Advantages and disadvantages of market segmentation

Importance of market segmentation in retail

In this case naturally mobile company which has divided the market into different segments will perform better than the company which manufacture only 1 type of mobile. Share on Facebook Market segmentation is an important part of modern marketing because it helps an organization identify different audiences. Production and stock-holding costs- high than for the option of just producing and stocking one differentiated product. Promotional costs - high as different advertisements and promotions might be needed for different segments- marketing economies of scale may not be fully exploited. They help the marketer to evaluate the results of his marketing programme. Behavioral Market Segments Whereas demographic marketing has traditionally been one of the most common approaches to marketing, behavioral targeting is now becoming one of the most appealing ways of advertising to the public. Disadvantages of Market Segmentation The first and foremost disadvantage of market segmentation is about the wrong selection of a segment, so if the company chooses wrong market segment which is too small or irrelevant for the business of the company then the company will not be able to sell its product. A market is the aggregate of consumers of a given product. Segments fall between the two extremes of total homogeneity and total heterogeneity. Sometimes, market segmentation becomes an expensive proposition. Since marketing segmentation includes finding out more about the regional tastes and preferences of new audiences, businesses can learn a lot from their market research.

For all of these reasons, it is important for businesses to perform the kind of market research that helps them better understand the tastes and preferences of the different segments of their audience. Though market segmentation offers a lot of advantages, it has some limitations with respect to cost and market coverage.

Disadvantages of market segmentation tutor2u

Now-a-days, segmentation has attained a high degree of sophistication. Behavioral Market Segments Whereas demographic marketing has traditionally been one of the most common approaches to marketing, behavioral targeting is now becoming one of the most appealing ways of advertising to the public. Market segmentation helps the marketer divide the heterogeneous market. Sometimes, market segmentation becomes an expensive proposition. By tailoring the marketing programmes to individual market segments, marketers perform their tasks effectively. Marketers segment the market and try to fulfill the needs of that segment. For example an air conditioner manufacturing company will divide the market according to weather in different areas of the country, same is the case with ice cream manufacturers as they will benefit from selling their ice creams in areas where temperatures are high than those areas where temperatures are low. A market is the aggregate of consumers of a given product. Disadvantages or Limitations of Market Segmentation 1. In this case naturally mobile company which has divided the market into different segments will perform better than the company which manufacture only 1 type of mobile. Marketing efforts are focused on the well defined needs of the segment.

Expansion and Profits By reaching out to new audiences while retaining existing ones, businesses are able to expand. Now-a-days, segmentation has attained a high degree of sophistication.

challenges of market segmentation

Best time to introduce new products, advertising etc. As one can see from the above that market segmentation has benefits as well as limitations and a company before deciding about segmenting its market should look first its product range, financial position, competition, consumer taste and so on.

Understanding what different consumers want can also make a business leaner and more focused. However, a wider customer base, business expansion and increasing profits are just a few of the market segmentation benefits.

Differentiated marketing strategies-focused on target market groups.

Advantages and disadvantages of market segmentation

Behavioral Market Segments Whereas demographic marketing has traditionally been one of the most common approaches to marketing, behavioral targeting is now becoming one of the most appealing ways of advertising to the public. Segments fall between the two extremes of total homogeneity and total heterogeneity. It helps the marketer concentrate on the fulfillment of the well defined needs of the specific segment. Within any given market, potential customers can be divided by characteristics such as age, income or even personality traits. Extensive market research needed. Another disadvantage of market segmentation is that it involves additional expenditure on the part of the company in the form of advertising, so in the above example a mobile manufacturer has to incur additional advertisement expenses for advertising mobile for young people apart from normal advertising expenses and if the benefit due to market segmentation is not there then the whole exercise of doing the market segmentation will be futile and wasteful expenditure. Efficient and economic marketing efforts: Segmentation makes marketing efforts both efficient and economic. The sales trend could not facilitate mass production.

Consider the example of mobiles if suppose a mobile manufacturer produces only one type of mobile which is costly and targeted only for rich people and another mobile manufacturer produces different types of mobiles like low cost mobile targeted at students and rural area, high cost mobile targeted for rich, mobile with good camera targeted at young people and so on.

Enables identification of gaps in the market - groups of consumers that are not currently being targeted - and these might then be successfully exploited.

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The Advantages of Marketing Segmentation