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THE MARKETING SEGMENTATION AS A MEANS OF ORGANIZATIONAL PERFORMANCE.
1.1 BACKGROUND OF THE STUDY
It is usually impossible for a particular organization to have a comprehensive knowledge of all the customers that made up a particular market, weather the market is industrial, consumer service, (Coles 2007). This is the situation most time because customers are usually widely spread, many and heterogeneous in what they buy and how they buy.
So rather that dissipate energy trying to serve all the customers that make up a market without having a comprehensive knowledge about any particular set of these customers, an organization without a good vision is expected to study the various sets of customers with a view to identifying the particular set that could be served most effectively and profitably and settle for some. One basic tool required to get this done effectively in the market segmentations, which Onayemi Shikan (In Sanyaolu, 2002) defines as the process of dividing a market into distinct sub set of customers, each of which can be considered as a target market with common heads and can be theory approached with a distinct marketing mix, action or programme.
Marketing segmentation is defined according to many textbook as the fundamental theory suggests that business adopting a market segmentation approach can enhance their organizational performance, (kotler, 2007) Market segmentation is grounded in economic pricing theory which suggests that profits can be maximized when pricing level discrimination between segments (Frank et al 1972). One of the reasons for the widespread acceptance of the approach is the belief that organizations cannot normally serve all the customers in a market. The leading textbook by Kotler, (2004) States that “Customers are too numerous and diverse in their buying requirement.” The implication here is that segmentation helps to homogenize market heterogeneity and coincidentally allows for improved organizational performance by targeting specific segments of the market.
Thus, customers who have been aggregated according to the similar buying needs and behavior will tend to demonstrate a more homogeneous response to marketing programs. (Choltray and Lillien, 1978; Wind 1978) Modern marketing literature identifies a range of benefit for business, pursuing a segmentation approach. The underlying logic is that segmentation can enhance marketing effectiveness and improve an organizations ability to capitalize on marketing opportunities (Beans and Ennis, 1987, Weinstein 1987).
This is partly due to the fact that segmentation builds on an excellent understanding of customers and competitors which can lead to fewer direct confrontations with competitors and the design of more suitable marketing programmes. Research has also show that segmentation also helps businesses to allocate financial and other resources more effectively (Mc Donald and Dunbeir, 1995).
Segmentation encourages businesses to play to their strengths by focusing their resources on the most attractive area of the market, and consequently earn better profits, consisting these claims, market segmentation, if could therefore be said that managers who are familiar with the concept and its application should achieve better performance than their counterparts who are neither familiar with it nor its application. This is the bases for the research in this project work which consider the view of staff aluminum warehouse and system limited, Lagos.
Aluminum warehouse and system limited was registered in July 2004 and commenced operation in February, 2005. The company is in the business of structural and architectural aluminum works with the unique capability of meeting the continuously changing requirement of her customers.
The company is a major player in the aluminum segments of the Nigerian building industry with a reputation for delivering world class quality services to a wide range of clients.
Also of particular significances are her direct and eventful relationship with such international supplier’s like Nigalex, Towerrex, and first aluminum that provide her the distinct advantage of prompt and efficient delivery to her clients.
The company presently has a total of 165 staff in its headquarters and sales outlets within Lagos and its environs.
1.2 STATEMENT OF THE PROBLEM
Evidence from a number of studies that in any marketing situation, it is practically impossible for a single organization to have sufficient knowledge about the entire customer in the market. Cole (1997) argues that, “The phenomena of market segmentation has come to recognize the need and importance of dividing market into customer groups or need so that marketers may succeed through developing products for specific market groups of segments whose need are not currently being satisfied by other competitors”. With such divisions, it becomes relatively possible for marketers to interact regularly with customers within such market group or segment identified within the marketing process. The overall objective behind this is to have reasonable knowledge about those customers in order to actually discover how best they can be served.
It is however regrettable to still observe cases in our contemporary marketing system where there are little or no orientation among marketing practitioners in their areas of business.
Altijosan (1987)emphasized that “Marketing orientation involves being consumer conscious and developing objectives, policies, strategies, plans and tactics that suggests in the long run that the organization adopts itself to moving along the path that ensures satisfaction of the consumer”.
Casino, (1967) also notes that a business can only have the mind of customer satisfaction if the business is viewed as a continuously integrated effort in search of the needs and wants of consumers and the formation of policies and strategies to satisfy these needs and want in such a way that to guarantee a long term satisfaction of both parties to the exchange process.
A critical look at the need for marketers to have sufficient “Marketing orientation” and the need for business to have “the mind of customer satisfaction” as entrenched in the works of Atidosan (1987). “The mind of consumer satisfaction reveals that marketing segmentations remain fundamental principles of marketing that marketers need to understand and apply effectively to get to the very top”. Little wonder marketing theory has suggested that businesses adopting a market segmentation approach can enhance their organizational performance, (kotler, 1997).
It is therefore imperative that organizational practitioners sees market segmentation as a pathway to formulating and implementing quality policies capable of catapulting them to achieving the highest level of customers satisfaction possible and make better profit consequently.
1.3 OBJECTIVES OF THE STUDY
- To understand what respondents believe to be the rationale for undertaking segmentation.
- To establish whether or not that business adopting a market segmentation approach performs better that those that give little or no attention to it.
- To access the role of segmentation towards performances.
1.4 RESEARCH QUESTIONS
The following are the research questions of the study.
- Segmentation leads to a greater understanding of the customer.
- Segmentation leads to a better match between the organization and it customers.
- Segmentation enables an organization to identify gaps and aids new brand development.
- Segmentation enables an organization to have a better knowledge of relevant market.
- Segmentation leads to improved and sustained level of relative profitability.
- Hi: Segmentation improve organizational performance
- Ho: Segmentation does not build customers loyalty.
1.5 SIGNIFICANCE OF THE STUDY
The significance of the study includes:
- To sensitize consumers on how to become brand loyal
- To sensitize consumers on how to make strategic purchase decision
- To sensitize consumers on how to locate organizations with the best offers for them.
- To enable marketers who are not familiar with the concept and application of segmentations, reposition and integrate the concept into their strategies to gain its full benefits.
- To enable marketer’s access the different segmentation techniques that best suit their marketing situation.
- To enable marketers gain new orientation concerning the role of segmentation in the marketing process.
1.6 SCOPE OF THE STUDY
The research is confined to assessing view on role of segmentation on organizational productivity and performance from staff or Eternity Aluminum Plc, Sapele and its sales outlets within sapele and its environs.
1.7 LIMITATIONS OF THE STUDY.
As a result of the study limited time, funds and other resources available?
- Primary data for the study are to be sourced from staff of Eternity Aluminum Plc, Sapele and its sales outlets. Within Lagos and its environs only.
- Secondary data for literature review are to be sourced from available current textbooks, within the reach of the researcher, the school library and the internet only.
- The questionnaire has considered to be the only instrument to access respondent’s views on relevant issues in the course of the study.
If there were sufficient time and funds data would have sourced from more marketers, universities and organization across several states; and other research instruments apart from questionnaire, used as well. So limitations to the study include:
- Insufficient funds
- Short time duration
- Inability to source data from other places and from the few earlier named.
- Inability to use other instruments apart from the questionnaire.
1.8 OPERATIONAL DEFINITION OF TERMS
Consumers Market; A market made up of goods and services designed for the ultimate consumers or for personal, family or houses hold use.
Customer Aggregation: Separation of customers into different groups according to buying needs and behavior.
Distinct Marketing Mix: Well planned integration strategies of the four “ps” to achieve some desired results.
Products (P1): Planning and development of products that a customer requires e.g. repair services.
Place (P2): Distribution of products through appropriate channels e.g. wholesale, retailers, etc which provide the services required by the customers.
Price (P3): Establishment of prices which offer both values to the customers and satisfactory profits to the supplier
Promotion (P4): Promotion of products through advertising, sales promotion, public relations and personnel selling.
Distinct subsets of customers: Differentiated groups of customers according to buying needs and behavior similar to customer aggregation.
Heterogeneous Customers: Different types of customers in terms of buying needs and buying behavior.
Homogenous Response: Similar response demonstrated by customers with the same segment.
Industrial Market: A market made up of goods and services purchased for the use of a firms operation to make other products. Industrial goods include machinery, raw material etc. Industrial buyers include manufacturers, wholesalers, retailers, government etc
Market Heterogeneity: Differentiated marketers.
Services Market: A market made up of non – tangible goods and services e.g. accounting services, medical services, engineering services etc.