Market Segmentation Is the Basis for Differentiated Marketing Strategy

Choosing and Using Market Segmentation Strategies

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Just as there are different market segments for any given product or service, there are different approaches to constructing market segments. There are three main approaches to constructing a segmentation strategy:

  • Single Target Market Strategy
  • Concentrated Marketing Strategy
  • Full Coverage Marketing Strategy

Target Markets and Market Segmentation

When a business selects a market segment to which it will focus its marketing efforts, the business has identified a target market. Target markets are further divided into segments. These market segments are made up of consumers who share particular attributes that are relevant to a marketing effort.

A marketing strategy is a plan of action and a course of action that is selected from among several alternatives. Differentiated marketing strategies are almost always more effective than an undifferentiated marketing strategy. An undifferentiated marketing strategy does not consider the differences between market segments and uses the same marketing mix for all of the markets that are intended to be included in the target.

Marketing strategy pulls together ideas and actions related to particular consumer groups, including various methods of messaging and communication, distribution channels, and pricing structures. A marketing strategy brings together target markets and marketing mixes. A marketing mix consists of variables that can be manipulated to create the best connection with consumers. Traditionally, the variables in a marketing mix are known as the eight Ps:

  1. Product
  2. Price 
  3. Place 
  4. Promotion 
  5. Packaging 
  6. Programming 
  7. Partnership
  8. People

How Is Optimal Marketing Strategy Determined?

A benefit to differentiated marketing strategy is that it permits a closer analysis of the effectiveness of strategy on distinct consumer groups. Using market research analysis techniques, a thorough understanding of the fit between marketing strategies and market segments is possible. Armed with this information, marketers and business decision-makers can determine an optimal strategy for various customers and consumer groups.

A common method for analyzing the consumer constituency is to use a matrix or quadrant approach in which four categories of customers emerge. The market segments may be described as follows: 1) segments to maintain; 2) segments to convert; 3) segments to grow; and 4) segments to ignore. The logic behind target market segmentation dictates that the whole universe of markets cannot be addressed by the finite resources of marketing and advertising. It is necessary to target the markets with the most probability of success.

Market segmentation should provide clarity about the attributes of the target markets. The breakdown should look something like this:

  • Maintain - This market segment consists of core customers, who are often brand advocates. The customers in this market segment are attractive to the business because they are a good fit with the existing marketing mix and because they require very little effort to engage them with the brand. It is a good strategy to protect these customers from competitor attacks.
  • Convert - This market segment consists of consumers who can be attracted to the product or service, but currently this is not being maximized by the marketing mix. It is worth spending some resources on this market segment as targeting it effectively often only means that some element of the marketing mix must be manipulated or improved.
  • Grow - This market segment is an easy target as the consumers can be won over to the business with little effort. Generally, this market segment is not profitable at current levels so periodic reviews to examine the fit between the consumers and the marketing mix are essential. Changing the marketing strategy for this market segment can be profitable, so conventional market research methods, such as focus groups or ethnographic market research, can be productively employed.
  • Ignore - This market segment must generally be cut from the targeted market segments. The decision to do this can be difficult as market researchers and marketers are trained to work to find the fit.