Stanisław Ślusarczyk, Maria
Wierzbińska
The Importance of the Policy of
Market Segmentation in the
Enterprise
Annales Universitatis Mariae Curie-Skłodowska. Sectio H, Oeconomia 28, 45-51
U N I V E R S I T A T I S M A R I A E C U R I E - S K Ł O D O W S K A L U B L I N — P O L O N I A
VOL. X X V III, 3 SECTIO H 1994
Z a k ł a d M a r k e t i n g u W y d z i a łu E k o n o m ic z n e g o F i l i i U M C S w R z e s z o w ie
S t a n i s ł a w Ś L U S A R C Z Y K , M a r i a W I E R Z B I Ń S K A
The Importance of the Policy of Market Segm entation in the Enterprise
Z naczen ie p o lity k i seg m en ta cji rynku w p rzed sięb iorstw ie
SEG M EN TA TIO N OF THE M A RK ET A N D SH A P IN G OF THE PRO M AR K ET CULTUR E IN EN TER PR ISE
In situations w hen th e m ark e t becomes a v e rifie r of production and lim its th e grow th in sales and p ro fitab ility of th e en terp rise every possible effort should be m ade to lessen or rem ove th e b a rriers to th e developm ent of the en terp rise. One m eans leading to m ore effective business activ ity is to segm ent th e m ark e t according to groups of custom ers and regions; besides, carefu l choice of m arkets helps to create a p ro m a rk et cu ltu re in th e e n terp rise. K ey elem ents of a p ro m a rk et c u ltu re are m o tivatio n to act m ore effectively and th e know ledge of the m ark e t w hich includes:
a) know ledge of th e needs of various groups of custom ers,
b) know ledge about decision m aking processes refe rrin g to purchasing, c) careful m apping of th e com petitors’ s tru c tu re and behaviour. If the m arket, th an k s to research on m arketing, is sufficiently clear to a producer, th e only thing he should find out is w h e th e r w ith in a certain m ark e t th ere are any segm ents w ith specific req uirem ents, modes of action and reactions to business practice. If so, th e n e x t step w ill be to w ork o u t a diverse m arketin g strategy.
As opposed to a classic stra te g y of ’’m ass m ark e ts” a segm ented m ark e t is characterized by a split/division of th e w hole m ark et into specific, hom ogeneous groups of custom ers. No such ’’segm ent of the m a rk e t” (i.e. p artial m arket, group of purposes) should be sim ilar to o th er segm ents — for th e sake of clear-cu t dem arcation and individualization. Instead of em barking on strong com petition, a businessm an — thro ugh th e segm entation strateg y — selects as th e sp h ere of activ ity those fields
46 S ta n isła w Ś lu sarczyk , M aria W ierzbiń sk a
of th e m ark et w hich can be used by him m ost effectively. Such a pro cedure offers th e following ad v a n ta g e s:
— g ettin g to know th e m ark e t and in d en tify in g b e tte r o p p o rtu n itie s and gaps in this m arket,
— tho rou g h linking of th e p roblem s in p a rtic u la r segm ents, — good chances for control (direct advertising to custom ers), — w inning supra-av erage price space,
— m ore efficient use of m aterial outlays on m arketing.
As a resu lt, ten d ers are suited to p a rtic u la r groups of custom ers (sat isfaction of special needs) and, at th e sam e tim e, a ttra c tiv e to th e e n te r prise (size of a m ark e t segm ent, purchasing power).
Gaining a m a rk e t position by e n te rp rise consists of creating th e m a rk e t and line com petence and th e concentrated use of m ark e tin g in stru m e n ts on th e selected m ark et. S egm entation of th e m a rk t is a hig hly indiv idu al in stru m e n t of controlling allocational decisions by ev ery en terp rise. It m akes it easier to define on w h at th e assets should be allocated, as w ell as w hen, how and w here its business activ ities should co n cen trate (Tab. 1).
In o rd er to achieve grow th in sales, an e n te rp rise should establish, m ain ta in and im prove th e relation s w ith p a rtia l m ark ets. Table 2 shows th e expansion of a product on th e m ark e t.1
Tab. 1. M atrix of con n ection s b e tw e e n products and m arkets M atryca poJqczen mdçdzy produktarmi a ryn k iem '''■ '-^ S egm en ts of m arkets
(lines) G roups of
products
From Tables 1 and 2 it is obvious th a t th e expan sio n of a p ro du ct on th e m ark e t forces th e e n te rp rise to act in th e follow ing w ays:
1) S tim u late th e actual custom ers to buy m ore and try products, in o th e r w ords a ttra c t the custom ers of th e com petitors and w in them over to one’s own side.
2) Discover additional regional, dom estic and foreign m ark ets and gain new groups of purposes (developm ent of th e m arket).
Tab. 2. S tra teg ie com binations: m ark et — product .•1 S tra teg iczn e kom b in acje: r y n e k -— produkt M ark ets/cu stom ers
P ro d u cts/p ro cesses E xistin g N ew
E x istin g (1) (2)
p en etra tio n of th e m arket d ev elo p m en t of the m arket
N ew (3) (4)
d ev elo p m en t of a product d iv ersifica tio n
3) Develop genuine innovations, m odify th e existin g p ro d u cts th ro u g h tra n sfo rm atio n s an d /o r d evelopm ent of v a ria n ts (developm ent of a product).
4) E xtend the program m e of a pro d u ct by introducing new products to new m arkets (diversification).
E very e n te rp rise faces c e rtain m a rk e t chances and risks. The task of th e m an agem ent is to id en tify th em and th en tr y to m ake th e best possible use of th e m ark e t chances and to w eaken th e negative effects th a t m ight ensue from th e m a rk e t influences on th e enterp rise. A key problem w hile selecting the m ark e ts is to p ro p erly define th e ir attractiv en ess. The la tte r is an in d icator of p o ten tia l re tu rn s and p ro fita b ility of th e en terp rise th a t can be achieved by its business practice on th e m arket. This a ttrac tiv e n e ss can be described by th e following four c riteria:
A. Size of th e m a rk e t and increase in sales. B. Q uality of th e m arket, e.g.:
— innovative potential,
— m ark e t b a rrie rs (en try and e x it barriers), — possibilities of m a rk e t segm entation, — price level and price elasticity of dem and, — su b stitu tiv e com petition.
C. S tru c tu re of th e m ark e t:
— actual and p o ten tia l com petitors,
— th e ir aims, strategies, m a rk e t behaviour. D. E x te rn a l factors, e.g .:
— legislation,
— su scep tib ility to m a rk e t changes,
— susceptibility to changes in th e exchange rate, — ad v ancem en t of technology.
W hile m aking an analysis of a business line, th e m anagem ent of th e en te rp rise should d efin e th e m ain d riving pow er of th e com petition. The key facto rs th a t affect th e com petition in th e line are: (see Tab. 3):
— com petition am ong e n te rp rises a lre a d y fun ctio nin g in a given line, — th re a t from n ew p o ten tia l com petitors,
48 S ta n isła w Ś lu sarczyk , M aria W ierzbińska
Tab. 3. F ield s of in fo rm a tio n and stru ctu ral in d ices o f th e lin e an alysis P o la in fo rm a cy jn e i stru k tu ra ln e w sk a źn ik i a n a lizy lin io w ej M o tiv e forces o f
com p etition In form ation d em an d —ty p es of in form ation C om p etition am ong
th e actu al com petitors
— a b sorp tive p ow er of th e m ark et (grow th in sales) prognosis o f th e m ark et ab so rp tiv en ess
— m arket seg m en ta tio n — u se of p rod u ctive pow er — d egree of con cen tration
— barriers to w ith d ra w a l from th e m ark et (their ch arac ter and height)
T h reat posed by n ew com petitors
— barriers to en try in to th e m ark et (typ e and height) — a ccess to th e m arket
— required k n o w -h o w — req uired resources
— ex p ected reta lia tio n (sanctions) — ex tern a l factors
T en d er pow er o f th e cu stom ers
— d egree o f co n cen tration and organ ization of custom ers (including th e costs o f d istrib u tio n and con su m er or gan isation s)
— a b ility to in tegrate ’’b ack w a rd s”
— costs of gain in g cu stom ers at th e ch a n g e of su p p liers — p olicy of trad e m ark and d ea ler’s brand
— stra teg y tow ard cu stom ers B argain p ow er of
suppliers
— p o sitio n in th e fie ld of k n o w -h o w
— p o ssib ility o f receiv in g su p p lies from other su p p liers — con cen tration of d eliv eries
— im p ortan ce of th e cost of raw m a teria ls and other m aterials
— th rea t posed by in teg ra tio n ’’fo rw a rd s”
— p o ssib ility o f u sin g su b stitu tiv e m a teria l resources S u b stitu tes (ten d en cy — cost of reco n v ersio n
tow ard s u sin g — ratio b e tw e e n prices and product q u a lity (as com pared su b stitu tes) w ith sim ilar co m p etitiv e products)
— te n d en cy to su b stitu te on th e part of custom ers (degree of th eir lo y a lty to th e e n terp rise and its p ro
ducts)
— bargain pow er and th re a ts from suppliers,
— th re a t posed by su b stitu te s and new technologies.
F o r th e e n terp rise, to be m ore effective on th e m a rk e t, m u st tak e in to account th e factors w hich a re decisive in purchase decision m aking and, in p articu lar, it m u st try to en su re the draw ing pow er of its products. L et us now analyze w h a t th ese m ain factors are, to w h a t e x te n t the e n terp rise concentrates on them and how th e e n te rp rise com pares w ith its com petitors.
Purchase decision m aking factors are im p o rta n t decision c riteria for th e receivers of goods and services. To th e fo re fro n t come such factors as q u a lity of a p ro du ct, tech n ical counselling, p u n c tu a lity an d rh y th m ic ity of deliveries, price.
I t is v e ry im p o rta n t fo r th e en terp rise to be able to iden tify th e purchase decision factors because this provides a basis for defining the needs an d facilitates such control of th e resources so as to best m eet th e expectations of custom ers tow ard th e offered goods o r services.
The n e x t step forw ard is to com pare o n e’s ow n products o r services w ith those of th e com petitors. Such an analysis of factors influencing pu rch ase decisions provides inform ation concerning th e advantages and disadvantages of th e p ro d u ct and m a rk e t policy, th e p ro d u c t’s draw ing pow er; it also helps to specify th e c o m p e tito r’s stre n g th s and m ay con stitute a basis fo r w orking o u t a successful strateg y tow ard com petitors.
H ere are some o th e r factors in achieving a m ark e t success, w hich should be tak en in to consideration in any Com parative analysis of com petition :
— w o rk e rs’ qualifications, — innovative potential, — reaction tim e, — flex ib ility of action,
— p o ten tial availability of capital, — organization al level.
P U R P O S E S OF A CTIV E SEG M E N T A TIO N OF THE M A RK ET
In o rd e r to achieve th e hig h est possible efficiency of m arketing in stru m e n ts e n te rp rises tr y in advance to define th e ir groups of purposes and a p p ly m ark etin g techniques w hich w ould be ad equate to various groups o f purposes. M arket is — consciously o r n o t — segm ented, i.e. controlled in a planned w ay. A p ro d u cer has to establish according to w h a t criteria th e m a rk e t is to be classified in to clear-cu t groups of purposes. A distinc tion should be d ra w n h ere betw een co nsum er and inv estm en t goods. T ypical featu res of segm entation of consum er goods are illu strated by 'i’ab le 4.
The follow ing c riteria are of im portance in the segm en tation of the fn ark e t in th e sph ere of m arketin g of in v estm en t goods: size of the e n te rp rise and its p u rch asin g po ten tial, m em b ership of a b ran ch (industry, com m erce, others), locality o r region (geographic dispersion of custom ers), in v estm e n t in te n sity (num ber of facilities, degree of m echanization of a given branch).
A segm ent is o ften not an u ltim a te field of a c tiv ity of th e en terp rise on th e m ark et. The n e x t step is f u rth e r frag m en tatio n of the segm ent and choice of a term in a l p a rtia l m ark e t. The selection of a p a rtia l m ark e t usu ally happens th ro u g h a com bination of m a rk e t segm entation criteria;
50 S ta n isła w Ś lu sarczyk , M aria W ierzbińska
Tab. 4. F eatu res of seg m en ta tio n in m ark etin g th e con su m er goods C echy seg m en ta cji w m a rk etin gu dóbr k on su m p cy jn y ch S ociodem ographic and
geographic featu res
P sy ch o g eo g ra p h ic fea tu res (internal variab les)
S o cio lo g ica l featu res (ex tern a l variab les) — gender, age, m arital — m o tiv es/w ish es — cu ltu ral in flu en ces
status — a ttitu d es (p eripheral and (subcultures) — size of h ou seh old and cen/tral) — so cia l strata
phase in fa m ily life — ex p ecta tio n s as to b en efits — social statu s — education, p rofession d eriv ed from th e buy (social roles)
fa m ily in com e — h ab its of shopping and — recom m en d atory — ow n ersh ip u sage of th e product groups
— size o f locality,, — life sty le, in terests — opinion giver — region o f p urchasing — b eh aviou rs co n n ected w ith — social p restige
pow er . learning,, p ercep tion and — stru ctu re and clim ate in n ovation
o f the area
L et us consider a case of a fam ily on an outing w ho w a n t to satisfy th e ir hun g er. They can choose b etw een a b ar, a re s ta u ra n t and a chip stand. A fam ily of five young c h ild ren w ill go to th e re s ta u ra n t w hich offers dishes from th e m enu, and a playg rou nd; an eld erly couple w ill look for a place w ith polite service and lu x u rio u s food.
A lthough one can define general segm ents (consum ption o r industry) w ith consum ers, fo r exam ple u sers of buses, cars o r m otorcycles, every p ro d u cer should perform seg m en tatio n of th e m a rk e t from th e point of view of his or h e r abilities and chances of serving th e m ark e t. Com panies such as V olksw agen, M ercedes, Porsche serve clients w ho belong to various, w ell-defined p a rtia l segm ents, whose p a ra m e te rs are prestige, econom y of use, sports qu alities and price.
T erm inal selection of a p a rtia l segm ent m u st include its a ttractiv en ess fo r th e producer; im p o rta n t factors h ere are: p ro fit m argin, m ark e t size and th e anticipated developm ent of th e m arket. T he pro ducer m ay also tak e into account th e serving of sev eral p a rtia l m ark ets. F ig u re 5 shows various possibilities of configuration of th e several p a rtial m ark ets.2
As is evident from th e p resen ted considerations the seg m en tatio n of th e m ark e t n o t only creates conditions for p ro m a rk et c u ltu re in the en terp rise b u t also ensures optim ization of th e u n d e rta k en m arketing activities.
2 S ee I. N o v o t n y : P la n m a rk etin gow y. B u d ow a p rzy szło ści p rzed sięb iorstw a, P o ltex , W arszaw a 1993, s. 33.
Interval : M-1 - P-3
Specialization in production : (M-1 + M-2 + M-3) P-2 Specialization on the market : M-2 (P-1 + P-2 + P-3) Selective specialization : M-1 P-1 + M-3P-1 + M-3P-3 The whole market means:
(P-1 * P-2 * P-3) (M-1 + M-2 + M-3) Pig. 5. S e lectio n of a p artial m arket
W ybór części rynku
S T R E S Z C Z E N I E
C elem p o lity k i seg m en ta cji ryn k u w p rzed sięb io rstw ie jest o siągn ięcie m ożliw ie n a jw ięk szej e fe k ty w n o śc i środ k ów m ark etin gow ych . P rzed się b io rstw a starają się u sta lić z góry sw o je gru p y ce ló w i zastosow ać d ziałan ia m a rk etin g o w e od p ow ied n io do zróżn icow an ych grup celó w .
Isto tn e zn aczen ie m a p rzyjęcie przez prod u cen ta w ła śc iw y c h k ryteriów , w ed łu g k tórych n a stęp u je podział c a łeg o rynku na grupy celów . A k ty w n a seg m en ta cja rynku sp row ad za się zatem do jeg o św iad om ego sterow an ia.
