Product Marketing Strategies: The Limitations of Mass Marketing and Benefits of Market Segmentation

It is widely understood that mass marketing, although advantageous to businesses by virtue of lower production and marketing costs, does not completely fulfill the needs of every customer in a market.  Nonetheless, many companies still employ this strategy.  And, it is particularly effective in the marketing of standardized goods and services – such as sugar, gasoline, or dry cleaning services – for which large numbers of people have similar needs and perceive the product or service as largely the same regardless of the provider.  In such cases, all things being equal, consumer buying decisions are usually motivated primarily by price.

Some producers of mass market goods employ a marketing strategy known as product differentiation to make their offering seem distinct from that of competitors, even though the products are largely the same.  One example might be that of a golf shirt manufacturer.  To distinguish its shirts from other products of similar material and quality, the producer might embroider its brand name on its shirts and sell them only through upscale department or specialty stores as a form of product differentiation.  Consumers might tend to perceive these shirts as somehow better than other brands, and thus worthy of a premium price.  But, changing consumer perceptions in this way can be very expensive in terms of promotion and packaging.  A product differentiation strategy is most likely to be effective when consumers care about the product and there are identifiable differences between brands.

Despite the cost advantages mass marketing offers to businesses, this strategy has several drawbacks.  A single product offering cannot fully satisfy the diverse needs of all consumers in a market, and consumers with unsatisfied needs expose businesses to challenges by competitors who are able to identify and fulfill consumer needs more precisely.  In fact, markets for new products typically begin with one competitor offering a single product, then gradually splinter into segments as competitors enter the market with products and marketing messages targeted at groups of consumers the original producer may have missed. These new competitors are able to enter a market ostensibly controlled by an established competitor because they can identify and meet the needs of unsatisfied customer segments.  In recent times, the proliferation of computerized customer databases has worked to drive marketing toward ever-more-narrowly focused market segments.

Applying a market segmentation strategy is most effective when an overall market consists of many smaller segments whose members have certain characteristics or needs in common.  Through segmentation, businesses can divide such a market into several homogeneous groups and develop a separate product and marketing program to better fulfill the needs of one or more segments.  Though this approach can provide significant benefits to consumers and higher profit margins, it can be costly to implement.  Instituting a market segmentation strategy demands significant amounts of market research, which can be expensive. Also, businesses may experience a rise in production costs as they forfeit the efficiency of mass production in favor of smaller production runs that meet the needs of a subset of the market.   Finally, a company may find that sales of a product developed for one segment encroach upon the sales of another product intended for another segment.  Nonetheless, market segmentation is vital to success in many industries where consumers have diverse and specific needs.


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