Research Paper on Market Research and Market Segmentation for targeting the right Consumers
Research Paper on Market Research and Market Segmentation for targeting the right Consumers
Market Segmentation and Targeting Consumers
Market segmentation is the research that determines how your organization divides its customers or cohort into smaller groups based on characteristics such as, age, income, personality traits or behaviour. Using these segments we can later optimize products and advertising to different customers.
Customers appreciate marketing that is specifically directed at them, designed for them, and that efficiently presents the information they need to make a sound purchase. The more a business knows about a target market, the easier it becomes to persuade the consumer to differentiate a product, service, or brand.
When a market researcher knows what is valued by a consumer (or consumer group), they know how to market the product and how to tailor the advertising in a way that appeals to that group.
Market segmentation is most easily established by exploring and analyzing many different characteristics of potential consumers.
Market Segmentation: How it's done?
Demographic
This category includes attributes related to age, city or region of residence, gender, race and ethnicity, and composition of the household. While these are all important attributes, the relationship between these characteristics and consumer behaviour may be quite small. Demographic attributes function best as a foundation for more specific segmentation of the research.
Socioeconomic
This category includes attributes related to household income, level of education, occupation, the neighbourhood of residence, and membership in various associations. These characteristics tend to be more refined in terms of the relationship to consumer behaviour—particularly as a reflection of a consumer's lifestyle, brand preference, price sensitivity, and the array of services used by the consumer.
Brand Affinity/Product Usage
Consumers who exhibit a brand affinity or actual product usage are segmented on the basis of their behaviour. This makes brand affinity and the product's usage one of the strongest categories to use when developing market segments. This is why inbound marketing works as well as it does—essentially, consumers create their own segments through their inbound marketing activity.
Tier Two is an extension of the Tier One attribute group. Tier Two attributes are obtained by drilling deeper into the Tier One attributes.
Psychographics
This category includes attributes related to specific lifestyles, hobbies, personality, attitudes, opinion, and even voting behaviour. The relationship between these psychographic characteristics and consumer behaviour is fairly strong and can provide an effective avenue of communication with potential consumers.
Generation
This category includes attributes related specifically to an identifiable generation cohort group. Segmentation by generation addresses similarities in people who are born in the same time period.
These generation cohorts tend to exhibit an orientation to life that has been (or is) strongly influenced by the economic, technological/scientific, political, educational, and political experiences they have shared.
Geography
This category includes attributes that are related to the geographical area in which consumers reside and work. Consumers in this category may be similar along with a number of important dimensions, such as political orientation, religious affiliation, and options for transportation and shopping.
These consumers may share an affinity for regional cooking or show strong preferences for certain kinds of apparel.
Geodemographics
This category includes attributes that combine geography and demographics, which may cluster into identifiable groups. Segmentation based on geodemographic strategies tends to be implemented through commercial software packages developed for this purpose.
This category of attributes is best when combined with other segmentation strategies.
Benefits Sought
This category of attributes is related to the benefits that consumers seek when they shop for products and services. The benefits that consumers seek can vary widely depending on what they want to buy. Brand loyalty, brand affinity, and consumer brand attitude cannot be measured collectively.
Rather, these attributes may be brand-specific, or maximally, categorically specific. For instance, a consumer may shop thrift stores for clothing or household goods but exclusively shop for food at expensive, organic food markets.
How to Get Started with Segmentation
Market segmentation doesn’t need to be complicated to be effective. There are five primary steps of segmentation.
Conduct Preliminary Research – Get to know your customers better by asking some initial, open-ended questions.
Determine How to Segment Your Market – Decide which criteria (i.e. demographics/firmographics, psychographics, or behaviour you want to segment your market by.
Design Your Study – Ask a mix of demographic/firmographic, psychographic, and behavioural questions. Be sure to make your questions quantifiable.
Create Your Customer Segments – Analyze your responses either manually or with statistical software to create your segments.
Test and Iterate – Evaluate your segments by ensuring they are usable and helpful. If they aren’t, try segmenting based on other criteria.
Ensuring Effective Segments
After you determine your segments, you want to ensure they’ll be useful. A good segmentation analysis should pass the following tests:
Measurable:
Measurable means that your segmentation variables are directly related to purchasing a product. You should be able to calculate or estimate how much your segment will spend on your product. For example, one of your segments may be a coupon maven, who is more likely to shop during a promotion or sale.
Accessible:
Understanding your customers and being able to reach them are two different things. Your segment’s characteristics and behaviour should help you identify the best way to meet them.
For example, you may find that a key segment is resistant to technology and rely on newspaper or radio ads to hear about store promotions, while another segment is best reached on your mobile app. One of your segments might be a male retiree who is less likely to use a mobile app or read email but responds well to printed ads.
Substantial:
The market segment must have the ability to purchase. For example, if you are a high-end retailer, your store visitors may want to purchase your goods but really can’t afford them.
Make sure, an identified segment is not just interested in you, but can be expected to purchase form you. In this instance, your market might include environmental enthusiasts who are willing to pay a premium for eco-friendly products, leisurely retirees who have can afford your goods and successful entrepreneurs who want to show off their wealth.
Actionable:
The market segment must produce a differential response when exposed to the market offering. This means that each of your segments must be different and unique from each other. Let’s say that your segmentation reveals people who love their pets and people who care about the environment have the same purchasing habits. Rather than have two separate segments, you should consider grouping both together in a single segment.
Market segmentation is not an exact science. As you go through the process, you may realize that segmenting based on behaviours doesn’t give you actionable segments, but the behavior does. You’ll want to iterate on your findings to ensure you’ve found the best fit the needs of your marketing, sales and product organizations.
Relationship Between Market Research & Market Segmentation
Market research is an important activity for companies hoping to better understand their customers and market so that they can improve their products and services to better meet market needs. An important element of effective market research is market segmentation, the process of dividing -- or segmenting -- the larger population into smaller units that better reflect target audiences.
Segmentation and Positioning
Segmentation and positioning are two important concepts in marketing. While these terms are generally used in relation to promotional activities, the term segmentation has relevance for market research as well. Segmentation involves dividing the larger universe of consumers or businesses into smaller units that represent more specific target audiences.
Positioning is the next step whereby companies determine, based on the segments they have identified, how they can effectively promote what they have to offer compared to competitive offerings (positioning). Effective marketers know that the better they can segment audiences, the more they will be able to develop target messages and select specific communication tools to reach and influence those audiences.
Market Research
Market research involves gathering information from audiences through tools that may range from focus groups to one-on-one interviews to broadly distributed surveys delivered via traditional mail, email, phone or online polling.
Different segments may lend themselves to different forms of market research. For instance, younger audiences may be well-suited to online research efforts, while older groups (baby boomers and older) might be best targeted through traditional survey efforts.
Qualitative Research
Qualitative research efforts are those that do not provide statistically reliable information, yet the input can be useful in creating more formal, quantitative research. Qualitative research efforts might include such things as focus groups or interviews conducted in shopping malls.
Qualitative research might also involve observation of various market segments in natural environments -- for instance, observing shoppers' behaviour in grocery stores or observing teens as they engage in sporting activities. Qualitative research can be particularly useful with segments of the population who are not able to effectively express their needs/interests, such as very young children or individuals with developmental disabilities.
Quantitative Research
Quantitative research involves focusing on specific target audience segments and then selecting a sample of that target population that will yield statistically significant results.
Segmentation is important here in that the researcher will need to identify the larger market segment and determine the portion of that market segment that will need to be targeted to achieve the desired response. Rarely will a research survey all of the markets; instead, a sample will be selected, based on mathematical calculations, to ensure a valid and reliable result.
Bibliography
- Identifying Target Markets for Improved Return on Investment BY GIGI DEVAULT
- What is Market Segmentation? Different Types Explained BY Qualtrics