By N2H

Market Segmentation process

October 24, 2007

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Process of Market Segmentation:

identify possible Market Segments

The marketer first explores various ways to divide the market into segments. In identifying segments a marketer should make decisions that support the organization’s mission and objectives e.g. a retailer who aims or whose objective is to sell goods at the lowest price, will tend to segment the market on the

Product Mix:

Marketers evaluate the organizations product mix by considering its width, depth and consistency. Width of the product refers to the number of product lines handled by the organization.Depth refers to the average number in each product line. Consistency refers to the similarity of product lines.

A narrow and consistent product mix lets the organization specialize in some types of products. Such an organization can build a reputation as an expert in a particular area. A wider product line can be useful when an organization wants to increase sales by serving more customers. Offering many kinds of products can protect the organization from a big drop in sales if customers use interest in one product.

However when there are many choices within a single product line, the organization runs a greater risk of cannibalization in one product taking sales away from another product mix. A product mix is a group of products related in some way.

IBM PC organization has 3 product lines i.e

- entry level computers branded PS/1

- high and personal computers branded PS/2

- aggressively priced value pointline positioned between PS/1 and PS/2. This can be considered to have a narrow product line.

However carbon companies have a wide product line in that they have a large network of travel agents and they encourage clients to stay at their hotels and resorts and also offer varied marketing service through their carbon marketing group. Line extension is a strategy where one ads a new product to an existing product line.e.g Omo with powerfoam.

Product Mix:

Product mix is the total collection of products sold by an organization. It is also referred to as product assortment or product portfolio.

To manages the product mix, marketer can

(i) Modify Products

This involves modifying any aspect of a product, including features of the product, packaging or services provided to customers. modification is important when a product is still profitable but some changes in environment (eg new safety standards, environmental standards etc) make the product less optimal.

(ii) Discontinuing Products:

A marketer should use this strategy if there is no other strategy to be used. The marketer should analyse if the sales and profits are likely to improve, where the product is in the lifecycle.

Deciding to discontinue is difficult because such a decision has potentially great impact i.e. customers of the product will be disappointed, you may have to retrench the production staff.

Discontinuing a product may allow the organization to focus its resources to more profitable products.

(iii) Adding products:

Adding a new product to the product mix may improve sales and the organizations profitability. The new products may be line extension or a whole new product.

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