Market Segmentation Strategies
Market segmentation refers to the process of identification and subdivision of a large market into small sections for easier marketing. Market segmentation is done after the marketer has conducted adequate market research to determine the characteristics of various markets and the needs of the particular markets. Market segmentation helps a business organization to put in place a proper marketing mix which caters for the specific needs of customers in that particular market segment (Lee &Kotler, 2011). Market segmentation is affected by factors such as; precise identification of the market segment, size of the market segment., accessibility of the segment through marketing and promotional efforts, how appropriate the segment is in relation to the policies, strategies and resources available to the organization. There are four basic market segmentation strategies that most organizations apply. Business organization can segment their markets based on; consumer behavior, demographic factors, psychographic factors and geographical factors (Lamb &Mcdaniels, 2012).Market segmentation helps in B2B marketing by grouping similar organizations together so as to make it possible for the organization to carry out target marketing.
Target marketing is a marketing technique used by business organizations where the business focuses its marketing efforts to a particular market segment. After market segmentation, target marketing should be done where an organization determines the specific market needs and offers specific products to that particular market segment
The company may decide to sell differentiated products in a particular niche market and these products may not be available in other markets that the organization is covering. In target marketing, the business organization will mostly concentrate its marketing and advertising efforts to the segments that closely match the products being offered by the organization and the marketing objectives of the company (Tybout, 2010). Target marketing in B2C marketing helps in making the promotional and marketing activities of the organization easier and cheaper. The pricing and distribution of products and services is also made easier when a business organization decides to market its products. In B2B marketing, target marketing helps an organization come up with strategies of satisfying specific needs of a particular set of business organization. Business organizations that are clients to the company and have similar characteristics and needs are grouped together. This will help the business in designing products and services based on the needs of these clients and also setting the prices of these products.
DSO has a very big market for its products and services in Australia. The large market for the company needs to be managed effectively in order to continuously meet the needs of its customers in different geographical regions and with different needs. DSO has clients who are business organization and other personal clients. This therefore means that the organizations marketing department carries out both B2B and B2C marketing. B2C constitutes majority of BSO`s customers. BSO is a not for profit organization and was formed more than 27 years ago. The organization is iconic in throughout Darwin and Northern Territory with the company leading in entertainment and promotional events.
DSO: A Case Study
The organization has facilitated and helped concerts to be organized and held in very remote areas through Australia. Most of these places were very abandoned and neglected before until the emergence of DSO(Ganesan,2012). DSO becomes the first orchestra to perform in Uluru which was a very iconic and significant concert. The business to customer markets for DSO is mainly by people who pay the organization to perform in private functions. Even though DSO mainly concentrates in community activities, it offers its products and services to individual customers who are willing and able to pay. The organization organizes performance in private functions such as wedding ceremonies, birthday parties and other entertainment needs that customers may require. The organization charges very cheap and affordable prices for its products. However, most of the activities of DSO are voluntary and are meant to empower and bring development especially in the rural communities. The members of the organization are the major contributor to the organization`s revenue earnings through donations.
The existing B2C market segment are divided both geographically and psychographically. Areas with large population which are mostly urban areas are divided into different geographical segments from other areas. Areas with large populations include areas such as Sydney and Melbourne. DSO applies similar marketing strategies for this market segments. The organization is therefore able to focus its marketing efforts in this areas reaching both the B2B and B2C markets (Bearden,Netemeger& Haws,2011). In geographical segmentation DSO also focuses its marketing techniques on the geographical segments of the rural areas where there is low population density. These areas have less concentration of population and therefore they require different marketing strategies from the market segments with large populations. Since DSO is a not for profit organization, it has an obligation to serve and reach all its customers regardless of their geographical location. The population and the number of potential customers do not matter in determining the level of attention that the organization gives to the market segments. DSO seeks to reach the most remote areas in its programs and activities. The remote and less populated areas will require the organization to adopt and implement unique promotional and advertisement strategies. DSO cooperates with community organizations and groups in these areas to promote both the brand and the activities of the organization.
B2C market for DSO is also segmented depending on psychographic factors such as lifestyle, social and personality traits of people living in a particular area. DSO markets its products and services to customers depending on the lifestyle of a particular group of people. Since the organization is mostly involved in entertainment activities, it has to consider the lifestyle and the culture of the people who it is targeting (Scott, 2013). An example is the performance by the organization at the Garma Festival a place that is largely dominated by the Gumatj people. Therefore in B2C markets, SO should segment its market appropriately in order to reach a wide range of customers from different geographical areas, with different cultures and lifestyles.
B2B Marketing and Market Segmentation
B2B markets also form a significant portion of the DSO market. B2B market refers to business activities between a business organization and another business organization. Marketing to business is very different from marketing to individual customers. It has been established overtime that in B2Bmarkets, business are so focused on streamlining the buying and procurement process in order to save on both time and money(Silberman&Hanburg). In B2B marketing, the client is also so focused on the quality of goods and services offered because they affect directly or indirectly their business. If the organization was buying a raw material and it purchases poor quality products it means that the final products will be of poor quality and therefore it will affect its relations with customers.
Another major difference between the B2B and B2C markets is that individual customers purchase is mostly based on emotion while purchases by business organization is based on logic. The business will always seek to minimize costs so as to maximize its profits and maintain the prices of its products low. DSO has segmented its B2B market depending on particular and specific needs of each customer. This is in B2B all the business have different needs. The B2B market segment for DSO include a group on non profit making organizations that collaborate with the organization in various undertakings and another group of profit making organizations that are in agreement with DSO for different purposes such as promotion and publicity. The nonprofit making organizations that collaborate with DSO help the organization in achieving its objectives and goals .(Weinberg, 2009)They also help DSO in fulfilling its core values of accessibility and quality services, vibrancy and community volunteering. Examples of institutions and organizations that collaborate with DSO include Alice Springs School of the Air. Through its music education program, DSO collaborates with this institution and many others in inspiring students through the Darwin region and other areas in Australia. DSO also enters into contracts with companies that donates and contributes to the organizations activities. The companies may provide financial support for DSO in exchange for among others advertising through the concerts that it organizes. The marketing strategies for these two market segments are very different due to the diverse nature of the relationships between the organizations. Therefore, the management of DSO needs to focus on each market segment and put in place the necessary resources and efforts to secure the market segment.
B2C Marketing and Market Segmentation
The target B2C niche market for DSO is weekly music and entertainment concerts targeting the youth. The segmentation of the broad DSO market demographically will help the organization to raise more money for the organization as well as helping the organization achieve its goals and objectives. By targeting the youth in weekly music gigs and concerts, DSO will be able to educate the youth on various aspects of social life. The weekly music concerts will be organized every Saturday where different artists and musical groups will be invited to perform. The ticket charges will be highly subsidized to ensure that people with different levels of income and social status can afford to attend. This will be in line with the organizations` core value of accessibility.
The decision to select this particular market segment was influenced by the huge population of youth in Darwin, Northern Territory and other parts of Australia. DSO targets the youth to educate them on various aspects of life such as the importance and value of education and emerging social issues. The concerts will also help to promote the culture of the people living in various localities. The concerts will be held in urban areas on a rotational basis. The concerts will be held in all major urban areas and towns where there are large populations of young people. By focusing on this niche market, the DSO will be able to achieve its long term and short term objectives as well as raise enough money to support other activities. Through these concerts, DSO will be able to showcase the culture of the people and fulfill the need for entertainment among the youth. The following is an illustration of how DSo can segment its market.
The buyer behavior in this market is characterized by price elasticity to demand. This means that the change in prices of commodities has a huge effect on the demand of a product (Moss, 2009). For DSO, the pricing of its ticket will be very crucial in determining the demand for the music concerts among potential customers. If the organization sets high prices for tickets, it means that the number of people attending the concert will be low. Low ticket prices for the concerts will mean that the demand for the tickets will be high. More people will buy the tickets and therefore more sales revenues will be generated. The price elasticity of demand in this market is is caused by the fact that the target market in this case is composed of young people most of who depend on transfer payments and do not have regular sources of income.
Target Marketing and Market Segmentation
The theories that explain the behavior of consumers in this market segment include the theory of psychological factors. This are factors such as the attitudes, perceptions, personality ,character and influence from other people. This theory focuses on the importance of pre-existing attitudes in decision making by a consumers. This theory focuses on specificity. Customers buy a product based on what they have learnt about a product over a period of time. The stages in decision making process for B2B are different fromB2C. The process is shorter in B2C and therefore influencing the behavior of consumers.
The niche market for B2B by DSO is that of corporate organizations that seek to collaborate with DSO in carrying out its activities. The niche market will be Western Australia. DSO will target companies in this region which are willing to support the programs of the organization decision making unit that is involved in the decision making process also influences the behavior of consumers in B2B target.. The market is very large in size with many potential customers for the products. This is because; Western Australia has a very large population. The large population means that the number of potential customers for DSO products is high.
The number of companies and other types of businesses in this area is also high. This provides the perfect platform for DSO to market its products. The niche market that has been chosen is accessible. The legal requirements to venture in this market are few and does not present any challenge to the organization (Harrigan and Hulbert, 2011). The infrastructure within the area of the niche market is also up to standard. This means that physical access of the market is efficient and transport and logistics cost will be low. The level of competition in this niche market is moderately high. However, it will be easy for DSO to access this market since most of its products are differentiated and the prices for the products are low since profits is not the primary objective of the organization.
The buyer behavior theories underlining the target marketing for B2B are the stages of decision making process, level of involvement in decision making, the decision making units in organizations and psychological aspects that affect buying behavior.. These theories explain the behavior of businesses when they are purchasing a product. The businesses are more logical and rationale compared to individual consumers when making a decision of what to buy and how much to buy (Hooley, Piercy and Nicoulaud, 2012). In B2B marketing, the people involved in making the purchase decision are many compared to when the buying decision is made by one person. Due to these reasons, it’s important for DSO to analyze the behavior of business organizations it’s doing business with. The organization can then come up with the appropriate marketing mix which will help it in conquering the niche market. The stages of decision making for an individual are very different from those of an organization. For an individual, the decision to buy a particular product is easier compared to that of an organization. Decision making process in B2B is longer due to the large number of people involved and the weight of the decision. The decision making unit in B2B target is also larger than that of B2C. It therefore means deliberations have to be made before the final decision is reached. There may be conflicting ideas on what and where to buy and this may at times cause delays in sealing transactions. Psychological factors such as perception, learning and attitudes also influence the decision making in B2B target.
Conclusion
It is very important for an organization to understand the behavior of consumers before embarking on the segmentation, targeting and positioning process. This is because, customers are the reason why organizations exist and therefore it very important for an organization to predict the behavior of its employees. Understanding the customer behavior will help business organizations to meet the needs and demands of consumers. Since organizations market to consumers, it is important for the business to portray itself in manner which will endear itself to the customers (Burrow and Bosiljevac, 2012). Therefore, before any business segments its markets and positions its products in the market, it is important to study the behavior of customers so as to act depending on customer needs and preferences.
References
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