You will recall that it was earlier stated that the essence of the marketing concept is the idea of placing customer needs at the centre of the organizations decision-making. At the heart of the marketing concept is a process of STP figure twenty-one. This starts with trying to understand the market by segmenting it.
Markets are rarely simple; they are complex consisting of a variety of buyers with disparate motives, backgrounds all leading to different needs and wants. Markets also have disparate macro-environment factors affecting them; different levels and types of competition and several other factors also mean that markets are rarely homogeneous.This means as marketers we need to adopt an approach that considers such factors as increased competition, better-informed and-educated customers and, most importantly, changing patterns of demand. It is this later factor that has primarily given rise to the need to segment markets. This stems from the fact that higherstandards of living and a trendtowards individualism has meant that consumers are now more able to exercise their choice in the marketplace. Witness the growth of consumerism in emerging markets - China is a good case in point where increased growth in Western style luxuries and other Fast moving consumer goods (FMCG) has been rampant in the last decade as more liberal market controls have been introduced.
Market segmentation can be defined as the process of breaking down the total market for a productor service into distinct sub-groups or segments where each segment may conceivably represent a separate target market to be reached with a distinctive marketing mix. Segmentation and the subsequent strategies of targeting and positioning start by recognizing that increasingly, within the total demandmarket for a product, specific tastes, needs and demand may differ. It breaks down the total market for a productor service into individual clusters of customers, or segments. Here, customers who share similar demand preferences are grouped together within each segment. STP is used to;
- Segment; determine which kinds of customers exist, then
- Target; select which ones we are best off trying to serve and, finally,
- Position; implement our segmentation by optimizing our products/services for that segment and communicating that we have made the choice to distinguish ourselves that way.
Generically, there are three approaches to marketing and this reflects into the STPneeds of each strategy. In the undifferentiated strategy, all consumers are treated equally and the company makes no effort to satisfy particular groups. This usually only works for commodities where the product is standard and where one competitor really cant offer much more any other. Here there is little to no need for segmentation.
In the concentrated strategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors. All low cost or budget airlines follow a concentrated strategy. They therefore need to understand the particular segment they are operating in depth but not the wholemarket.
In contrast, most scheduled airlines follow the differentiated strategy: They offer a variety of classes and tickets, geared to convenience, prestige, etc. in an effort to capture as much of the disparate needs of travellers as they can. They need to understand the whole market and to be able to segment it on differing customer needs.