Why would you want to use customer segmentation? Generally speaking, no business will want to produce what people will not buy. This is more compelling in the growing competitive and complex business environment. To succeed, you must be able to identify and fill your prospective and existing customers’ needs and wants profitably. Simply put, market segmentation is the subdividing of a total market into smaller target market based on factors such as age, geographic location, gender, spending pattern, or language.
Market segmentation rests on the premise that consumers have different needs and wants, and careful analysis of these requirements may reveal unsatisfied needs and wants.
Here are the top 10 benefits of market segmentation:
1. It improves your understanding of the consumers, and above all why they buy.
2. It facilitates the development and application of appropriate marketing programs.
3. Consumers’ requirements are ever changing, consequently a continuous program of market segmentation boosts your capabilities in meeting changing market demands.
4. It directs your efforts towards where you have the best competitive advantages considering your competitive strengths and weaknesses. In other words, market segmentation helps businesses to concentrate their commercial efforts.
5. It promotes an efficient allocation of marketing resources. For instance, product and advertising appeals can be better coordinated and directed towards specific markets. Similarly, proper management of media plans minimizes wastes through excessive exposure. All these result in sharper brand image.
6. It facilitates control. Given that target markets are defined based on a set of objectives, performance can be evaluated in view of modification or improvement with regard to expected results.
7. It promotes new product development. Improved understanding of your potential and existing customers enables you to identify any unsatisfied needs or wants. This process further allows you to modify or develop new products that satisfy your target markets most of the time.
8. Market segmentation helps build customer relationship. By providing selected offerings for selected groups (target markets) in an effective an efficient way, you not only build enhanced customer relationships and improved brand loyalty but also prevent brand switching.
9. It improves competition. By focusing and understanding what your target markets need and want you could create an appealing campaign that directly targets your potential customers thereby outperforming your competitors. Lastly,
10. Market segmentation assists in product pricing. When you find the ideal market for your products it becomes easy to price your products for each target segment.