By focusing on the specific wants and needs of market segments, marketers can deliver goods and services that are specifically tailored for the associated groups. This practice not only improves customer satisfaction but also allows for better use of promotions resources through the selection of communications vehicles that precisely reach desired populations.
Market segmentation is the process of dividing a market into groups (i.e., segments) of individuals who share common characteristics. When the market has been segmented, marketers engage in targeting where they select (i.e., target) attractive segments and focus their efforts on satisfying the wants and needs of these groups. These targeted segments are known as an entity’s target market. A useful tool for target marketing is known as the Market-Product Grid, an instrument that specifically addresses the segmenting and targeting aspects of practice.
The Market-Product Grid consists of a matrix with markets identified on its vertical axis and products identified on its horizontal axis. To create a Market-Product Grid, marketers simply (1) construct a matrix of sufficient size, (2) list potential markets on the vertical axis, (3) list product offerings on the horizontal axis, and (4) evaluate each of the resulting market-product combinations, characterizing them as large, medium, small, or nonexistent markets.
The actual number of cells in the matrix, of course, dependent on the number of markets and products identified. As a result, Market-Product Grids range from being quite small for entities with few markets and few products to being very large for entities that offer multiple markets an extensive array of products as shown below.
The specific segments examples that exist within each of the four major segmentation categories are:
Geographic (Country, City, Climate, …).
Demographic (Age, Gender, Family size, Income, Education, Religion, Nationality, …).
Psychographic (Social class, Lifestyle, Personality, …).
Behavioral (Occasions, Benefits, User status, Attitude toward a product, …).