MARKETING MIX AND MARKETING SEGMENTATION

Marketing Mix and Marketing Segmentation

Marketing Mix and Marketing Segmentation

Although several factors are essential in determining the effectiveness and profitability of marketing segmentation as a managerial strategy, two of the most critical are identifiability and responsiveness. Originally proposed by Frank, Massy, and Wind , identifiability requires that market segments represent distinct groups of customers that are based on specific characteristics, or segmentation bases. (Galper, Gary, 2002) Because these identifiable segments must represent profitable targets to the firm, the criterion of responsiveness further requires that one or more of the segments possess a strong likelihood of differential response to alternative marketing-mix formulations.

This responsiveness criterion ensures that segments will react uniquely to subsequent marketing efforts directed toward them. (Galper, Gary, 2002) In practice, these two criteria are met by separating customers into distinct, internally homogeneous partitions, but so that measures of market responsiveness, or proxies of that responsiveness, are maximized across the partitions.

Introduction

One of the most critical decisions that managers make in multiproduct, multimarket firms are choices concerning what products to produce and which markets to address. (Galper, Gary, 2002) The competitive reality is that firms often select to serve only certain segments of a market with their product portfolio. Extensive research on market segmentation has led to highly sophisticated methods and models for unraveling buyer heterogeneity, identifying market structures, and designing marketing responses. However, past research has not addressed the fundamental segment selection problem. Segment selection is a highly complex and messy problem. It is a complex problem because there are many alternative courses of action, there are numerous dimensions to any particular course of action, and there is uncertainty regarding the outcomes of any choice. (Galper, Gary, 2002)

Segment selection is fundamentally a strategic process involving the evaluation of segments according to some relevant criteria such as measurability, substantiality, accessibility, responsiveness, and actionability. Wind suggests that it is important to evaluate the expected market response, product line implications, management objectives, and available resources. (Galper, Gary, 2002) In other words, segment evaluation entails strategic considerations of more than just the statistical difference between clusters. It should include consideration of customer tastes as well as the firm's ability and desire to serve the market. Thus, segment selection requires systematic identification and reconciliation of multiple decision criteria. The complexity and strategic importance of the segment evaluation and selection process suggests a need for a more structured approach to eliciting and explicitly modeling the tradeoffs among the multiple decision criteria.

Implementing a systematic procedure for multicriteria segment evaluation and selection is a modeling challenge that requires a blend of science and art. Organizations are made up of people who represent different functional areas that are measured against different goals and performance requirements. (Rangan, Rowland, Gordon, 2002) Thus, segment selection requires compromise rather than optimization or simply statistical testing. For example, marketing's primary objective is to satisfy customer needs with product and service solutions. Engineering's primary goal is to develop products that are functional and meet performance ...