Market Segmentation in Technology Businesses - Essay Example

?Contents Introduction 2 Market Segmentation in Technology Businesses 2 To divide all possible s into groups: 3 Profile all s in every segment: 3 Evaluate the segment for buyers: 3 Introduce the product or Service: 4 Benefits of segmentation to technology firms 4 Increase in profitability 4 Matching of Client needs 6 Opportunities for Growth 7 Increasing Competitiveness 8 Challenges of Market Segmentation 9 Conclusion 9 References 10 Bodimeade, M. 2012. Global Information Technology Market. [online] Companies and markets. Available at: [Accessed 20 October 2010]. 10 Bose, C. 2010. Modern Marketing - Principles & Practice. New Delhi: PHI Learning Pvt. Ltd. 10 Cant, M., Strydom, W., Jooste, C., and du Plessis, P. 2009. Marketing Management. Cape Twon: Juta and Company Ltd. 10 Dibb, S and Simkin, L. 2013. Market Segmentation Success: Making It Happen! New York: Routledge. 10 Duening,T., Hisrich, R and Lechter, M. 2009. Technology Entrepreneurship: Creating, Capturing, and Protecting Value. Waltham: Academic Press. 11 Hill, C and Jones, G. 2012. Strategic Management: An Integrated Approach. Belmont: Cengage Learning. 11 Jones, C. 2013. Apple's Stock Awards Value Has More Than Doubled Over The Past Three Years. [online] Forbes. Available at: < http://www.forbes.com/sites/chuckjones/2013/09/17/apples-stock-awards-value-have-more-than-doubled-over-the-past-three-years/> [Accessed 20 October 2010]. 11 McDonald, M. 2012. Market Segmentation: How to Do It and How to Profit from It. New York: John Wiley and Sons. 11 Mohr, J., Sengupta, S and Slater, S. 2010. Marketing of High-technology Products and Innovations. Missoula: Jakki Mohr. 11 Sigal, M. 2010. Apple's segmentation strategy, and the folly of conventional wisdom: Ten years after an iPod powered rebirth, Apple's run continues unabated. [online] O’Reilly Radar. Available at: http://radar.oreilly.com/2010/09/apple-segmentation-strategy-an.html[Accessed 20 October 2010]. 11 Thorson, E and Duffy, M. 2011. The Principles of Advertising and Marketing Communication at Work. Belmont: Cengage Learning. 12 Market segmentation in technology Business Introduction Marketing is the determinant of profitability in any business regardless of the industry and the nature of business. Managers of the marketing departments in most businesses have come up with ingenious ways of ensuring the marketing works, and the business makes profits. Market segmentation is the strategy that has been proven to work miracles in the world's business. The strategy is based on dividing the various clients or customers of the business into various groups. Consumers with the same specifications and needs are grouped together. This makes it easy to address the needs, requirements and issues the clients in the various groups may have (Elsevier, 2002). Market Segmentation in Technology Businesses Market segmentation is one of the best marketing strategies know today. This strategy categorizes clients in different groups making it easy for the companies to address their client needs. In that situation, businesses benefit from increased sales and profitability. Marketing segmentation also has benefits to the consumers. Their needs are well addressed according to their specifications. The information technology industry is comprised of programming, computing, data processing, telecommunications, gaming, networking, the Internet and applications. The information technology industry is different from all the others in several ways. However, targeting potential clientele and segmentation of the market is all the same. For proper market segmentation, the businesses have to do the following. To divide all possible customers into groups: The first thing a technology manufacturer or service provider is to determine the target markets. This should be done according to demographics, geographical, psychological and perception and behavioural variables. The company should also determine the gender that is likely to purchase their products or subscribe of their products or service. This has been a large dividing line for many of technological products and services. Some of them are common in women while others are common with men. Establishing the gender that will purchase the products and services is an important aspect in marketing the products and services (Mohr, Sengupta, and Slater 2010). Profile all customers in every segment: Once the technology product manufacturer or service provider has established the different segments, the next step should be to understand the clientele better. Each segment may have varying parameters discussed above and would therefore need specific products or services. Questionnaires, data and statistics from government and independent institutions as well as other methods of study can be used to understand the various segments. Products and services should be provided precisely according to their needs (Mohr, Sengupta, and Slater 2010). Evaluate the segment for buyers: Not all people within a segment are going to purchase the products or services. As such, technological companies should establish the exact number of clients within the segment likely to purchase their products or services. That should guide the manufacturer or service provider on the number of products to manufacture and the resources to be availed for the services (Dibb and Simkin, 2013). Introduce the product or Service: After successful implementation of the above processes, the manufacturer or service provider can now introduce their items to the market. They should note and document the perception of clients when they get the product. This should be based on the attractiveness, the performance, and general view and though of the product or service. Surveys and questionnaires can be used in this case. That should help them to understand where changes and corrections need to be made (Mohr, Sengupta, and Slater 2010). Benefits of segmentation to technology firms Market segmentation has been determined to have advantages to the technology firms that use the strategy. Some of the benefits are; Increase in profitability Good segmentation markets can influence a company’s profitability a lot. The main principle of the strategy is to understand the clients well even when there are new products in the market. The ability to segment the target market, work on their tastes and preferences and provide the product or service at the right time, has been determined to increase profitability a lot (McDonald, 2012). Apple, one of the most successful and influential technology companies in the world has been very profitable for following market segmentation accordingly. When Apple launched the iPod in 2001, it had already done enough study into the market and knew its target clients. As such the product was bought in high volumes leaving many big technology companies wondering. The same thing happened when the iPhone and iPad were launched in 2007 and 2010 respectively. The other companies and business strategists could not understand just how Apple could do that, yet Microsoft and other competitors were at the bottom of the ladder. It later emerged that Apple had a secret market segmentation strategy (Sigal, 2010). Unlike other technological companies and service providers who were loosely using market segmentation, Apple a perfect segmentation strategy. The company chose to study the market comprehensively first. The company spent months establishing the tastes and preferences of the clients basing on the products that were in the market as of that time. Apple was not only able to know what the clients were looking for but also understood the limitations of the products in the market at that time. Information obtained was used to come up with a product that met most of the clients’ needs if not all (Duening, Hisrich and Lechter, 2009). The product was embraced with both arms, and sales skyrocketed immediately after the launch and as time passed. People believed in the company, and that trend has had a great influence of the company’s profitability. The subsequent Apple products were embraced the same way making the company to make profits more than most other technology companies and service providers. According to (Sigal, 2010) the value of Apple shares increased by 3000% from 2001to 2010. The value increased by 125% since the launch of an iPhone in 2007, and by 20% from the time iPad was launched in 2010 to the end of the year 2010 (Sigal, 2010). The value of the stock has continued to increase. No wonder Apple has consistently claimed to be the most valuable company in the world today. Its stock, which is a direct reflection of profitability, has increased by over 250% since 2010 to 2013. The number of employees has increased by over 100% in the same period. This remarkable growth and profitability has been realized all because of proper market segmentation (Jones, 2013). Matching of Client needs Information technology companies match the needs of their clients according to their income class, the industry they are in and the purpose of the technology product or service they purchase. People with higher incomes can be able to purchase expensive and costly products and services. Conversely, the ones with low incomes have to settle for the cheaper options. Continually, the purpose of the product or service also dictates the needs of the client. Technological products and services for industries have higher requirements compared to those for homes. For example, a computer for performing industrial purposes has to be complex enough to meet the demands of that particular company or business. On the other hand, a computer for home only needs to have the basic functions of accessing maybe the Internet and storing important information. This knowledge helps the manufacturers and service providers to divide their clients in those categories (Applied Computer Research, Inc, 2010). Technological manufacturers and service providers go to the extent of studying the various industries their products and services will be used. Some of the sectors that are studied in by technology manufacturers and service providers’ depth include government, education, hospitality, industrial, health care, telecommunications and mining. This assists the technology companies to understand the specific needs for each client making it easy to deliver to them. For instance, the computers that would be used in the hospitality industry like in a hotel would differ from computers that are used in industrial plants or nuclear energy production plants. The manufacturers marketing departments usually go out to their specific clients and ask questions about their products. The surveys assist them in identifying specific needs clients would like, but they are not provided or where they can improve. Matching their specific clients' needs leads to satisfied clients (Applied Computer Research, Inc, 2010). Opportunities for Growth Segmenting the information technology industry presents invaluable opportunities for growth. The various businesses in this sector do a market analysis on the trends in their respective market segments. This assists them to know the way client requirements changes as the world becomes more dynamic. The companies use existing information over a specified period. Every purchase made is documented and when there are changes, they are documented and compared against the expectations. In most cases, companies have expectations on sales and subscriptions they are likely to make (Bose, 2010). When the markets, change, the manufacturers and providers gather information from the clients in a bid to improve their services. There are also specific companies and institutions whose main objectives are collecting information and data on changes in the market, for example, the companies and Markets Company. This institution documents the specific number of units and subscriptions made in a year and compared with the previous years. They also document the specific industries and regions and the spending on the various technology products and services (Bose, 2010). The businesses in these sectors use such data to understand their clients better, strategize how they will market their products in those specific regions. Opportunities for growth for the technological manufacturers and providers have changed remarkably in the last decade. Nowadays, they do not have to send people on the ground to collect information and data on the potential market. The Internet is used to conduct surveys and information sent instantaneously. It takes short time for the businesses to address the specific needs faster encouraging clients to purchase more and refer others for the same products and services (Bodimeade, 2012). Increasing Competitiveness Market segmentation has been known to increase the competitive edge to technological companies that use the strategy. Companies are able to categorize their clientele according to different tastes and preferences. The knowledge is critical and delivering on the findings is important for the technology manufacturers and service providers. They know when to ship the products, how to produce them, the general specifications of the products and services. Delivering within the expected timeline also influences competition (Hunt and Arnett, 2004). Business strategists argue that for a company to succeed in market segmentation competitiveness, it has to focus on what is lacking in the market or the consumers that are marginalized. For example, there can be a market where technological products and services are expensive, making it impossible for the poor to afford the products and services. A new company or a company that would like to have a competitive edge on that market can introduce a product fit for that particular market. Marketing managers pay attention to this because a lot of money can be earned. In addition, the reputation of the company could become positive (Thorson and Duffy, 2011). According to (Hill and Jones, 2012), competitiveness should be determined by a number of factors. They include the market demand and the current pricing model for a particular product or service. With these factors at hand, the business should be able to come up with proper functional level costing strategy to determine the price they will offer the technology product or service at. This model of market segmentation in technology should make it easy and straight forward for a company to enter a certain market even if the product is new or venturing in a new market (Hill and Jones, 2012). Challenges of Market Segmentation Though marketing segmentation has a lot of benefits to the technology businesses that implementation the strategy, it comes at a cost. Market segmentation is extremely expensive because the company has to custom the products according to the different segments’ tastes and preferences. At the same time, the technology company has to gather enough information on their clientele. This could be challenging, tedious and expensive, especially in third-world countries where data, information and statistics are usually marred with errors (Cant, Strydom, Jooste, and du Plessis, 2009). Conclusion Segmentation of market for technology manufacturers and service providers’ promises to not only change their marketing strategies but also to increase profitability and availing a competitive edge over the competitors. Manufacturers and service providers looking forward to using this strategy should be aware of its best practices to succeed in implementing it. There are technological companies that have implemented this strategy and changed the company for the better. Though the strategy is expensive to implement, it is worth every dime. References Applied Computer Research, Inc. 2010. Identifying Information Technology Markets: A Reference to Demographic Characteristics for Information Technology Market Planners. [online] Applied Computer Research, Inc. Available at: [Accessed 20 October 2010]. Bodimeade, M. 2012. Global Information Technology Market. [online] Companies and markets. Available at: [Accessed 20 October 2010]. Bose, C. 2010. Modern Marketing - Principles & Practice. New Delhi: PHI Learning Pvt. Ltd. Cant, M., Strydom, W., Jooste, C., and du Plessis, P. 2009. Marketing Management. Cape Twon: Juta and Company Ltd. Dibb, S and Simkin, L. 2013. Market Segmentation Success: Making It Happen! New York: Routledge. Duening,T., Hisrich, R and Lechter, M. 2009. Technology Entrepreneurship: Creating, Capturing, and Protecting Value. Waltham: Academic Press. Elsevier, 2002. Introduction to the Special Issue on Market Segmentation. International Journal of Research in Marketing 19 (2002) 181–183. Hill, C and Jones, G. 2012. Strategic Management: An Integrated Approach. Belmont: Cengage Learning. Hunt and Arnett, 2004. Market Segmentation Strategy, Competitive Advantage, and Public Policy: Grounding Segmentation Strategy in Resource-Advantage Theory. Australasian Marketing Journal 12 (1), 2004. Jones, C. 2013. Apple's Stock Awards Value Has More Than Doubled Over The Past Three Years. [online] Forbes. Available at: < http://www.forbes.com/sites/chuckjones/2013/09/17/apples-stock-awards-value-have-more-than-doubled-over-the-past-three-years/> [Accessed 20 October 2010]. McDonald, M. 2012. Market Segmentation: How to Do It and How to Profit from It. New York: John Wiley and Sons. Mohr, J., Sengupta, S and Slater, S. 2010. Marketing of High-technology Products and Innovations. Missoula: Jakki Mohr. Sigal, M. 2010. Apple's segmentation strategy, and the folly of conventional wisdom: Ten years after an iPod powered rebirth, Apple's run continues unabated. [online] O’Reilly Radar. Available at: http://radar.oreilly.com/2010/09/apple-segmentation-strategy-an.html[Accessed 20 October 2010]. Thorson, E and Duffy, M. 2011. The Principles of Advertising and Marketing Communication at Work. Belmont: Cengage Learning. Read More