age factor stands out for the confectionery producer. Another entrepreneur might decide to design a product for children. Income level is also a frequently used segmentation factor in demographic segmentation. For example, BİM appeals to those looking for economy in shopping, while Macrocenter appeals to consumers with higher income.
In psychographic segmentation, buyers are divided into groups according to social class, lifestyle or personality structures. Although this segmentation is not very successful in determining consumers numerically according to geographic and demographic segmentation, it is increasingly used because of its ability to bring together people with similar behavioral characteristics. For example, consumers who easily adopt innovations can create a meaningful market segment for the company that launches a new product. Similarly, people's interests, hobbies, holiday behaviors or lifestyles are an important determinant on their consumption patterns. For example, Harley Davidson motorcycle targeted adventurous consumers by segmenting its market. Albaraka Türk, on the other hand, develops services for savers who have a conservative lifestyle.
In behavioral segmentation according to buyer behavior, consumers are grouped according to features such as utility, level of use, and usage status.
- In segmentation by benefit, consumers are segregated according to the benefit they expect from the product. For example, some of the bicycle users demand bicycles for weight loss, another part for transportation, and another part for recreational purposes. It is necessary for the entrepreneur to determine basically which benefit expectation he / she should meet and plan his / her marketing activities accordingly.
- In segmentation according to the level of use, consumers are grouped according to the frequency or amount of consumption, such as those who never use it, those who use it occasionally, and those who use it regularly. For example, the business can create some advantages such as extra discounts, conveniences, special sales conditions for its regular customers. On the contrary, the business can create advantageous programs to attract consumers with no users. Many campaigns of mobile phone operators on this issue are a good example of this.
- In segmentation according to loyalty level, consumers are grouped according to their level of loyalty to the brand. Some consumers may develop emotional bonds and loyalty towards certain brands, while others do not see any difference between competing brands. Accordingly, different marketing programs can be developed for each group by dividing consumers into high, medium and low levels of loyalty. In some sectors, consumers have high brand loyalty. For example, it is known that the brand loyalty of consumers is higher in areas such as hairdresser services, detergent and market. Therefore, it will be a priority work for an entrepreneur who wants to operate in these sectors to develop a marketing effort to change the brand behavior of consumers.
In market segmentation, an effective segmentation is tried to be made by using the above features. It should be noted that the following features exist in order to achieve effective market segmentation:
- Measurability: It is necessary to know or at least be predictable numerical characteristics of consumer groups that emerge at the end of segmentation. In other words, knowing information such as the number of potential consumers in the market segment, their purchasing power, and their geographical location is necessary for a qualified market segmentation.
- Accessibility: Market segments created must be accessible through various marketing tools.
- Size: The market segment must be large enough for the business to operate profitably. Markets defined too small will not be profitable for the business. If it is larger than necessary, the market will be heterogeneous, in other words, consumers with different requests will be included in the same section. Therefore, the market size should be defined at the optimal level.
- Differentiability: The reactions of the consumers in the market segments created should be different from each other. For example, if the reaction of women and men to carbonated beverages does not change, it would not be meaningful to make a market segmentation according to gender.