Conceptual Model/Guide for Evaluating Market Segments, Research Paper Example

Segmentation of the market is literally the process of classifying a market into groups of buyers with different wants or behaviour who may desire different mixes in marketing or separate products. These segments need to be evaluated for better performance. Generally, segments evaluation involves taking into consideration three factors which are: the segment’s structural attractiveness, its size and growth and the company’s objectives and resources.

Francisco J (1996) explains about the different methodologies used in evaluating and selecting market segments. The processes would run from analysing academic contributions to checking their relevance in the professional circles. The most common methods are then concentrated on hence the tendency of experts to aim at evaluating different segmentation techniques. Dibb (1999) on the other hand comes up with a checklist of criteria whose completeness is difficult to judge and very little guidance is given about its application. Still on the criteria, the article contradicts itself on the types of criteria needed. It mentions three types which are focussing on the before, during and after the segmentation process while the market segmentation literature focuses on the ‘during and after’ stages. The factors that assist in segmentation are therefore ignored which should not be the case.

The major differences on the Scholarly and practitioner articles are therefore brought about by the inability to firmly select a specific criterion to evaluate a market segment with. These differences in scholarly journals to identify conceptual models and theoretical frameworks for evaluating market segments hence need to be streamlined and common methods and techniques of evaluation established so that there can be a standard way of evaluating segments.

The general process of evaluating a market segment is first collecting and analysing data on current segment sales, growth rate and expected profitability for various segments. A segment that has the right size and growth characteristics will be more appealing. The company also needs to examine major structural factors that affect long run segment attractiveness for example aggressive competitors, strong substitute products, relative power of buyers, existence of powerful suppliers. The company must also consider whether it posses the needs and resources to needs to succeed in that segment. A segment might be a poor choice from an environmental, political or social responsibility view point. The company should enter segment only in which it can offer superior value and gain advantages over competitors.

As stated above there could be different processes of determining market segment and this would vary depending on the type of segment. In a consumer market, different variables such as the geographic, behavioural, demographic and psychographic would be considered while a business market would factor the operating variables, purchasing approaches, situational factors and personal characteristic.

There are forces that have some effects on market segments. These forces could either be external or internal. Olsen (2008) discusses both the internal and external forces affecting a segment. The internal forces are mainly the Strengths and weaknesses of a segment while the external are its opportunities and threats. These forces are further narrowed down to the size and growth of the segment, its profitability, the competitors’ cost and value-added components, distribution systems, the market trends, resources and key success factors. The external forces are mainly generalized as the environmental factors which consist of political, technological, economical, sociocultural and future.

These forces have different effects on the segments. They could either result to causing risks or benefits. Benefits would arise in instances like; favourable economy-where the interest rates and inflation rates favour the segment, lenient government policy, development of technology which advances the segment operations and an overall competitive advantage over the competitors. However, these forces could also bring forth risks which would be brought about by stringent government regulation, unfavourable social cultural trends and scarcity of resources at disposal of the segment.

In trying to differentiate between market segmentation and product differentiation, Dickson and Ginter (1987) conclude by stating that both have a great significance in market strategy. Market Segments play a very important role in market strategy. While developing a marketing strategy, there is need to determine the market coverage and the positioning strategy. This is where market segments come in handy. They generally assist the marketing team in deciding what strategies to adopt depending on different segments. It therefore becomes easier to satisfy customers because the marketers know what each segment requires.

References

Dibb (1999). Criteria guiding segmentation implementation: reviewing the evidence. Journal of Strategic Marketing, Volume 7, Issue 2. Retrieved on February 6 ,2010 from   http://www.informaworld.com/index/B4QUL3YRYN7624MQ.pdf

Dickson P. R. and Ginter  J. L. (1987). Market Segmentation, Product Differentiation, and Marketing Strategy. Journal of marketing: Vol 51, 1-10.  American Marketing Association.

Francisco J (April 01, 1996 ). Model for market segments evaluation and selection. European Journal of Marketing. Sarabia, Francisco. Retrieved on February 6 ,2010 from   http://www.accessmylibrary.com/article…/model-market-segments-evaluation.html

Olsen E.  (2008). Internal and External Analysis. Retrieved on February 6 ,2010 from http://mystrategicplan.com/resources/internal-and-external-analysis/