While developing effective marketing strategies and plans, managers refer to segmenting the market in order to determine the areas in which the product or services will be proposed. The overall levels of segmentation include the mass market, the segments, niches, and individuals. The managers choose whether to compete within the mass market, the certain segment, the specific niche, or be oriented to individuals. When segments are selected, the managers focus on their characteristics and differences in order to address the chosen category directly. In their turn, the segments as groups of customers with specific needs and expectations in the market can be determined with the help of focusing on variables or differences of potential customers.
The process of dividing the market into segments includes the focus on variables or characteristics of customers. Traditionally, the managers divide the market into segments while referring to such variables as behavioral, geographic, psychographic, and demographic ones. The whole process of the segmentation includes several steps like the identification of the buyers’ profile with the focus on their interests and needs. At this stage, the managers select customers with references to their demographic characteristics such as age, gender, ethnicity, religion, family size, education, and income among others. They also pay attention to the psychographic elements like personality traits, their specific lifestyles, and visions in order to create the complete profile of the ideal customer. In this context, the potential buyers can be divided into innovators, thinkers, achievers, experiencers or survivors, believers, strivers, and makers. The next step is the focus on the behavioral segmentation. It is important for the managers to select the category of customers according to their attitude and actual responses to the product. The segmentation is realized according to the decision roles or behavioral variables. Then, the managers select the specific market segment or several segments to start operations in them. The managers also rely on the geographic segmentation, and they determine which countries or cities they will serve or where the products can be purchased effectively.
The market segmentation can be discussed as effective when certain criteria or requirements are addressed. First, the managers need to focus on measurable markets. It means that the segment’s features such as the number of potential customers can be measured. Second, the segment should be substantial in terms of its size and potential advantages. It is profitable to serve large markets selected according to the careful segmentation process. The next requirement is the accessibility. It is important for the company to identify segments that can be easily served. In addition, segments need to be differentiable. It means that segments need to differ from each other in terms of the customers that are included in them. One more requirement is that the segment needs to be actionable. The managers should have the opportunity to formulate and develop effective programs to address segments.
Business markets are segmented like consumer markets, but there are also additional variables. As a result, the business markets are determined with the focus on demographic variables, numerous personal characteristics, operating variables, specific purchasing approaches, and definite situational factors that influence segments. Demographic variables include the segmentation according to the company’s size, industry specifics, and the company’s location. Operating variables refer to the customer technologies and capabilities. Purchasing approaches include all policies and rules associated with the process of purchasing the product or service. Situational factors include the order specifics and its urgency. Personal characteristics are important to determine the loyalty factor and attitudes.
Markets can be targeted as mass markets, segments, niches, and individuals. It is a challenging task for a company to identify the most attractive market to target, and this process should be based on the certain kind of analysis. It is necessary to measure the attractiveness of the market segment with references to its size, number of potential customers, and its accessibility. However, it is also necessary to correlate the attractiveness of the segment with the company’s specific goals and capacities. Thus, it is important to choose target markets in terms of their size, the potential for the development, profitability, and minimal risks. The correlation with the company’s objectives is a necessary condition because the market that is discussed as generally attractive can be inappropriate for the company because of available resources and set goals. The company can choose the full market coverage while having enough resources; the specialization in several segments to address more consumers; the specialization in only one segment while having the limited resources and the narrowly targeted product; and the individual marketing when the number of potential customers is rather low.
Example 1: HSBC – The World’s Local Bank
The concept of marketing segmentation implies that the business or the company will evaluate the market and segment it in the groups of those who are most likely to become their customers. Compared to the mass-market strategies, marketing segmentation does not treat the whole market as potential clients. If a company chooses segmentation, it needs to develop unique techniques that will be used to attract the target market. In the case of HSCB, the bank needed to review their target market carefully, segment it according to variables in each country, choose the right techniques that would target the consumers efficiently, and position itself according to its slogan “the world’s local bank”.
Segmentation of each market in every country where the bank operates can easily fail if the bank does not review the target market with the greatest attention. Moreover, each of the markets will require specific targeting strategies that can be completely opposite in two different countries. Moreover, even if the bank selects a successful strategy, it is quite possible that some consumers will find it unappealing. At last, market positioning of the company will also require serious investment and understanding of the local markets, which can be very challenging if one has to advertise its business in more than 85 countries. Nevertheless, the bank seems to have a profound approach to target market because it implements completely different strategies depending on the city.
As to the question about the HBSC’s recent campaign, it can be said that it reflects the bank’s aim to establish close relations with its international customers and, at the same time, stress the multiple viewpoints that these customers might have. Nevertheless, the pictures printed as ads might not be as successful as it appears. Since the bank’s customers can only be citizens that are 16 years old (or older/younger, depending on the country), it seems unclear why the bank had decided to put a picture of a child’s accomplishment. On the one hand, it seems that the bank tried to target children as their customers. On the other hand, this ad probably had focused on the customers who had children of the same age and saw the success of their children as their accomplishment as well. Other pictures that were also used had focused on different customers, including diesel heads, environmentalist, those interested in science or fashion, etc. Therefore, the bank’s recent campaign does resonate with the target audience, presenting different viewpoints and beliefs.
Example 2: BMW – The Ultimate Driving Machine
The German company BMW is a prominent example of successful market segmentation as it has created different types of cars for different consumers. Market segmentation implies that the company does not aim to use general mass-market strategies but rather segment the market into groups and decide, according to the consumers’ age, income, life cycle, local features, and other variables, what strategy is the best one and what product these customers are more likely to purchase. BMW has used segmentation in a particular way: it manufactured and advertised different types of cars according to the customers that it had segmented earlier. For example, yuppies of the 1990s were presented with excellent, fast, and sporty sedans that could reflect their life and approach to work. The 7 series, however, targeted the “upper conservatives” that were not interested in sporty cars but rather preferred comfortable and reliable vehicles.
Although BMW is a prestigious and luxury brand, it had also provided cars for the “modern mainstream” group – people who would generally prefer other cheaper brands to BMW’s cars. One could assume that the products offered by BMW are too different from each other and focus only on the specific target market. Nevertheless, one immediately recognizes a BMW car when one sees it; therefore, the company manages to find a particular approach to each of its markets, but at the same time, it never forgets to present its cars as “the ultimate driving machines”. These approaches are the pros of the BMW’s selective target marketing. On the one hand, the company could provide more lower-priced cars to the customers with moderate income. On the other hand, BMW is a company that specializes in luxury and prestige cars, and it will seem strange if it decides to present “simpler” vehicles.
It seems unreasonable to blame BMW for too selective targeting during the global financial crisis of 2007-2008. The company was not the only one that had to face the decrease in revenues during this period. One should not forget that the corporation produces prestigious products that are mostly affordable for the members of the upper class only. The crises lead both to the decline in sales and revenues as well as stop or even reverse of the wealth grow. Therefore, those who could be described as BMW’s potential customers probably regarded the cars of the company as too expensive to purchase during the recession.
Moreover, even the wealthiest customers would approach such purchase carefully because business investment usually declines during a financial crisis, also leading to a significant decrease in consumption. The drop in sales, however, was not as severe as one could predict. The segmentation strategy of the company remained the same during the recession years, but it is highly unlikely that it was the reason why BMW experienced a decline in its sales. It could have tried to retarget the market and manufacture vehicles that would be less luxurious and more affordable. However, if production of automobile series takes approximately several years, it would be entirely unreasonable to reframe the product lines due to the recession as it only lasted for two years. Therefore, BMW met a right decision, and the decrease in sales was connected to the global recession but not to their segmentation strategy.