Informative Essay on Market Segmentationpsychology
Informative Essay on Market Segmentationpsychology

Informative Essay on Market Segmentationpsychology

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  • Pages: 4 (935 words)
  • Published: December 31, 2017
  • Type: Essay
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This essay will discuss the concept of market segmentation, including a description of the different kinds of segmentation.

The text discusses the topic of market segmentation and aims to provide a balanced opinion on its implementation. The following paragraphs will explore how Heron Engineering utilizes market segmentation, identifies its target customers, handles competition, and utilizes resources. These issues will be examined in relation to the theoretical background. The conclusion will summarize the essay, providing a comprehensive understanding of the subject matter. Market segmentation is a method of meeting customer needs by applying marketing concepts to various groups of people (Jobber, 2007, p275). Consumer market segmentation can be based on behavioral, psychographic, and profile factors (Jobber, 2007, p278).

Organizational market segmentation can be done through either macrosegmentation or microsegmentation. Macrosegmentation involves profiling based on organizational

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size, industry, or geographic location. On the other hand, microsegmentation considers indicators such as choice criteria, buy class, or organizational innovativeness. One unique example of macrosegmentation is the ACORN consumer classification, which is used to profile Great Britain and has strong discriminatory power in identifying customers. Another example is the VALS(tm) system developed by the Stanford Research Institute, which describes lifestyle-based segmentation.

There are several other behavioral methods that can be implemented, such as The LOV and Rokeach (Raaij et al., 1994, p51). It is important to note that segmenting markets based on individual qualities may not be as useful as combining them (Czinkota et.al 2001, p477).

According to Phipps, marketers segment markets to identify untapped or partially filled market spaces, allowing firms to position their brand against competitors in the same product field (Phipps et al., 1996, p30). Dibb also suggests that segmentation ca

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help identify growth potential in mature or declining markets and uncover opportunities in under-served customer groups. Additionally, market segmentation can result in better resource allocation and a competitive advantage over rivals (Dibb et al., 1997, p52).

Jobber (2007, p276) argues that market segmentation is crucial for identifying opportunities and threats in a constantly changing market. Dibb (1998, p396) cautions about the potential pitfalls of market segmentation, emphasizing the importance of meaningful segments for customers rather than companies and the risk of overemphasizing segmentation at the expense of primary objectives. Czinkota and Kotabe (2001, p215) suggest that incorrect application of market segmentation can increase costs, while Wright (1996, p23) emphasizes the need for evidence to ensure that segments are associated with consistent preferences and offer higher returns compared to other approaches.Heron Engineering serves a wide range of customers, including small supermarkets, airports, docks, factories, and more.

Heron (Jobber, 2007, p71-73) categorized customers into segments based on geographic location: Western European region (WE) and Central and Eastern European region (CEE) (Jobber, 2007, p293). In each region, they created two additional segments for the high-technology and low-technology sectors. Within each segment, customers had different needs. For the low-technology sector in both WE and CEE countries, price and product availability were the main criteria. In the high-technology sector, customers from WE countries valued functionality and customization, while CEE customers emphasized attractive financing and functionality. The satisfaction of customers is of great importance.

Donovan and Samler (1994) propose that making customers satisfied ought to be a fundamental business strategy. To support their argument, they outline a ten-step approach for creating an organization that is driven by its customers (p.38). Similarly, McDougall (1997) suggests

a three-step process for estimating the duration of customer value (p.6), which aligns with Donovan and Samler's viewpoint.

Heron possesses both tangible and intangible competitive resources. With a 30% market share in CEE and 40% in WE, Heron holds a significant position in the market. Additionally, they have a well-established brand name, foreign branches, expertise, and financial resources. These factors, coupled with their substantial market share, provide a strong foundation for future enhancements.

According to Passemard et al., there are five forces that determine competitive advantage: the threat of new entrants, the threat of product or service substitution, the bargaining power of suppliers and customers, and local competition. The strength of these forces depends on the economic and technical characteristics of the industry.

, 2000, p111) states that competitive advantage can be achieved through various means such as lower prices, better product quality and distribution, better skills and infrastructure. According to Viswanathan et al. (2007, p52), firms like Heron should aim to provide customers with the same or better value compared to their competitors while also being more efficient in production. Additionally, Passemard et al. (2000, p112) suggest that creating processes that generate greater final value can contribute to competitive advantage, which is referred to as Porter's "Chain Value". It can be argued that Heron should prioritize maintaining its competitive advantage, as doing so is more challenging than creating one.

The text discusses three conditions that affect the advantage a company may have. These conditions include the source of the advantage, which can be minor (such as reduced workforce or production costs) or major (such as owning unique technology that is difficult to imitate). The second condition is the

number of competitive advantage sources, while the third condition is the company's commitment to continuous improvement. Based on the Heron case study, it is evident that market segmentation is a useful concept. However, it is important not to overestimate its impact. Companies should incorporate the best practices from market segmentation into their operations while also considering how it influences their overall business strategy.

Marketing managers must possess the ability to identify market shifts and react quickly, even if it requires altering their previous strategies. Bearing this in mind, I aspire to have offered a fair viewpoint and instilled a sense of urgency for further investigation into the captivating subject of market segmentation.

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