4. Market segmentation

Literature review about segmentation on the basis of existing scientific articles in the ProQuest database.

The two strategies a company can take to market its products is trying to sell to everybody (that is the mass-marketing) or focusing its effort on targeting segments (segmentation-marketing). Because mass-marketing is expensive and in most cases ineffective, market segmentation has become one of the most important concepts in today’s marketing.


Market segmentation can be defined in many different ways. Segmentation is what guarantees the effectiveness of marketing policies in a highly competitive market. It involves grouping customers so that those put into one market segment share common characteristics, needs, purchasing behaviour, usage and attitudes and are fairly homogenous, while those put into a different segment share a different set of such traits and behaviour.
Segmentation is what enables organizations to selectively target good businesses.  It is what gets them closer to the right customer and saves them from wasting money on those who are not worth targeting. It is the only way organizations can tailor propositions cost effectively for groups of their smaller accounts.
From a resource-based view, segmentation contributes to a better distribution of the organization’s limited resources.
The concept to product differentiation is closely related to market segmentation. It can be defined as distinguishing a product or offering from others on a relevant or irrelevant attribute to make it more attractive to a particular target market. It is a source of competitive advantage and serves to secure a measure of control over the demand for a product by advertising and promoting differences between a product and the products of the competitors.
Differentiation and segmentation as marketing strategies share two traits. They both adhere to the principles of imperfect competition and are concordant with resource-based view of competition and strategy. Also, they both take substantial advantage of advertising and promotion. However, segmentation differs from differentiation in the
former is a change in the supply side so that the company’s offering better satisfies preferences of customer, while the latter is a change in the demand side so that customer distinguish the company’s offering from those of competitors.
So how to conduct a market segmentation? It is not an easy task. A market segment, that is a sub-set of a market composed of people or organization with at least one common characteristic that cause them to demand similar products and/or services based on their qualities such as price or function, can be considered as well defined if it meets certain criteria. These criteria are the following:
-be distinct from other segments (as they have different needs),
-be homogenous within the segment,
-respond in a similar way to a market stimulus and
-be reachable by a market intervention.
There are various approaches, methods of market segmentation and classification cryteria. The most popular seems to be the division into the a priori and post hoc segmentation. The a priori segmentation is based on the pre-existing criteria such as age, gender, level of income or geographic location. For some companies classifying the segments on the macro level is all they need to drive sales and marketing campaign. The sector of technology is a good example. Because of the strong relationship between the age and the level of use, in this case the a priori segmentation proves to be correct.
Due to the fact that the a priori market segmentation has more limitations than advanateges, marketers tend to choose the post hoc method of segmentation, also sometimes referred to as response-based segmentation. In this approach, segments are defined based on a result of a broad survey containing questions about demographics, attitudes, behaviour, lifestyle, psychographics, category and brand perceptions and preferences.
The process of identifying customer segments is gradual and can be broken down into the following steps:
-searching and selecting of information;
-creating the segments
-describing the segments
-evaluating of the segments
-selecting these segments that meet the needs of an organisation
-deciding on positioning and developing the right marketing mix.
Another possible classification of segmentation methods uses the qualitative/quantitative approach. Qualitative segmentation is based on defining the market structure by behavioural patterns using qualitative research. This method of breaking down the market into segments characterizes as being very subjective. The quantitative segmentation studies are more detailed and complex. Therefore they cost more money. The advantage of quantitative market segmantation over the qualitative one is in the fact that it generates a probablity measure of error, but if it exceeds 5%, marketers can reject this approach. 
So far, almost every customer variable has been used as a cryteria for segmentation. Within the most common basis variables are the following:
„-geographic (region, urban/rural, city/county size);
-demographic (age, gender, income, education, presence of children, occupation, ethnicity);
-ttitudinal/psychographics (lifestyles, interest, opinions, values,
-product usage or knowledge (frequency of use, brand loyalty, attitude toward product, level of product knowledge, usage patterns, end use, involvement with category, purchase volume);
-decision process (decision making unit, shopping pattern, media use, information search, distribution channel, buyer profile);
-adoption propensity (interest in new products, opinion leadership, likelihood of buying new products);
-firmographic (SIC/industry, buying centralization, size (employees, revenue, worksites));
-needs/product benefits (needs to be filled, expectations, perception of product, satisfaction, product preference).”(1)
Segmentation practices very across firms and industries from simple and relatively cheap to sophisicated and relatively expensive. The level of investment in the hardware and software needed to conduct market segmentations should be adequate to company’s needs and resources. Those with higher marketing budgets can consider using data mining as it has proven to be an effective tool.
Ocasionally, it happens that organizations has been using some sort of customer classification for decades, but those identified groups are not in fact market segments. Once it is realised, a re-classification of customes is needed. This process of moving from the organization’s existing definitions of consumer groupings to markets segments consists of six stages:
-convening of a team of competent menagers;
-decribing existing consumer groups;
-analising buying behaviuor and customer characteristics in each group;
-further proliferating the number of customer groups;
-re-aggregating those groups into market segments and finally
-selecting the desired segments to target and develop marketings programmes for engagement.
The importance of segmentation, or actually, the importance of properly conducted market segmentation is immense. Because the strategy of appealing to mass markets is one most companies cannot afford in recent economy, and even if the could in most cases it would be a waste of money anyway, the solution is market segmentation.
Instead of a company assuming that everyone can purchase its product, it should do market segmentation so that it can focus on he customers who are most likely to spend money on its products. This tactic allows a much greater revenue per dollar spent on marketing.
Because final consumers or clients differ from one another according to their geography, demographics, lifestyle, psychographics, personality, motivation, purchase and usage behaviour and also the decision-making process organizations develop market segmentation strategies believing that treating certain groups of customers differently is more profitable than treating them all in the same way.
Thanks to grouping consumers who are alike in important ways, the products that companies’ product offerings can be tailored so that they meet costumers needs and wants. This approach also leads to an increase in sales and revenue.
There are many practical benefits of market segmentation. The most important are the following:
„- focusing on customers' needs, expectations, aspirations and share of wallet!;
- building relationships with the most attractive customers;
- creating barriers for competitors;
- delivering focused product and service propositions, differentiated from rivals' propositions;
- increasing revenues and share of their wallet from targeted customers;
- determining who not to chase for business;
- prioritising resource allocation and marketing spend on the most worthwhile opportunities; and
- establishing commitment and single-mindedness within the organisation - one vision, one voice, harmonised messages.(2)
However, only the effective adoption of market segmentation by an organization will lead to such benefits.
Because market segmentation and corresponding product differentiation strategies are what can give a company a temporary commercial advantage over its competitors, marketers will continue working on finding new and improved methods of identyfying market segments to target. The further development of computer-based statistical tools will without doubt contribute to doing so in a faster and more efficient way. 

Segmentation of Polish book/publishing market:

The easiest way of segmenting the book/publishing market is by type of literature. There can be as many segment as different book genres. The biggest is of course the segment of scholar publishings. In the nonscholar part of the market the biggest are the segments of fiction (including crime novels, romances, fantasy and science fiction) with 30% of buyers, bibliographies, memoirs and letters with 11% buyers, books for youth and children with 10% of buyers and professional and technical books with 4% of buyers. Other types of publications such as for example those about travels or cuisine needs to be considered as niche segments because of the very low percentage of their readers and buyers. 
Each segment has it's own socio-demographic profile. Scholar books are purchased by parents from all over the country for their children as well as children themselves. Those who buy books from the segment of fiction writing are mostly people the age 15 plus  from cities with over 50 thousand residents, both male and female. The segment of bibliographies, memoirs and letters characterizes by buyers mostly male, over 45 years old, with higher eduction degree and from cities with over 50 thousands residents. Books for youth and children are mostly bought by parents for children, but the number of young people who buy books for themselves is growing. They are equally bought by residents of small and bigger cities, and more by women than men. The sector of professional and technical books is dominated by male buyers, with higher education degree and from cities with over 300 thousands residents. 

Even though the number of big segments is limited, there are plenty of niche segments on the market. Thanks to that, those who are looking for specialized publications, can find them without greater problems. Even if a desired book is not available on the spot, in most cases it can be ordered online. The multitude of small, specialized sectors allows people dedicaded to bookselling business get a fair revenue, despite the low turnover.