Market Segementation Market Segmentation Is a Way

Market Segementation

Market segmentation is a way to differentiate a group so that the seller of goods or services does not concentrate on the entire universe, but on a group of high potential customers that are more likely to purchase the product. A market segment, of course, is a sub-set of the entire marketing unit that is made up of individuals or organizations with characteristics that allow them to be grouped together to provide a more appropriate marketing experience, a more individuated for of sales. Since different segments have different values, the homogeneity with in the segment defines the common goals and needs. This has been part of the more sophisticated manner of looking at specific demographics and psychographics to set pricing, packaging, and even types of service. In effect, while there may be a number of "ideal" market segments for a specific product or service, manufacturers must develop different ways of creating product different ion strategies to exploit different segments. (Baker and Saren, 2010, 336).

Company Analyzed

Seattle based Amazon.com is now the world's largest bookseller globally. The era of the brick and mortar book shop is virtually over, and has resulted in a number of changes in the industry, publishing world, and even the way consumers shop. Amazon is able to switch its strategy with almost the touch of a button, and has such a sophisticated set of algorithms that it is almost as if one has a personal shopper at all times -- and not just for books. Obviously, this is succesful since the company posted revenues of almost $50 billion in 2011 (Rosenthal 2009, amazon.com, 2012).

One of the most interesting ways that Amazon uses market segmentation, aside from the obvious categorization of materials, is through its Kindle, a software and hardware platform that displays, stores and allows for manipulation of digital media. Before this release, Amazon put special efforts into converting and releasing a variety of materials compatible with the Kindle. There are Kindle applications for numerous phone and computer platforms as well, and almost any e-book or publication may be read and stored on the device. Indeed, there are even times when Kindle releases outsell printed copies (Ratcliffe, 2009).

Segmentation Theory

Not every book is on Kindle, but they are moving towards this. However a great example of market segmentation occurred when the company segmented users into purchase groups and marketed to the Innovators (3%) of the population) the Early Adaptors (about 14%) and then the Early Majority (about 34%) (The Product Differentiation Curve, 2009). They did this by offering free books, applications, readers that integrated with computer and smart phone, and by using smart algorithms to track and recommend certain Kindle products for these individuals. Lately, because of market competition, the Kindle expanded into a totally segmented "family" of devices so that literally every member of the family could use one:

Price

Features

Segment

Kindle Basic

79.00

Light, small, fast, built in Wi-Fi

Designed for price-conscious or people who just want a book reader; can be carried in pocket or purse. Children, seniors

Kindle Touch

99.00

Adds audio and touch screen

Small upgrade to use as MP3 player with touch screen; children, seniors

Kindle Touch 3G

Adds 3G wireless connectivity

Those who are price concerned but have Wi-Fi connectivity