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SOME USEFUL TOOLS FOR MARKET SEGMENTATION: CRITERIA,

STRATEGIES AND METHODS

Codruţa Dura, Assoc.Prof., Ph.D., University of Petroşani, Romania, codrutadura@yahoo.com


Imola Drigă, Assoc.Prof., Ph.D., University of Petroşani, Romania, imola.driga@gmail.com

ABSTRACT: The market is made up of a variety of types of consumers, each with different tastes, demands and
expectations. Market segmentation designates the process of identifying and determining the various groups of
customers that place a demand on a specific market, who have common features of consumption and meet certain
conditions of classification according to various criteria. The segmentation criteria represent the variables used for
the delimitation of the segments that form the internal structure of a global market. According to Philip Kotler’s
approach, there are four main segmentation criteria for the goods market: demographic criteria, geographic,
behavioural and psychographic criteria. Our paper employs the typological analysis by accumulation in order to
identify certain types of consumers, based on their similar characteristics, and to draw up focussed strategies
tailored to each market segment.

KEYWORDS: market segmentation; segmentation criteria; the typological analysis by accumulation; types of
consumers.

1. INTRODUCTION characteristics of the global market, the possible


consumer behaviours etc.
Global market research in the context of marketing The list of segmentation criteria which is available
research is an extremely difficult approach, if not to those who carry out market researches is extremely
impossible to complete in certain conditions. That's why comprehensive. Philip Kotler completed logic
most businesses restrain the sphere of the market systematization, identifying - for the goods market -
research, focusing on the sectors or the segments of four main categories: demographic criteria, geographic,
demands which seem more appealing, with behavioural and psychographic criteria. These are
characteristics that correspond to their objectives and presented in table 1, along with the typical market
potential. These typical groups or classes of customers segments that can be determined with their help.
are called market segments.
The market is made up of a variety of types of Table 1: Segmentation criteria of the consumer goods
consumers, each with different tastes, demands and market
expectations. Men, for example, will not call for CRITERIA TYPICAL SEGMENTS
feminine perfumes and deodorants, youngsters wouldn't I. Demographic
like to dress in dark colours, women would not consume
spirits, elderly people prefer less crowded tourist < 6 years; 6-14; 15-20; 21-30; 31-
Age (years)
destinations for their holidays, people with low incomes 40; 41-59; > 60
will buy cheap products and the examples could Sex Men; Women
continue. Marital Single; Married; Bachelor;
Market segmentation means the operation of status Widowed.
identifying and determining the various groups of Romanian; Hungarian; German;
Nationality
customers that place a demand on a specific market, Italian; Arabic etc.
who have common characteristics of consumption (use) Orthodox; Catholic; Greek-catholic;
Religion
and satisfy a certain condition of classification Muslim etc.
according to various criteria. Illiterates; Elementary school;
Secondary school; College;
Education
2. THE SEGMENTATION CRITERIA University; Master Degree;
Postgraduates; Doctors Degree
The segmentation criteria represent the variables Specialists with higher education;
used for the delimitation of the segments that form the Clerks; Craftsmen; Workers;
internal structure of a global market. Their choice Occupation Farmers; Pupils; Students;
depends on many factors: the nature of the products sold Housewives; Unemployed;
on the market in question, their destination, the size and Employers etc.

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Size of 1-2 members; 3-4 members; > 5 among the marketing guidelines of contemporary
family members. enterprises.
Single youngsters; married Although theoretically the staging seems logical and
youngsters, without children; easy to implement, choosing the appropriate
married youngsters, with children; segmentation criterion is not easily achieved in practice,
Family life married old people, without especially in situations where several variables seem to
span children; married mature with have an approximately equal value. In such situations it
children (under 18, and above 80 is necessary, as a rule, to conduct a sample survey,
respectively); single seniors; other followed by the use of some methods for segmentation
categories purposes. The methods and techniques for structuring
Income Low; Medium; High. (segmentation) the market can be summarized into two
main categories [12]: methods of market typology and
II. Geographic
methods of market segmentation, respectively. In the
Transylvania, Moldavia, Banat- first category we come across the typological analysis
Region
Crişana, Muntenia, Maramureş, through accumulation and typological analysis through
(area)
Oltenia, Dobrogea etc. concentration, while the second category includes the
Country
Romania, Hungary, USA, France, most commonly applied χ2 test, the Belson method and
Italy, Great Britain etc. multiple linear discriminator.
Less than 5000 inhabitants; 5000-
City (size) 20.000; 20.000-50.000; 50.000- 3. SPECIFIC MARKETING STRATEGIES
100.000 etc.
Medium Urban; Rural There are two extreme approaches of the market
Climate Warm; Cold; Dry; Wet. (applicable, however, in quite rare cases) - mass
marketing and differentiated marketing, among which
Landforms Mountain; Plain; Hill.
we may find a third approach prefigured by the content
III. Psychographic of this paragraph - target marketing.
Introvert; Extrovert; Phlegmatic; Mass marketing (undifferentiated) deliberately
Personality Sorrowful; Impulsive; Bossy; ignores the differences between clients; therefore the
and temper Passionate; Conservative; Anxious offer is addressed to an "average consumer". The market
etc. is considered to be homogeneous, and the product is
Lower class; Middle class; Higher designed to meet the requirements expressed at an
Social class
class. acceptable level. For example, at some point Henry
Implementer; Egotist; Pragmatic; Ford sold all its purchasers the same model of black car.
Life style
Fighter; Ecologist; Whimsical etc. Mc Donald's restaurants offer almost identical fast food
IV. Behavioural menus worldwide.
Attitude The main advantage of non-differentiated marketing
Enthusiastic; Positive; Indifference; orientation is that it enables a substantial reduction in
towards the
Hostile the level of production costs through the exploitation of
product
scale economies. Therefore the costs of logistics
Loyalty Absolute; Medium; Random; Weak
activities, marketing researches or promotional
Usage Rate Reduced; Medium; Intense campaigns are distributed on a high volume of goods of
Quality; Prestige; Comfort; Utility; the same type. Accordingly, the average cost decreases,
Advantages
Price; Services; Economies etc. and the profits are likely to increase.
Non-consumer (absolute or relative); The disadvantage of this strategy is the risk of
Status of Ex-consumer; Potential consumer; penetration of new competitors on the market using a
user Regular consumer; Casual consumer differentiated marketing approach and adapting the offer
etc. so as to meet the requirements at a higher level of some
Importance market segments that can be attracted this way.
Great; Medium; Reduced
of shopping Differentiated (individualized) marketing provides a
Decision of Unconscious; Conscious; Informed; wide and broad range of products targeted to meet
purchasing Interested; Intentional etc. consumer requirements, identifying the distinct market
Time segments. This alternative is extremely expensive and
Rushed customers; in transit; difficult to carry out, due to increased complexity of
allotted to
Available. administrative and coordination activities, and as a
purchasing
result of the proliferation of distribution channels and
Of course, the inventory of possible segmentation promotion actions. There are still economic sectors
criteria and "typical" categories of clients is far from where the peculiarity of the activity requires the
being exhausted in the columns of the table above. production of custom made goods and services: tailor
Without claiming an exhaustive approach, we were made clothing, building of houses, manufacturing
limited to presenting those criteria and market segments luxury cars, production and deliveries of complex
that make their presence felt ever more frequently industrial equipment with outstanding performances etc.
This is the strategy that best satisfies customers,

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although the high costs needed for its implementation the structural characteristics of the market, the company
increase prices that consumers must be able to pay. carried out a survey upon a sample consisting of
Target marketing represents the modern optics of consumers of five of the most popular products
enterprises, which are concerned with the delimitation (symbolized M1, M2, M3, M4, M5). The survey is
of distinct and relatively homogeneous segments of the conducted based on a questionnaire that includes a
global market, as well as with the adjustment of supply series of questions about the essential features of
and marketing policies to each distinct group. The consumers, thus forming the actual typology criteria
advantages of this marketing guideline are as follows established in a previous stage of the market research. It
[9]: is desirable to identify four distinct types of consumers,
 effective use of marketing resources, which so that marketers should be able to develop
focuses on a limited number of market areas; differentiated strategies for each segment individually.
 diversification of risks generated by the loss of The questionnaire included the following questions
some traditional market segments; and choices:
 deeper knowledge of customer needs, marketing 1) The monthly net revenues of consumers fall into one
researches being carried out on a smaller number of of the following categories:
consumers organized in relatively homogeneous a) below 1500 lei;
subsets; b) between 1500-2500 lei;
 retaining the clientele due to the possibility of c) between 2500-5000 lei;
meeting the requirements of buyers at a higher level; d) more than 5000 lei.
 raising awareness with regard to the actions of 2) The age of consumers ranges:
competitors; they are easier to monitor on relevant a) between 18-35 years;
market segments as compared to global markets; b) 36-50 years;
 ability to establish and achieve levels of c) over 50 years.
objectives and performances that are more realistic and 3) The preferred distribution channel is represented
easier to put into practice. by:
The target marketing strategy presents several a) classical shops;
disadvantages as well: b) Internet (e-shops);
 there is a possibility to neglect some consumer c) supermarkets and hypermarkets.
segments as a result of targeting other sectors of the 4) The chosen type of clothing:
market, potentially more profitable; a) M1;
 high level of production and marketing costs, as b) M2;
a consequence of differentiated treatments applied to the c) M3;
targeted market segments in terms of product policy, d) M4.
price, promotion and distribution policies. The answers to the first 12 questionnaires are those
Despite these drawbacks, however, outweighed by listed in the table below (the encoding of the table of
the numerous benefits reported, target marketing is responses is based on the following agreement: "1"
currently the strategy and approach of the market that is symbolizes an affirmative response to one of the choices
most often used by businesses in most areas of activity. of the question and “0” symbolizes a negative
response).
4. MARKET SEGMENTATION USING THE Table 2: Responses of consumers of “Style” to the
TYPOLOGICAL ANALYSIS BY questionnaire
ACCUMULATION
1 2 3 4
This method is aimed at dividing a community of a b c a b c a b c a b c d e
consumers into categories which bring together 1 0 0 1 1 0 0 1 0 0 0 1 0 0 0
individuals of the same type, with common or very 2 0 0 1 0 1 0 0 0 1 0 0 0 1 0
similar features. Therefore the typology groups 3 1 0 0 1 0 0 0 1 0 1 0 0 0 0
marketing phenomena into categories (classes), starting 4 0 1 0 0 0 1 1 0 0 0 1 0 0 0
from the discovery of similarities in the behavior of 5 1 0 0 0 1 0 1 0 0 0 1 0 0 0
consumers included in the same subdivision. The 6 1 0 0 0 1 0 0 0 1 0 0 0 0 1
particularities of each class are highlighted through the 7 0 0 1 1 0 0 0 0 1 0 0 1 0 0
initiation of a quantitative marketing research based on 8 0 1 0 1 0 0 0 1 0 1 0 0 0 0
a selective survey, applied to a sample of consumers, 9 1 0 0 0 1 0 0 0 1 0 0 0 1 0
representative for the total population. The
10 0 0 1 0 1 0 0 1 0 0 1 0 0 0
questionnaires which help carry out the market survey,
11 0 1 0 0 1 0 1 0 0 1 0 0 0 0
include questions that capture the essential
12 1 0 0 0 1 0 0 1 0 1 0 0 0 0
characteristics of consumers in accordance with the
established typology criteria.
In order to illustrate the procedure for applying the We shall determine, gradually, the types of
method of typological analysis by accumulation in consumers starting from the first one. There are some
practice, we shall consider the case of "Style" company, steps that must be followed:
producing women’s clothing. With the aim of knowing

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1. the maximum typological distance between two - Dab > F , in which case the two consumers fall into
elements of the sample can be determined using the separate categories.
following relation: In our case, D1,2 > F, as a consequence consumers 1
2n
D= (1) and 2 are of different types.
N During this phase of the survey one can notice two
where: D – the maximum typological distance; n – different types of consumers: type t1 consisting of client
the number of questions within the survey ; 2n - the no. 1; type t2 consisting of client no. 2
maximum number of possible non-coincidences in the 5. The responses to the following questionnaires
answers of two consumers (in case their answers to are then analyzed, repeating steps 3 and 4 for each of
each question are different); N – the total number of them, until the number of acceptable types (Nt) is
possible choices to every question of the questionnaire exhausted.
n

N= ∑k
i =1
i
(2) If a type is made up of p elements (p≥2), it is
necessary to recalculate the coordinates of this type of
ki – the number of possible choices to question i. composite using the relation:
p
We’ve mentioned previously that the managers of
‘Style’ wish to identify four distinct types of consumers, ∑ cr ij

with the aim of drawing up some tailored strategies; t kij = r =1


(5)
p
therefore, the number of acceptable types is Nt=4. The
number of questions within the questionnaire which where: tkij – the time coordinate “tk” for question i
helps carrying out the selective investigation is also and response j; crij – the response of consumer r
equal to 4 (n = 4); while the total number of possible belonging to type k to question i, and response j (crij=1 if
answers (variants) to the questions that make up the the response is positive and crij=0 in case the response is
questionnaire is given by the sum of: negative) ; p – the number of consumers belonging to
N = k1 + k2 + k3 + k4 = 3 + 3 + 3 + 5 = 14 type “k”.
As a consequence, the maximum typological -Analyzing the questionnaire filled out by
distance shall be determined as follows: consumer no. 3 makes us calculate the typological
distances:
2n 2 ⋅ 4
D= = = 0 ,57 1
N 14 D1,3 = ⋅ ( 1 + 0 + 1 + 0 + 0 + 0 + 1 + 1 + 0 + 1 + 1 + 0 + 0 + 0 ) =
2. the exigency threshold is calculated next using 14
6
the formula: = = 0 ,428  F
D 14
F= (3) 1
Nt D2 ,3 = ⋅ ( 1 + 0 + 1 + 1 + 1 + 0 + 0 + 1 + 1 + 1 + 0 + 0 + 1 + 0 ) =
0 ,57 14
Thus, F = = 0 ,1425 8
4 = 0 ,57  F
3. let us consider the questionnaires filled out by 14
two different consumers marked as “a” and “b” and As a consequence, a new type of consumer marked
calculate the typological distances between their t3 comes into existence and it is made up, for starters, of
responses: consumer no. 3.
n k - Questionnaire no. 4:
∑∑
1 i

Dab = aij − bij (4) 1


N i =1 j =1 D1,4 = ⋅ ( 0 + 1 + 1 + 1 + 0 + 1 + 0 + 0 + 0 + 0 + 0 + 0 + 0 + 0 ) =
14
where: aij – the choice of consumer a for the
4
response j to question i( j = 1, k i ) ; bij – the choice of = = 0 ,285  F
14
consumer b for the response j to question i( j = 1, k i ) . 1
D2 ,4 = ⋅ ( 0 + 1 + 1 + 0 + 1 + 1 + 1 + 0 + 1 + 0 + 1 + 0 + 1 + 0 ) =
If the choices for the response j to question i are 14
opposite, then aij − bij = 1, whereas these answers are 8
= = 0 ,57  F
identical then aij − bij = 0. 14
1
For starters, we shall compare the responses within D3 ,4 = ⋅ ( 1 + 1 + 0 + 1 + 0 + 1 + 1 + 1 + 0 + 1 + 1 + 0 + 0 + 0 ) =
14
the first two questionnaires:
8
= 0 ,428 = = 0 ,57  F
1 6
D1 ,2 = ⋅(0 + 0 + 0 + 1 + 1 + 0 + 1 + 0 + 1 + 0 + 1 + 0 + 1 + 0 ) =
14 14 14
4. the exigency threshold F is compared with the As a result of comparing every typological distance
typological distance Dab. The following two situations calculated, in this case, using the exigency threshold
may occur: determined in step 2, there appears a new type, type t4,
which is made up of consumer no. 4. It is worth
- Dab ≤ F , in which case the two consumers will
mentioning that by this time all possible types have
both fall into the same category; been exhausted, therefore no additional types can be
further developed.

595
6. After determining the acceptable number of ∆t2,t4 = n · Dt2,t4 = 4 · 0,570 = 2,28
categories, the responses to the following ∆t3,t4 = n · Dt3,t4 = 4 · 0,570 = 2,28
questionnaire are then analyzed, calculating the 2o. between consumer 5 and the types t1 and t4,,
typological distance towards each type: respectively:
1 n k ∆t1, 5 = n · Dt1, 5 = 4 · 0,285 = 1,14
∑∑
i

Dtk ,h = t kij − hij , k = 1, N t (6) ∆t4, 5 = n · Dt4, 5 = 4 · 0,285 = 1,14


N i =1 j =1
As a result, we have the following equality:
where: tk – type tk and h – the next consumer; ∆t1,t4 = ∆t1, 5 = ∆t4, 5
tkij, hij – coordinates of type k and consumer h, which helps outlining the following three options:
respectively to question i the response j. - consumer 5 can be included in type t1;
Based on the result of comparison with the exigency - consumer 5 can be part of type t4
threshold, there are two possibilities: - consumers 1 and 4 can merge, while consumer 5
- if Dtk,h≤ F, then consumer h belongs to type tk and forms a distinct type.
implicitly, the coordinates of this type must be Each of the mentioned solutions is correct; however,
reevaluated with the relation (5); the analysis carries on in order to highlight the most appropriate one, we shall
with the questionnaire filled out by consumer no. h+1; analyze the responses to questionnaires 1, 4 and 5.
- if Dtk,h>F, for any k = 1, N t there are more types to Following this analysis, we consider it more appropriate
be developed. In this case, we face two possibilities: we to include consumer 5 in the type t4, because unlike the
can either include consumer h into one of the categories responses to questions 1 and 2 which are very different,
formed previously (taking into consideration the the responses in questionnaire 5 are somewhat closer to
minimum typological distance); or we can merge two those in questionnaire 4, as compared to questionnaire
types that have already been formed, thus creating an 1. Based on the decision to include consumer 5 into the
available category for consumer h. In order to adopt the type t4, a new type of consumer will be formed, marked
best of the two possibilities, the movable indicator must t41, the coordinates of which are recalculated using the
be determined by the product of the number of relation 5 and they are listed in the table below:
questions and the typological distance. Table 3: Coordinates of consumer type t41
It is also necessary to find two variants for the Ty 1 2 3 4
minimum movable variable: pe a b c a b c a b c a b c d e
1. the movable variable between consumer h and the
0,5
0,5

0,5
0,5
t41
0
0

1
0
0
0
1
0
0
0
type towards which the minimum typological distance is
registered: 7. The acceptable exigency threshold must be
( ∆tk ,h ) min = n ⋅ ( Dtk ,h ) min (7) reevaluated based on exponential smoothing. The
2. the movable variables between the types of formula used in this respect is the following:
consumers distinguished so far: F 1 = α ⋅ F + ( 1 − α ) ⋅ ∆min (9)
∆tk ,tm = n ⋅ Dtk ,tm ; k ≠ m (8) where: α - smoothing coefficient (0<α<1);
If ( ∆tk ,h ) min ≤ ( ∆tk ,tm ) min , then consumer h belongs ∆min = min{( ∆tk ,h ) min;( ∆tk ,tm ) min} (10)
to type tk; if ( ∆tk ,h ) min > ( ∆tk ,tm ) min, then the types of In our case study, the new exigency threshold shall
be:
consumers tk and tm blend together, and consumer h will
F1 = α·F +(1- α)·∆ min=0,8·0,1425 +(1- 0,8) ·1,14 =
form a distinct type.
0,342
- Questionnaire no. 5:
Further on, we shall analyze the questionnaires filled
As opposed to the previous four types, the
out by the other consumers:
typological distances of the responses in questionnaire 5
can be determined based on the relation (4) and they can - Questionnaire no. 6:
8 4
be compared with the exigency threshold: Dt , 6 = = 0 ,57  F 1 Dt , 6 = = 0 ,285  F 1
4 6
1
14 14 2

Dt ,5 = = 0 ,285  F Dt ,5 = = 0 ,428  F 6 6
14 14 Dt , 6 = = 0 ,428  F 1 Dt , 6 = = 0 ,428  F 1
1 2

6 4
3
14 14 4

Dt ,5 = = 0 ,428  F Dt ,5 = = 0 ,285  F Comparing the calculated typological distances with


3
14 4
14
the new exigency threshold is followed by the fact that
Since the number of pre-established types is used up,
that the answers of the questionnaire 6 are closest to the
consumer 5 can no longer form a different type from the
coordinates of type t2. As a result of including consumer
ones already formed.
6 into type t2, there appears a new type of consumers
In order to choose the best variant according to
marked t21, the reevaluated coordinates of which can be
determinations in step 6, the minimum movable variable
found below:
must be calculated:
Table 4: Coordinates of consumer type t21
1o. between types of consumers already formed:
Ty 1 2 3 4
∆t1,t2 = n · Dt1,t2 = 4 · 0,428 = 1,712 pe a b c a b c a b c a b c d e
∆t1,t3 = n · Dt1,t3 = 4 · 0,428 = 1,712
∆t1,t4 = n · Dt1,t4 = 4 · 0,285 = 1,14
0,5

0,5

0,5
0,5

t21
0

0
1
0
0
0
1
0
0
0

∆t2,t3 = n · Dt2,t3 = 4 · 0,570 = 2,28

596
Steps 3-7 are successive, until exhausting all the 12 questionnaires, the structure and the coordinates
responses of consumers in table 2. Thus, after analyzing of the types already formed is presented as follows:
Table 5: Coordinates of the four types of consumers
Consu- 1 2 3 4
Type
mer a b c a b c a b c a b c d e
T1( t11) 1,7 0 0 1 1 0 0 0,5 0 0,5 0 0,5 0,5 0 0
T2 (t22) 2,6,9 0,67 0 0,33 0 1 0 0 0 1 0 0 0 0,67 0,33
T3 (t22) 3,8,12 0,67 0,33 0 0,67 0,25 0 0 1 0 1 0 0 0 0
T4 (t43) 4,5,10,11 0,25 0,50 0,25 0 0,75 0,25 0,75 0,25 0 0,25 0,75 0 0 0

Analyzing the four types of consumers and their advertisers conceived target commercials in order to
coordinates, one can draw the following conclusions: attract a certain group of viewers which identify with
- Type T1 – consists exclusively of people with their slogans.
monthly incomes over 5000 lei, between 18 and 35 In our way of thinking, segmentation should
years of age. This type of consumers equally uses the remain a valuable tool both for companies and
Internet and classic shops for purchasing “Style” consumers, supporting at the same time, the
products. The types of clothing demanded by this identification of clusters which feed the company’s
category are M2 and M3; profits and the features of product and service
- Type T2 – is made up mostly of people with low offerings which tailor the very group of clients
income (below 2500 lei/month), with ages between 36 interested in buying them.
and 50 years. The method of purchasing products is
through classic shops, while the preferred models are
M4 and M5; 4. REFERENCES:
- Type T3 – groups mainly people with incomes below
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mainly between 2500-5000 lei/month. People in this Timişoara, 2007
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consumers. If a larger number of questionnaires were marketingului, Editura Teora, Bucureşti, 2008
processed using this method, the larger the number of [8]. Kotler P., Managementul marketingului, Editura
consumers included in a type, the greater the diffusion Teora, Bucureşti, 2008
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and immutable. Nowadays, we know that global [14]. Yankelovich D., Meer D., Rediscovering
markets sum up a wide range of people which display Marketing Segmentation, Harvard Busieness Review,
much different buying behaviour. That reality is well February, 2006.
known by modern marketers, responsible of drawing
product development strategies or pricing and
promotion policies. Instead of directing companies in
suiting their products and services to the categories of
consumers most likely to purchase them, marketing
segmentation has become an old technique with a new
focus: media advertising and message. Thus, many

597

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