Market Segmentation and Sales Strategy

Market Segmentation is a marketing term that describes a strategy to summation of prospective customers into segments that have similar needs and react alike to a marketing action performed by a company. Segmentation helps companies to target a number of different customers divided into groups that perceive a need of a product differently. By doing so, the companies are able to satisfy the needs of different buyers by using unique marketing strategies to boost sales.

The main purpose of marketing is to satisfy the needs of some groups of potential customers that the company serves. This greatly emphasizes the fact the company needs to look for customers that are not as gratified by the product marketing, as they should be. What needs to be understood is that not two customers are alike or like to be treated alike, thus no market strategy should focus just on one kind of marketing mix.

Although there are many different personalities involved when the idea of ‘everyone is unique’ is touched but there can be groups that need a similar kind of satisfaction from a product. Thus, it is important to comprehend such groups and find a sales strategy that serves best to these groups.

Market or sales segmentation is a process in which two things need to be addressed:
• Naming broad product-markets
• Segmenting these broad product-markets in order to select target markets and develop proper marketing mixes.

The first step as mentioned above is to name the market of the product that is of interest to the firm. A firm cannot satisfy all the needs of all customers thus it has to concentrate on what its product and to which market it must cater. This way the firm is catering to a broad product-market where most of its resources and experiences are concentrated.

Disaggregating is a strategy that helps companies narrow down the sales focus onto a product-market area and likely help develop breakthrough sales strategies. For example for a car developing company, it needs to focus on transport for people for which it sees what potential customers are there in the market that prefer the kind of cars developed by the firm. The company can then further divided this group into subgroups, which need cars for different activities, like basic transport, family car, racing etc.

There are four types of market segments that are considered ‘good’ in terms of sales segmentation strategy:

1. Homogeneous: The customers in a segment are as similar in needs as possible who would respond to a marketing mix in a similar way.
2. Heterogeneous: The segments of customers are as different as possible. That is the no two customers from two segments should react similarly on a marketing mix strategy.
3. Substantial: The segments need to be large for profitable sales.
4. Operational: The segmentation should help develop good marketing mixes.

Among the four, Operational is the most important since placement and promotion strategies would fail without the demographic dimensions like age, income, family size etc. It is important to keep the demographics dimension as measurable as possible. For example, moods are not a dimension that would help develop a segment for sales but annual income in an area is a good approach.

It is possible to charge higher prices for a product in a well-segmented product-market. Since the customer needs are met and are properly satisfied through the appropriate marketing mix, a customer is ready to pay more for a product that seems reliable rather than a cheap one with no guarantees.

Segmentation allows companies to cater to its customers on a personal level, which builds reliability and sustainability thus developing better company-customer relationship. This in turn creates brand-loyalty amongst customers, which can help with steady sales even when a new kind of product is introduced into the market.

This however does not mean that a company should keep old strategies, as the customers are “loyal” towards its products. The market is forever evolving and new firms are entering with their own strategies and marketing mixes. It is of utmost importance that new strategies and ways should be addressed to serve existing customers. It should help increase sales rather than let it become stagnant. Moreover, there is always the opportunity to seek more segmented product-markets and the potential to gain more customers.

Many companies today are heavily using the internet to set dimensions and segment the customers into different groups. Companies through advertisements online gain access to the general demographics and dimensions of potential customers and direct their advertisements towards them.

This way, customers are easily segmented and catered to. Online advertisements have become something of a trend followed by every marketing and sales company. Sales segmentation strategy can be better understood with the help of this technology thus increase the sales of a company on a broader prospective.