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Impacts Of Segmentation On Market Growth

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Question:

Discuss about the Impacts of Segmentation on Market Growth.

 

Answer:

Introduction

Market segmentation involves the division of the market and the potential customers based on certain similar characteristics. Legge (2009) highlights that a market can be segmented based on shared features like demographical factors, common consumer needs, similar interests or similar consumer profiles. With segmentation, an organization is able to identify the portions of the market with potential for increased sales and hence profits. At the same time, the strategy enables the sellers to treat the selected areas while focusing on a particular area of specialization which is in conformation with identified common needs. It can therefore be deduced that dividing the market enables an organization to concentrate and hence exert more effort on the established target markets. According to Gavett (2014), when a segment is sufficiently managed, there is the likelihood of registering growth in the overall market for the goods or products. In this essay, we highlight the relationship between market segmentation and market growth. Basing the arguments on review of relevant literature, the discussion seeks to establish whether or not segmentation is an ideal approach for enhancing market growth.

 

Segmentation and Market Growth

According to the theory of market segmentation, marketers tend to believe that each segment of the market is characterized by a unique need based on the interests of both the business and the consumer. As noted by Jones (2010), organizations tend to exert more effort on the segments of the market which are laced with a huge potential for increased sales and profit.  For instance, when a given segment is identified to be productive, the business organization is likely to install strategies which would enhance adequate access to such locations. Such steps may include improving the infrastructure around the area in addition to updating the business-consumer relation strategies. Each of these steps may not only play a crucial role in stabilizing the company’s market base but also expands it in one way or the other.

Segmentation also enables a business organization to note the portions of the market which may not be ideal for good sales and hence return on investment. By identifying the specific needs, preferences and consumer profiles in a given region, the organizations are able to specialize their supply strategies. According to Craig (2009), the supply of products and services is always meant to satisfy these identified needs as much as possible. With this trend, the business organization lowers its marketing activity rate in the segments with low potential for growth. The resources which could have been used in these segments are therefore diverted to enhance the ‘fertile’ market segments. This strategy leads to a gradual expansion of the market.

Additionally, segmentation of the market enables the business organization to identify the portions in which the consumers experience low levels of satisfaction. The organization in turn uses these outcomes as an appropriate opportunity to enhance the market and hence sales.  In order to achieve this, the company may modify their products and services in a manner that suits the needs of the consumers (Jones and Tadajewski, 2016). When the satisfaction in a given market segment is effectively achieved, the business organization establishes a firm grip of the clientele in the given region. With the registered success in this phase, the organization applies creativity and innovation to device new methods which in turn increases customer satisfaction within the target market. This strategy plays a pivotal role in enhancing market growth within a given segment.

On the other hand, segmentation may not be considered an ideal approach of enhancing market growth especially when the strategies involved concentrate on one area at the expense of the other market portions. Due to the dynamic nature of the market, the consumer needs and preferences might change with variations in the social and economic status. This therefore implies that there is not specific guarantee a market segment will remain productive forever. As a result, a company may experience a drastic reduction in sales when the consumer reception in a given segment changes due to the encroachment of competitors offering better prices and services. The effect may be worse in case the company’s market largely depended on the given segment. It can therefore be deduced that over-concentration in one portion of the market hinders an organization from exploring other options. When other segments are not adequately addressed, a holistic growth in the market base is greatly hindered.

Conclusion

When a market is effectively segmented, an organization is able to identify the areas with potential for growth. Strategies can therefore be implemented to enhance sales in the identified target market. This in turn enhances market growth. However, managing market segments requires effective strategies which would ensure minimal risks in case of changes in the market trends. In addition to identifying a particular productive segment, there is the vital need for an organization to diversify its marketing approaches. This enables the business entity to establish appropriate alternatives in case the target segment fails to meet the set target and organizational expectations. In a nut shell, segmentation can enhance market growth but only when the right management approaches are installed to accompany the strategy.

 

References

Craig, G. (2009) ‘A Benefit–Based Segmentation’. Journal of Travel Research, 31(1), pp. 30–35.

Gavett, G. (2014) ‘What You Need to Know About Segmentation’.  Harvard Business Review, 4(1), pp. 2-17.

Jones, G. and Tadajewski, M. (2016) The Routledge Companion to Marketing History. Oxon: Routledge.

Jones, R. (2010) ‘The History of Marketing Research’. Journal of Marketing, 14(5), pp. 71-80.

Kleiman, L. (2010) ‘Competitive Advantage and Public Policy: Grounding Segmentation Strategy in Resource-Advantage Theory’.  Australasian Marketing Journal, 12(1), pp. 7-25.

Legge, D. (2009) ‘Consumer Segmentation through Latent Class Analysis’. Journal of Consumer Research, 10(1), pp. 170-174.

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