Differentiated Segmentation Strategy for Small Company
DQ1: Is it a good idea for a small company to adopt a differentiated segmentation strategy? Explain. Point out the benefits as well as the dangers of this approach. Does it fit every industry, or would it be better in certain domains and less effective in others
I do not believe it is a good idea for a small company adopting a differentiated segmentation strategy however this can depend on the industry and products that the small company is selling. Most small company are created to focus on one type of product or service thus selling to a select (niche) market segment. If a small company tries to diversify too quickly then the small company may find themselves over stretched in the required effort to complete operational tasks and stay competitive as well as in the capital undertaking of managing and trying to sell so many fragmented products or services groups. A small company would be in a much better position if it stays focused on one product before attempting to expand into other market segments. By staying focused on a tailored product the company is able to meet the consumers needs more effectively, and are likely to increase consumer satisfaction thus a greater sense of loyalty from their consumers.
Differentiated segmentation is concerned with targeting each segment with a product that designed to match the needs of the consumers within the segment. The decision to operate in a differentiated segment approach is not clear cut each company would need to assess their situation to determine if it would be beneficial to offer more products and if the company can handle the undertaking.
These are some of the known opportunities and risks from segmentation.
Opportunities:
- Company provides products or services that fit more closely to customers needs and serve each segment profitably
- Customers feel more loyal to company without switching brands since they are responsive to the segments and products provided
- Enables organizations to target its marketing mix that matches customers’ needs better
Risks:
- Risk of poor segmentation understanding which could lead to brand confusion.
- Fragmentation of the market that results in difficulty to serve customers
References
Kotler, P., Armstrong, G (2010) Principles of Marketing, 13th ed., Prentice Hall, New Jersey
University of Liverpool/Laureate Online Education (2009), Lecture notes from Principles of Marketing Seminar 3 [Online] Available from: University of Liverpool/Laureate Online Education VLE (Accessed: 20 August 2009)
