Standardization European marketing strategies in Consumer Electronics Industry

Chapter 2        MARKET SEGMENTATION

 

Introduction

An important aspect of marketing and especially international marketing is the segmentation of markets. As Wind stated (Wind, 1978):”Segmentation provides guidelines for a firm’s marketing strategy and resource allocation among markets and products”. However, in literature, relatively few attention is paid to this subject. Most articles are limited to mathematical methods and the identification of specific segmentation bases.

 

In this chapter an overview of the literature about international market segmentation in general and concerning Pan-European market segmentation in particular is provided.

 

2.1         Market segmentation

 

Market segmentation is concerned with the methods and procedures of dividing markets into homogeneous groups of customers.

 

According to Kotler the modern strategic marketing can be described as STP marketing. This stands for Segmenting, Targeting and Positioning (Kotler, 1991). This strategy consists of three steps:

 

1.  Market segmentation:   The market segmentation step incorporates the identification of

segmentation variables and the segmentation of the market,

resulting in distinct groups of buyers who might require separate

products and/or marketing mixes. Besides, the identified

segments are profiled.

 

2.  Market targeting:           Market targeting consists of evaluating the attractiveness of each

segment and selecting the target segments.

 

3.  Product positioning:      Product positioning means identifying possible positioning

concepts for each target segment and subsequently developing and communicating the chosen positioning concept.

 

Sometimes ‘segmentation’ is confused with the term ‘differentiation’. This misconception is not entirely incomprehensible, because of the confusing relation between the two. According to Porter (Porter, 1989), a firm can appeal to a segment through either product differentiation or a low-cost/low-price. What sets segmentation apart is its scope. Segmentation avoids competition across a broad market by focusing on part of the market. By segmenting the firm tries to appeal especially to customers in that segment with either low prices or unique products.

 

Overlap occurs in situations where products are differentiated to appeal to segments. The terms themselves reveal their emphasis: market segmentation and product differentiation. With segmentation the attention is on the market, where differentiation is product oriented.

The relation becomes even more clear if one realizes that segmentation requires differentiation. To appeal to a segment a firm must change something real or imagined about the product. It is impossible to appeal effectively to a segment of the market without goods that are different from those sold in the mass market. Differentiation does not require segmentation. Product can be differentiated without appealing to a segment of the market.