Market Segmentation

One of the first steps in developing an overall marketing strategy is to perform a market segmentation analysis, as a way to manage the strategy development process and ensure its effectiveness and success. The concept behind market segmentation is intuitive and relatively simple. Market segmentation is simply taking a look at the overall market for your product and service and thinking of it in terms of smaller, more manageable pieces.

Think of market segmentation as what Bert and Ernie from

Sesame Street sing about when they suggest “One of these things is not

like the other ... one of these things doesn’t belong.” In a sense, that’s what we are doing when we segment a market—we are looking at the whole and trying to determine how we can group the mass market into smaller groups that, while different from each other, within the groups are more alike.

Once we have identified these sub groupings, we can target which of these market segments are likely to be the most productive and be the best fit with our company’s strengths and competitive advantages. A well-used example of market segmentation is the way the players in the hospitality industry look at the market for hotel/motel rooms. Rather than take a “one size fits all” approach to this market, a company like Marriott looks at the overall market and segments it into several smaller, but more focused market segments. For the “travel and leisure” segment of the overall hotel/motel market, Marriott’s Fair field Inn is located near major tourist attractions, is budget priced, and appeals to families. For the middle-level manager who travels a lot and

wants some comforts of home while on the road, the Courtyard by Marriott is located near businesses and has a residential “feels like home” atmosphere. For CEOs and top-level executives, Marriott’s Ritz- Carlton has all the upscale amenities and top-level customer service that presidents and CEOs of business and industry are used to and expect when they travel. Note in these examples how Marriott has bro- ken this overall mass market into more manageable, more focused segments, and, importantly, how its marketing strategy for each segment is tailored to that segment.

By applying the principles of market segmentation, marketers can make better use of their marketing budgets and more efficiently man- age their overall marketing strategy.