Explain the importance Of Market Segmentation.

1. It allows the development of standardized marketing mix strategies: It helps in designing the marketing mix for the diverse customer groups that have different needs, preferences, resources and behaviors. Marketers group customers into market segments on the basis of common characteristics which allow developing a standardized marketing mix for all customers in this segment
2. It facilitates better serving customers needs and wants by tailoring product offering to a certain market segment improves customer satisfaction: It is possible to satisfy a variety of customer needs with a limited product range by using different forms, bundles, incentives and promotional activities.
3. Allows price differentiation and the opportunity to charge premium prices. It allows price increases in segments that are not price sensitive rather than increasing in the whole market i.e. it is possible to develop premium segments in which customers accept a higher price level. For instance, using discriminatory pricing based on geographic variables or regional price segmentation.
4. Creates Opportunities for Growth through niche marketing: Targeted marketing plans for particular segments allow to individually approach customer groups that otherwise would look out for specialized niche players. By segmenting markets, marketers can create their own ‘niche products’ and thus attract additional customer groups. It assists recognizing gaps in the market that are not served at all or under-served.
5. Provides opportunities for new product development or extension of the existing product or service range. by identifying niche segments. The marketer can spot and compare marketing opportunities. The marketer can examine the needs of each segment and determine to what extent the current offering satisfies these needs. Segments which have low level of satisfaction from current offerings represent excellent opportunities for the marketer.
6. Forms the foundation for the allocation of organizational resources to the various segments . With the help of knowledge about different segments, the marketer can better allocate the total marketing budget. Differences in customer response to different marketing tools serve as the basis for deciding on the allocation of market funds to different customer groups.
7. Enables the firms to create customer loyalty by establishing sustainable customer relationships in all phases of customer life cycle .
8. Targeted communication. It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all market segments. Such a targeted communications allows to stress those criteria that are most relevant for each particular segment (e.g. price vs. reliability vs. prestige).
9. It stimulates innovation/new product development . It assists recognizing gaps in the market that are not served or under-served. These can provide areas for new product development or extension of the existing product or service range. Management can identify new profitable segments which deserve special attention.
10. Increase in competitiveness. Increases market share and brand loyalty which reduces chances of a new competitor entering might be low.
11. It creates competitive advantage which helps it stand out the competition and may secure continued growth and revenue. Carefully and accurately defined market segments gives the firm a competitive advantage over competitors. Essentially, the firm that best understands what makes customers unique within a segment, and different from one segment to the next, wins.
12. Creates stronger positioning: Marketing tactics allow you to implement campaign strategies, such as marketing schemes to reach your target audience. Furthermore, marketing schemes like campaign tactics support campaign objectives. Promotional strategies become more efficient as the company only contacts those they believe will be interested in their products.
13. Leads to improved communication or promotional efficiency by dividing customers into defined segments. This facilitates developing tailored media messages. Segmenting markets and selectively distributing marketing messages improves the value of the message.
14. It helps small firms to compete in the marketplace by creating defensible niches in the market.
15. Results in market expansion through territorial expansion – Geographic segmentation is one type of segmentation where expansion is immediately possible. If you have your market strategy on the basis of geography, then once you are catering to a particular territory, you can immediately expand to a nearby territory. In the same way, if you are targeting customers based on their demography then you can expand in similar products ..
16. Increases profitability by increasing competitiveness, brand recall, brand equity, customer retention, communications. Thus if it is affecting so many factors of your business, then definitely it affects the profitability of the firm.

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Lellah answered the question on November 5, 2021 at 06:47