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Role of Market Segmentation in Marketing Decision Making

Market segmentation is the act of identifying and profiling distinct groups of buyers who might prefer or require varying products and marketing mixes. It is a process of dividing the total market for a good or service into several groups, such that the members of each group are similar with respect to the factors that influence demand. It plays a vital role in marketing decision-making. Market segmentation plays the following roles in marketing decision making. They are:

1. Identification of market opportunities

Without segmentation organization cannot find the needs of customer easily. Organization can identify the market opportunities like most profitable sectors, through well segmentation.

2. Understanding of the customer

A segmentation perspective leads to more precise definition of the market in terms of consumer needs. Segmentation thus improves management’s understanding of the customer and more importantly, why he/she buys.

3. To direct marketing programs

Management, once it understands consumer needs, is in a much better position to direct marketing programs that will satisfy these needs and hence parallel the demands of the market.

4. Strengthen management capabilities

A continuous program of market segmentation strengthens management capabilities in meeting changing market demands.

5. To assess competitive strengths and weakness

Management is better able to assess competitive strengths and weakness of greatest importance; it can identify those segments where competition is thoroughly entered. This will save company resources by forgoing a pitched battle of locked-in competition, where there is little real hope of market gain.

6. Systematic planning

It is possible to assess a firm’s strengths and weakness through identifying market segments. Systematic planning for future markets is thus encourages.

7. Efficient allocation of marketing resources

Segmentation leads to a more efficient allocation of marketing resources. For example, product and advertising appeals can be more easily coordinated. Media plans can be developed to minimize waste through excess exposure. This can result in a sharper brand image, and target consumers will recognize and distinguish products and promotional appeals directed at them.

8. Market objectives

Segmentation leads to a more precise setting of market objectives. Targets are defined operationally, and performance can later be evaluated against these standards.

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