Market segmentation and consumer targeting are two marketing tools which go hand in hand to provide companies with a more custom approach toward buyers. If we could summarize the essence of these two methods in a few words it would be: divide and conquer.
The market segmentation approach allows companies to divide the market into groups of potential customers who share specific needs and characteristics, and are therefore likely to behave in a similar way when purchasing goods and services. It thereby saves them from putting efforts into conquering every consumer, as not everyone is suitable for every good and it is costly and impractical to pursue an unrealistic market segment. Segmenting the market and targeting particular groups is a way for companies to attract more of the type of customers which are suitable for their business.
The advantage of this method is the possibility to discover a given market niche and adapt precisely to it. This is possible for companies, because when they are aware of the specifics of the group they wish to target, they may tailor the product, its price and promotion to suit precisely the needs of the group.
Once the segmentation of the market has been made and consumers are clearly divided into groups of interest for the company, the targeting of particular groups is easier and more effective. The company can make products and offer them in such a way as to attract people with specific needs and wants.
In the case of IBM and Dell the advantage of market segmentation and consumer targeting is especially large. Companies which offer technological products need to understand the needs of their customers. Everyone uses computer equipment in different ways, therefore when it comes to the manufacturing and sales of IBM or Dell products, there should be a variety of products meant for specific customer groups, with differing needs. There cannot be one universal computer for all.
An example of this is the segmentation of Dell products in 1999, (when there was already a huge array of possible feature combinations) into three categories:
- Dimension L – suitable for word processing, e-mail, personal finances, learning software, etc.
- Dimension XPS T – suitable for high speed internet use, multimedia, games, and digital imaging
- Dimension XPS B – suitable for streaming video and audio, digital imaging, and intense gaming
Behind these three so called “dimensions” there is a strong logic derived from the experience of Dell in developing personal computers, and their excellent acquaintance with the kind of customers which are of interest to their company, their needs and wants. Already in 1999 there was apparently a strong need for market segmentation and targeting of consumers, which has only grown with the discovery of new technologies and their further specialization.
We could conclude that market segmentation and consumer targeting are key marketing tools which enable companies to conduct a more effective and profitable business. They not only allow for companies to adapt their products and marketing campaigns, but enable them to save time and resources by focusing only on profitable consumer groups.
The use of the two methods is more simple in the context of Second life. They are more easily applied in the virtual reality of the Second life world, because it has already narrowed down the customer base to computer literate people who are technologically aware and on average young.
How firms may adapt their marketing strategies to the changes in technology such as the growth of Second Life
The marketing strategy of a company consists of the plan (and consequent actions) of the company aimed at achieving the best results when selling a product. The marketing mix, also known as the four P’s (product, price, place, and promotion) occupies a very important place in the marketing strategy of the company. These elements of planning of marketing activity must determine the goals of a company and what actions will be taken to reach them within a given time period. This suggests that companies’ marketing strategies should not be static, as business conditions are always changing.
There are a wide range of considerations, measures, and tactics a company needs to consider when forming its strategy for the coming period. Some of these include researching trends in the industry, putting the market for your product in figures (quantity), considering competition, developing a marketing plan for specific products and product ranges, etc. All of these are subject to constant change and development. One of the possible factors of change for an industry could be a change in the channel of distribution or the appearance or expansion of a method of advertisement. The growth of Second Life could be viewed mainly as a new and larger opportunity for companies to advertise their products.
As a result of this new opportunity, companies would have to rethink and adapt their marketing strategies and mixes to give a larger role to the promotion of goods and services via Second Life. This would involve revising the promotion part of the marketing mix by setting aside larger sums of money and focusing more on the possibilities offered by the virtual world. Companies could, for example, transfer a part of the resources devoted to placing ads in the press and broadcasting them on television, to buying some more virtual reality space (a new store, more land, etc.). Alternatively the company could make little change in the structure of advertising and instead try to direct attention to its Second Life identity via its old advertising methods.
Companies might consider it necessary to adapt and change not only the promotion, but also the product. This could be necessary in order to provide a better fit for the image of the new channel of distribution or other change in technology. An example of this could be a change in the image or packaging of the product. Companies could launch a limited edition related to the use of the new method of advertisement. Alternatively, if an industry experiences another kind of technological change the company would have to eventually include the new discovery or feature into its product range to avoid falling behind and losing its market share.
Changes could also be brought into the other elements of the marketing mix such as the price of the product which would have to be adapted to reflect the changes in technology, while keeping in mind the behavior of the industry (prices cannot deviate greatly from the overall price level). The place of sale and method of distribution is another valid element to be considered when companies experience a technological change. In the case of Second Life, a possibility for companies would be to add a new method of selling products via the virtual shops and facilities.
The overall marketing strategy of the company could be subject to many changes. Companies could also change the frequency with which they reevaluate their strategies in order to achieve better cohesion with technological changes. Overall however it is a wise decision for businesses to maintain a steady rate of change in strategies, as it is costly and time consuming to make too many changes too often. It is necessary to conduct extensive research before implementing a practical change in company behavior; therefore altering the marketing strategy should be moderate and well thought out.
Give examples for each aspect. Write all the possibilities of the answers to these questions. What could be the limitations of the changes in marketing strategies and mixes. Why they will work and why they would not.
Product Strategy for High Technology Companies by Michael E. McGrath
Handbook of Market Segmentation by Art Weinstein
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