Market segments are not divided according to product varieties or product series, but from the perspective of consumers (referring to final consumers and industrial producers) – the diversity and differences of consumer needs, motivations, and purchasing behaviors. Through market segmentation, companies can produce and market more accurately, thereby better serving customers.
1. Market segmentation is conducive to selecting target markets and formulating marketing strategies
The sub-markets after market segmentation are more specific, and the customer portraits are clear. Companies can determine their service objects, that is, target markets, based on their own business ideas, policies, production technologies, and marketing strengths. It is convenient to formulate special marketing strategies for smaller target markets. At the same time, in segmented markets, information is easy to understand and feedback. Once consumer needs change, companies can quickly change marketing strategies and formulate corresponding countermeasures to adapt to changes in market demand and improve the company’s adaptability and competitiveness. For example, the classic case of Procter & Gamble entering China, its shampoos include Rejoice, Head & Shoulders, Pantene, and Sassoon. Pantene focuses on nourishing and caring for hair, Rejoice makes hair smooth and supple, while Head & Shoulders focuses on removing dandruff, and Sassoon makes hair shiny and smooth. At the same time, in terms of price, Rejoice targets low-consumption groups, Sassoon targets high-consumption groups, and Pantene and Head & Shoulders target middle-consumption groups.
2. Market segmentation is conducive to exploring market opportunities and opening up new markets
Through market segmentation, enterprises can analyze and compare the purchasing potential, satisfaction level, and competition situation of each market segment, explore market opportunities that are beneficial to the enterprise, enable the enterprise to make timely production and off-site sales decisions, or formulate new product development plans based on the production and technical conditions of the enterprise, make necessary product technology reserves, grasp the initiative of product renewal, and open up new markets, so as to better adapt to market needs. For example, Quanmianshidai originally positioned itself as a medical gauze company. After its sales were blocked, it switched to the toilet paper market. In the face of fierce market competition, it ushered in a turnaround by re-segmenting the market, which can be described as “a new hope after a dark tunnel”.
3. Market segmentation is conducive to concentrating human and material resources into the target market
The resources of any enterprise are limited. By segmenting the market and choosing a target market that suits them, enterprises can concentrate human, material and financial resources to gain advantages in the segmented market. For example, Japan’s “White Lover” biscuits once wanted to break out of Hokkaido, but later found that it was more beneficial for the company to focus on the Hokkaido market.
4. It is conducive to enhancing the competitiveness of enterprises and improving customer loyalty
Through market segmentation, enterprises can grasp accurate customer portraits, so as to better meet customer needs, improve customer loyalty, make themselves less likely to be replaced by competitors, and enhance the competitiveness of enterprises.
In addition, after market segmentation, enterprises can produce marketable products, accelerate commodity circulation, increase production batches, reduce production and sales costs, improve the labor proficiency of production workers, improve product quality, and ultimately improve the economic benefits of the enterprise.