Define the problem
Develop a research plan
Collect the data
Interpret data into information
Disseminate information formally in the form of a report
Market segmentation
Main article: Market segmentation
Market segmentation pertains to the division of a market of consumers into persons with similar needs and wants[15]. As an example, if using Kellogg's cereals in this instance, Frosties are marketed to children. Crunchy Nut Cornflakes are marketed to adults. Both goods aforementioned denote two products which are marketed to two distinct groups of persons, both with like needs, traits, and wants.
The purpose for market segmentation is conducted for two main issues. First, a segmentation allows a better allocation of a firm's finite resources. A firm only possesses a certain amount of resources. Accordingly, it must make choices (and appreciate the related costs) in servicing specific groups of consumers. Furthermore the diversified tastes of the contemporary Western consumers can be served better. With more diversity in the tastes of modern consumers, firms are taking noting the benefit of servicing a multiplicity of new markets.
Market segmentation can be defined in terms of the STP acronym, meaning Segment, Target and Position.
Segment
Segmentation involves the initial splitting up of consumers into persons of like needs/wants/tastes. Four commonly used criteria are used for segmentation, which include:
Geographical (a country, region, city, town, etc.)
Psychographic (i.e. personality traits or character traits which influence consumer behaviour)
Demographic (e.g. age, gender, socio-economic class, etc.)
Behavioural (e.g. brand loyalty, usage rate, etc.)
Target
Once a segment has been identified, a firm must ascertain whether the segment is beneficial for them to service. The DAMP acronym (meaning Discernable, Accessible, Measurable and Profitable) are used as criteria to gauge the viability of a target market. DAMP is explained in further detail below:
- Discernable - how a segment can be differentiated from other segments.
- Accessible - how a segment can be accessed via Marketing Communications produced by a firm
- Measurable - can the segment be quantified and its size determined?
- Profitable - can a sufficient return on investment be attained from a segment's servicing?
The next step in the targeting process is the level of differentiation involved in a segment serving. Three modes of differentiation exist, which are commonly applied by firms. These are:
Undifferentiated - where a company produces a like product for all of a market segment
Differentiated - in which a firm produced slight modifications of a product within a segment
Niche - in which an organisation forges a product to satisfy a specialised target market
Position
Positioning concerns how to position a product in the minds of consumers. A firm often performs this by producing a perceptual map, which denotes products produced in its industry according to how consumers perceive their price and quality. From a product's placing on the map, a firm would tailor its marketing communications to suit meld with the product's perception among consumers.
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