Suppose you were given the job of getting chocolates for an entire class of students for a special party. The supervisor asked you to ensure that you did not get just one kind of chocolates to cater to every type of preference. However, you were allotted a budget that meant that you could not just buy every brand on the market.
Therefore, you shortlisted some 7 brands and decided that you will decide to buy only 3 brands depending on whichever ones the children in the class most voted for. So, when you did get the votes, you found the three most favored brands and got the chocolates. Essentially, you divided the market (class) into different groups (segments) to find the right chocolates (offering). A concept often used in marketing called market segmentation.
Market Segmentation in Modern Times
Although the idea of segmenting the markets for research and satisfying more and more customers is ancient, it is still in practice today. In fact, eCommerce sites make use of tools such as magento 2 customer groups to create distinct groups of customers to easily satisfy everyone’s wants an gather information.
However, this makes one wonder why the concept is still in practice today. Here are some reasons that make Market Segmentation such a timeless tool:
Mass Marketing is not the Way to Go
In the modern day and age with multiple sellers looking to grab the market, Mass Marketing is not a safe bet for any company. Of course, using just one strategy to reach the entire market will get the attention of customers, but it will never satisfy the specific markets that exist everywhere. To achieve effectiveness, therefore, segmenting the market is an imperative step.
Segmentation allows for a better matching
If you remember how the barter system worked, you might recall that it required a double coincidence of wants. Although the introduction of paper money solved that problem, it still lingered in one form or the other. In this sense, the market segmentation is an essential tool to ensure that each customer gets what they want. How? Segmenting the market allows more focus on groups of individuals and hence a better response to that group’s wants and hence better matching.
Often when a segment tends to become too large in comparison to other ones owing to focused marketing strategies and better offerings, businesses find it easier to grow those segments. In growing these very segments, they often develop into full-fledged business units generating huge revenue and value for the business while diversifying their portfolio.
Everything about market segmentation is not just about the business benefits. The customers, when they find that their demands are being met better in a group, tend to stick with that group in that brand. As a result, the business finds that their customers are retained more and find it easier to create brand loyalty and hence can regularly sell their products.