Identifying the target market starts with segmentation. Once you recognize your customers and are able to segment the market, you deserve to identify the target market with the most potential. There is a procedure of segmenting the market and then selecting and reaching the target segments. The process has five steps as shown in the figure below.

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Market segment Process.The process of sector segmentation is composed of 5 steps: 1) team potential buyers right into segments; 2) group commodities into categories; 3) build market-product grid and estimate market sizes; 4) select target markets; and 5) take marketing action to with target markets.

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Step 1: group Potential Buyers into Segments

There are five main criteria to use when creating the segments:

Potential for increased profit: segment is costly. Businesses use segmentation just if it will certainly lead to higher profits. If over there is no chance of increasing profits, then there is no need for segmentation.Similarity of requirements of potential buyers in ~ a segment: Potential consumers who space in the very same segment must share comparable needs and wants. Businesses take marketing actions in the direction of each segment and they expect to acquire the very same reaction native the consumers who are in the exact same segment.Difference of needs of buyers among segments: Potential consumer who room in various segments must have different needs and wants. If lock share similar needs and wants, they must be in the same segment. Various segments require different marketing actions, which way greater costs. It help to reduced the prices if the firm combine the segments that space not substantially different so that it reduce the number of marketing actions.Potential the a marketing activity to with a segment: getting to a segment requires efficient marketing actions. If the actions room very complicated or impossible to take climate there is no allude in segmentation.Simplicity and also cost that assigning potential buyers come segments: As stated earlier, segmentation is costly. It calls for research come identify particular needs the potential buyers. If the research shows the needs are really diverse and that trying come segment will result in so plenty of micro segments to i beg your pardon it will certainly be very costly to reach the end then there is no allude in segmentation.

When segmenting, we have the right to pick from many segmentation variables. Over there are 4 main dimensions of segmentation: Geographic, demographic, psychographic, and behavioural segmentation. The table listed below shows these dimensions and also the variables matching to every dimension.


Main DimensionsVariablesTypical BreakdownGeographic SegmentationDemographic segmentationPsychographic associationBehavioural segmentation
RegionAtlantic provinces, Quebec, Ontario, Prairie provinces, brothers Columbia
City or census metropolitan area (CMA) sizeUnder 5,000; 5,000-19,999; 20,000-49,999; 50,000-99,999; 100,000-249,999; 250,000-499,999; 500,000-999,999; 1,000,000-3,999,999; 4,000,000+
DensityUrban, suburban, rural
ClimateEast, west
AgeInfant; preschool; child; youth; collegiate; adult; senior
GenderMale, female
Family size1-2; 3-4; 5+
Birth eraBaby Boomer (1946-1964); Generation X (1965-1976); baby Boomlet/Generation Y (1977-1994)
Marital statusNever married; married; separated; divorced; widowed
IncomeUnder $10,000; 10,000-19,999; 20,000-29,999; 30,000-39,999; 40,000-54,999; 55,000-74,999; 75,000+
EducationGrade school or less; some high school; high college graduate; part university; university graduate
RaceWhite, Black, Asian, Native, Other
Home ownershipOwn home; rental home
PersonalityGregarious; compulsive; extroverted; introverted
Lifestyle (PRIZMS)Grads & Pads; new Air Families; our Time; Pets and PCS; etc.
Benefits soughtQuality; service; low price
Usage rateLight user; tool user; heavy user
User statusNon-user; ex-user; prospect; first-time user; consistent user
Loyalty statusNone; medium; strong

Step 2: Group assets to be Sold right into Categories

Businesses pay close attention to the differences in the needs of consumer in each segment. In bespeak to address the needs in the best way possible, businesses produce differentiated products. These assets could be different based upon the attributes of the product, pricing, distribution, etc. As you have learned, companies have full control over the marketing mix facets (4Ps) which permits them to develop different mixes of the 4Ps to produce differentiated products.

Segmentation and green consumerism

It is an extremely common to apply demographic segmentation, or segmenting a sector based on populace characteristics. However, there are many other variables that can be used, as you have actually seen in the graph above.

In addition to the variables provided so far, there is also segmentation based on environmental friendliness. Service providers with a green focus pay attention to segment aligned v consumers’ eco-friendly orientation.

One important point is the segmentation have the right to be done making use of a mix of various variables fairly than simply a solitary variable. Using a solitary variable is likewise fine but in many cases a single demographic variable may not be adequate in understanding and segmenting a offered market. As a result, marketers incorporate a number of variables that can be appropriate to your target market.


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Example:Cosmetics companies, such as Clinique, integrate many variables in your segmentation, specifically gender, income, and also occupation. This variables help to identify segments for various lines of cosmetic products.


Step 3: construct a Market-Product Grid and Estimate size of Markets

You have seen an instance of a market-product grid from Sleep Country. Listed below is secondary example indigenous a rapid food restaurant that is located next to an urban university. We brand the industry segments in the horizontal rows and products in the upright columns as presented in the table below. The sector sizes are estimates from zero come three. Zero way no potential. One represents small potential. 2 represents medium size potential. Three shows the many potential.


Products: MealsMarketsBreakfastLunchBetween-meal SnackDinnerAfter-dinner SnackStudentDormitoryApartmentDay commuterNight commuterNon-studentFaculty or staffLive in areaWork in area
01303
13311
03210
00132
03110
01221
03010

The blue-shaded area in the table mirrors the target markets. The reason behind the selected target sector is coming from the potential industry size estimates. Over there is nearly no potential because that breakfast. For that reason, the restaurant made decision not to serve breakfast in ~ all. The non-student segment is likewise eliminated native the target market because of lower potential contrasted to the student segment. The restaurant still offer non-students but all marketing activities are directed towards students due to the fact that they are promising the greatest market dimension estimates.

Step 4: select Target Markets

Once you develop a market-product grid, the is reasonably easy to recognize the target industry from the grid based upon the greatest market dimension estimates.

The net is the tool to use when picking a target market.

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Critical thinking Activity:Develop a market-product grid for your group project. Remember the you space not identifying their present target market. Rather, friend are developing the grid based upon yourmarket-product strategy and also segmentation.

1. The very first step in segmenting and targeting sectors that attach customer needs to marketing action is to