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Market Segmentation Process
Market segmentation involves a major commitment from the organization, influences its product development and refinement, and focuses its communications to its marketplace. For a market segmentation strategy to succeed:
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Senior management must make the strategic decision to segment the market, with the intention of appealing to the more profitable segments of the existing market, or developing new markets for existing products and services.
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The marketing department must be able to interpret the results of the marketing research, and develop alternative marketing strategies, pricing, and promotion or distribution systems.
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The research and development function must be able to come up with products or services for the targeted market, either by refining existing ones or by developing new ones.
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Production of the product or service must accommodate the changes.
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The finance function will need to report earnings and expenses by market segments, and support the marketing department in assessing customer satisfaction and response to the changes. Implementing a segmentation strategy has three components:
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Identifying the market segments
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Choosing which one(s) to focus on, and
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Positioning your organization to take advantage of those choices.
In identifying a market focus, the segments should be focused on the clearly identified customers, have access to actual customers within that segment, and measurable, in the sense of producing profit. Choosing which segments to focus your efforts on is a strategic issue, based on identifying your target customers' needs, understanding what the rest of your competition is doing regarding your market.
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