Page 231 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes There are three steps in designing a customer driven marketing strategy, namely, market
segmentation, targeting and positioning. Market segmentation is the process of dividing the
total market into relatively distinct homogeneous sub-groups of consumers with similar needs
or characteristics that lead them to respond in similar ways to a particular marketing programme.
A market segment is a portion of a larger market in which the individuals, groups, or
organisations share one or more characteristics that cause them to have relatively similar product
needs. In this unit, you will be introduced to the three-decision processes comprising market
segmentation, target marketing, and positioning that are closely related and have strong
interdependence and essentially need to be examined carefully and implemented to be successful
in managing a given product-market relationship.

9.1 Segmentation

9.1.1 Requirements for Effective Segmentation

Five conditions must exist for segmentation to be meaningful:
1. A marketer must determine whether the market is heterogeneous. If the consumers’ product
needs are homogeneous, then it is senseless to segment the market.
2. There must be some logical basis to identify and divide the population in relatively
distinct homogeneous groups, having common needs or characteristics and who will
respond to a marketing programme.
3. The total market should be divided in such a manner that comparison of estimated sales
potential, costs and profits of each segment can be estimated.
4. One or more segments must have enough profit potential that would justify developing
and maintaining a marketing programme.
5. It must be possible to reach the target segment effectively. For instance, in some rural
areas in India, there are no media that can be used to reach the targeted groups. It is also
possible that paucity of funds prohibits the development required for a promotional
campaign.

As more and more identifying characteristics are included in segmenting the market, the more
precisely defined are the segments. However, the more divided a market becomes, the fewer the
consumers are in each segment. So, at least in theory, each consumer can be considered as a
separate segment. An important decision for the marketer is how far to go in the segmenting
process. A market niche is composed of a more narrowly defined group of consumers who have
a distinct and somewhat complex set of needs. A niche market is smaller in size but may prove
to be quite profitable if served properly. Consumers in a niche are ready to pay a premium to
the marketer who best satisfies their needs.

Example: G4 Power Mac computers serve the needs of a niche market, while PCs serve
rather large market segments.

9.1.2 Bases for Segmentation

Selecting the right segmentation variable is critical. For example, small car producers might
segment the market on the basis of income but they probably would not segment it on the basis
of political beliefs or religion because they do not normally influence consumers’ automobile
needs. Segmentation variable must also be measurable to segment the market accurately.

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