Marketsofasinglecustomer: exploiting conceptual developments in market segmentation Ali Kara Pennsy Pennsylva lvania nia State State Univer Universit sity y at York, York, Pennsyl Pennsylvani vania, a, USA, USA, and Erdener Erdener Kaynak Kaynak Pennsylvania State University at arris!urg, Middleto"n, Pennsylvania, USA At early stages of market development, development, many sellers sellers made t#eir products products availa!le availa!le for specific specific custom customer er groups groups$$ %ailor ailorss for instan instance, ce, made made a diffe differen rentt garmen garmentt for eac# custom customer& er& and s#oemakers s#oemakers made a special special pair of s#oes for eac# pair of feet$ %#ese craftsmen craftsmen did not produce for inventory !ut for order !ecause t#ey did not kno" "#at si'e or materials t#eir customers "ould "ant$ Even today some people "ill order customi'ed suits, s#irts, and s#oes to fit t#eir specific individual re(uirements and expectations )*avis, +-./$ 0ntroduction 0n t#e current marketing literature, it #as !een "ell esta!lis#ed t#at markets and customers "#o form t#ose markets are not #omogeneous in nature )Alderson, +-1& Assael and 2oscoe, +.3& 4laycamp and Massy, +3-& Smit#, +53/$ 0n most cases, it is almost impossi!le to satisfy all customers in a single market "it# a single marketing strategy$ 0ndividual uses of or !enefits soug#t from a product class6form6!rand6options #ave !een found to differ in terms of consum consumer7 er7ss indivi individua duall prefer preferenc ences, es, c#oice c#oice !e#avi !e#aviour ourss in t#e market marketplac place, e, as "ell "ell as t#eir t#eir effective responses to marketing actions of firms )8rover and Srinivasan, +-& 9ind, +.-/$ %#erefore, %#erefore, firms offer a multitude multitude of products products and !rands to different different market segments$ segments$ 0n t#is "ay, t#ese firms move a"ay from mass marketing to"ards a target marketing strategy "#ere t#e focus is on a particular group of customers$ %#e identification of target customer groups )a #omo #omoge gene neou ouss grou group p of peop people le "it# "it# simi simila larr type type of need needs6 s6"a "ant nts/ s/ is call called ed mar marke kett segm segmen enta tati tion; on;,, "#ere "#ere custo custome mers rs "it# "it# simi simila larr re(ui re(uire reme ment ntss )exp )expec ecta tati tions ons// and !uyi !uying ng c#aracteristics are aggregated<+= into t#e same group$ 0n strategic marketing plans, t#is process !y "#ic# market segmentation takes place usually consists of t#ree main elements: segmentation )decision on varia!les for segmenting markets, profiling of emerging segments, and validation of segments/, targeting )decision on targeting strategy, and targeting single or multiple segments for marketing strategy development/, and positioning )understanding consumer perceptions, position products in t#e mind of consumers, and designing appropriate marketing strategies to differ different entiat iatee produc products ts or a company company from from its compet competito itors/ rs/ )*i!! )*i!! and Simkin Simkin,, ++/$ ++/$ %#e c#anging c#aracteristics of consumers > t#at is c#anging t#e composition of family unit, ageing of t#e population, t#e rise in t#e et#nic population and c#ange in its composition > coupled "it# t#e transformations taking place in t#e tec#nological environment and pro!lems associated "it# t#e segmentation studies cultural context and diffusion process > "ere linked in an integrative matrix summari'ing various tactics for promoting and distri!uting a video cassette recorder )F42/ around t#e "orld, "it#in t#e !ounds of a glo!al marketing strategy$ 0n a segmentation approac#, four levels of felt involvement and t"o rates of product learning are proposed )Amine, +1/$ Gurt#ermore, t#ere are different market segmentation criteria for t#e development of segments
and allocation of marketing resources to t#e segments )8reen, +..& Ma#aDan and Hain, +.-& Young et al$, +.-/$ Also, t#e aggregation pro!lems )t#at is, "#et#er t#e aggregation s#ould !e done done on t#e !asis !asis of simila similarit rity y of elasti elasticit cities ies,, margin marginal al respon responses ses,, or respon response se functi function on coefficients/ of normative market segmentation t#eory )%ollefson and Iessig, +.-/ are some of t#e factors t#at complicate t#e practical implications of market segmentation studies$ 8enerally, it is accepted !y sc#olars t#at segmentation is not a very refined "ay of differentiating parts of a market, so a more refined sc#eme #as evolved "#ic# is la!elled as nic#e )any of parts of a segment t#at can !e furt#er divided/$ Alt#oug# segmented and nic#ed, #o"ever, t#e market #as not yet (uite reac#ed its ultimate level of internal differentiation$ Per#aps t#e final step in t#e segmentation is t#e identification of t#e unitary !uilding !locks$ 0n today7s market, advances in comp comput uter er and and tele teleco comm mmuni unica cati tion on tec# tec#no nolo logi gies es and and in#er in#eren entt autom automat atio ion n capa capa!i !ili liti ties es in manufacturing allo" marketers to !ring out afforda!le individuali'ed versions of products$ %#e o!Dect o!Dective ive of t#is t#is paper paper is t#en t#en to invest investiga igate te and concept conceptual uali'e i'e t#e advanceme advancements nts in segmentation t#eory$ 0t is argued in t#is paper t#at finer segmentation )GS/, t#e ultimate level of inte intern rnal al diff differ eren enti tiat atio ion, n, repr repres esen ents ts t#e t#e fina finall advan advance ceme ment nt in mark market et segm segmen enta tati tion on and and development studies$ 0n GS, markets are assumed to !e perfectly #eterogeneous, information and manufa manufactu cturin ring g tec#no tec#nolog logies ies are !eing !eing used used extens extensive ively ly and strate strategic gicall ally y, and custom customi'e i'ed d products are delivered on a mass !asis as in t#e same "ay t#at segments and nic#es are reac#ed on a mass market !asis$ %o t#is end, some researc# propositions and related #ypot#eses regarding to GS are developed$ Gurt#ermore, future researc# avenues in GS are outlined$ Key segmentation concepts used in t#e literature 0t is imperative to discuss !riefly t#e differences among some of t#e segmentation concepts used in t#e marketing literature in order to explain finer segmentation segmentation concept clearly clearly$$ Some of t#e most fre(uently fre(uently used segmentati segmentation on related related concepts are: normative segmentation, nic#e marketing, micro marketing, data!ase marketing, relations#ip marketing, and mass customi'ation$ Eac# definition !elo" integrates various aspects and popular practices t#at #ave !een suggested$ @ormative segmentation ne of t#e most fre(uently used p#rases in t#e marketing literature is t#e identification of market segments t#at usually entails t#e identification of #omogeneous su!sets of t#e mass market !y clustering )grouping/ customers on a set of varia!les$ %#us, segmentation is an aggregation process in "#ic# consumers "it# similar needs and expectations are clustere clustered d into into a marke markett segme segment nt t#at t#at is differ different ent from t#e ot#er market market segmen segments$ ts$ 0n segm segmen enta tati tion, on, cons consum umer erss "#o "#o make make up a part partic icul ular ar marke markett segm segmen entt are are assu assume med d to !e #omogen #omogeneous eous "it#in "it#in t#e segmen segmentt and #etero #eterogen geneous eous across across segmen segments$ ts$ Some Some sc#ola sc#olars rs vie" vie" segmentation as disaggregative in its effects "#ic# tends to !ring a!out recognition of several demand sc#edules )*ickson and 8inter, +-./$ Segmentation represents a rational and more precise adDustment of product and marketing effort to consumer or user re(uirements )Smit#, +53/$ 0n ot#er "ords, market segmentation is t#e act of dividing a market into distinct groups of !uyers "#o mig#t re(uire separate products and6or marketing mixes$ Market segments are large identifia!le groups "it#in a market, suc# as car !uyers seeking #ig# performance$ %#us, a market segment is a relatively #omogeneous group of customers "#o "ill respond to a marketing strategy in a similar "ay$ %#ere are t"o principal approac#es to market segmentation: )+/ a priori segmentation "#ere t#e researc#er first c#ooses some varia!les of interest and t#en classifies !uyers according to t#at designation& and )?/ post #oc segmentation "#ere t#e researc#er c#ooses a !attery of interrelated varia!les and t#en clusters !uyers into groups "#ose average "it#in "it#inJgr Jgroup oup simila similarit rity y is #ig# #ig# and "#ose "#ose !et"ee !et"een n group group simila similarit rity y is lo" )9 )9in ind, d, +.-/$ +.-/$ Segmentation effectiveness depends on arriving at segments t#at are measura!le, su!stantial, accessi!le, differentia!le, and actiona!le )2o!erts, +3+/$ Ginally, t#e firm c#ooses one or more of t#e identified segments and treats eac# as a smaller market )Keegan et al$, +?/$ @ic#e marketing A nic#e is a more narro"ly defined group of customers$ Keegan et al$ )+?/ define nic#e marketing as a small market t#at is not served !y competing products;$ S#ani and
4#alasani )+?/ define it as t#e process of carving out a small part of t#e market "#ose needs are not fulfilled$ 0t is argued t#at nic#e marketing strategy consists of selecting narro" segments t#at re(uire special special tec#nical tec#nical and marketing marketing expertise )Coyd and 9alker, alker, +B/$ Kotler )+/ suggests t#at t#e key idea in nic#e marketing is speciali'ation$ Gor instance, 0ndustrial 4omputer Source #as t#e #ig#est name recognition in t#e USA personal computer !usiness$ 0n addition to its direct marketing efforts, t#e company #as succeeded !ecause of t#e diversity of its nic#e$ %#e c#allenge #as !een targeting and segmenting its extensive data!ase and t#e rented lists it uses )Poirier, +1/$ 0n t#e marketing literature, t#e ideal nic#e "as descri!ed as #aving t#e follo"ing five c#aracteristics )Kotler, +/: )+/ t#e nic#e is of sufficient si'e and purc#asing po"er to !e profita!le& )?/ t#e nic#e #as gro"t# potential& )1/ t#e nic#e is of negligi!le interest to competitors& )/ t#e firm s#ould #ave re(uired skills and resources to exploit t#e nic#e& and )5/ t#e nic#e s#ould provide entry !arriers for competitors t#roug# accumulated customer good"ill$ A careful analysis of t#ese descriptions yields t#at a nic#e takes segmentation one step furt#er in terms of creating distinct group of customers$ Gor instance, Marriott offer a variety of #otels to different market nic#es$ 4redit card companies offer services aimed different customer groups$ Kaepa 0nc$, a sneaker manufacturer, targets a c#eerleaders7 nic#e )Under"ood, +?/$ 0t is predicted t#at nic#es "ill !e also nic#ed in t#e future )Iinneman and Stanton, ++/$ Micro marketing6#yperJsegmentation %edlo" )+B/ identifies t#e era of +5Bs t#roug# to t#e early +Bs as segmentation p#ase$ e speculates on t#e emergence of a ne" era of micro marketing or #yperJsegmentation "#ic# is !ased on developments in information tec#nology$ %#is implies t#e esta!lis#ment and coJordination of closer and more intimate relations#ips !et"een manufacturers and t#eir target markets$ Micro marketing is defined as a form of target marketing marketing in "#ic# companies tailor t#eir t#eir marketing marketing programs )products, )products, advertisin advertising, g, sales promotions, and personal selling efforts/ to t#e needs and "ants of narro"ly defined geograp#ic, demograp#ic, socioJeconomic, psyc#ograp#ic, or !enefit segments; )Kotler, +/$ Gor instance, !a!y !oomer market, ispanic market, mature market, "orking "omen market, and single parent market are some of t#e micro markets to "#ic# companies target t#eir programmes$ Micro marketing can !e vie"ed as an extension of target marketing$ Usually, needs!ased segmentation is t#e frame"ork used for effective micro marketing$ 0t forms t#e !asis of segmenting t#e customers into target groups !ased on commitment to a product class and profiling prospective customers into smaller clusters or groups$ *ata!as *ata!asee market marketing ing *ata!as *ata!asee marketi marketing ng involv involves es t#e collec collectio tion n of inform informati ation on a!out a!out past, past, curren current, t, and potent potential ial custom customers ers to !uild !uild a data!as data!asee to impro improve ve t#e market marketing ing effor effortt of a company company )S#ani )S#ani and 4#alas 4#alasani ani,, +?/$ +?/$ As part of its tec#nical tec#nical coJoper coJoperati ation on "ork "ork in trade trade information, t#e 0nternational %rade 4enter identifies data!ases relevant to international trade and tests t#em for t#eir usefulness to t#e foreign trade community of developing countries$ Gor exporters and importers certain types of trade information are crucial for operating successfully on t#e international market$ %#ese include: )+/ details on products traded and demand on t#e markets for t#em& )?/ ne"s on commercial and economic developments t#at affect international marketing& )1/ information on companies active in t#e trade of given products& )/ statistical data on market si'e& )5/ commodity prices& )3/ trade opportunities arising out of ne" industrial proDects& and an d )./ tec#nical standards and trade regulation for specific products$ Some data!ases cover suc# specific su!Dects as trade control measures, trade fairs sc#eduled for t#e next fe" years, and s#ip movements in given #ar!ours )Ancel and Srivastrava, +1/$ ence, t#e data!ase is considered a strategic decisionJmaking tool for companies and pu!lic agencies$ nce potential custom customers ers #ave #ave !een !een identi identifie fied, d, compan companies ies need to captur capturee inform informati ation on a!out a!out consum consumer er demograp#ic profiles, consumer likes and dislikes, taste patterns, purc#asing !e#aviour, and consumer lifestyles$ %#is type of data!ase is already !uilt for #ig#Jinvolvement products suc# as automo!iles and some packaged goods )i$e$ Kim!erly 4lark7s uggies/$ e"lettJPackard #as significantly increased its productivity !y training its sales people to use laptop computers
connected connected to customer data!ases )4aruso, +?/$ Anot#er Anot#er form of data!ase data!ase marketing marketing is called called interactive marketing )Clatt!erg and *eig#ton, ++/$ 0n interactive marketing, marketers use actual !e#aviour to identify customers and prospects and statistical models to assess t#e value of eac# eac# indi indivi vidua duall and t#en t#en eac# eac# cust custom omer er rece receiv ives es a custo customi mi'e 'ed d offe offeri ring ng$$ %#us %#us,, crit critic ical al components of interactive marketing are: data!ase management, statistical modelling, creating a customer customer data!ase, data!ase, production and accounting$ accounting$ 0n data!ase data!ase marketing, marketing, companies use t"oJ"ay t"oJ"ay c#annels of communication to create ric#er, more securely !ased relations#ips, reac#ing across a "#ole range of products, and t#ey engage in a dialogue "it# t#eir customers$ 2elations#ip marketing 2elations#ip marketing #as attracted a great deal of attention in t#e +Bs and #as !een t#e topic of discussion among marketing practitioners and sc#olars alike$ 2elations#ip marketing #as !ecome a popular !u''"ord in t#e academic )unt and Morgan, +& Morgan and unt, +/ and !usiness )Ievine, +1& McKenna, ++/ press$ Professional associations suc# as t#e American Marketing Association Association )AMA/ and t#e Academy of Marketing Science Science )AMS/, )AMS/, added added relati relations ons#ip #ip market marketing ing track track in t#eir t#eir annual annual meetin meetings$ gs$ 2elati 2elations ons#ip #ip marketing marketing com!ines com!ines elements elements of mass media advertisin advertising, g, sales promotion, promotion, pu!lic pu!lic relations, relations, data!ase marketing, and direct marketing to create more effective and more efficient "ays of reac#ing t#e target customers )4opulsky and 9olf, ++/$ 0n vie" of intense competition in t#e market marketplac place, e, firms firms of all si'es si'es and from from differ different ent indust industrie riess feel feel t#e need to form form !etter !etter relations#ips "it# t#eir customers$ %#e interactive process t#at takes place !et"een t#e !uyer and t#e seller in an exc#ange situation, "#ic# is not !ased on a single transaction !ut a series of transactions over time, ena!les a relations#ip to !e formed !et"een t#e t"o parties$ 2elations#ip marketing re(uires t#at marketers define "#ic# customers are "ort# cultivating !ecause t#ey can meet t#eir needs more effectively t#an anyone else$ %o t#is end, customer data!ases are needed to make make t#is t#is relati relations ons#ip #ip "ork$ "ork$ Accor Accordin dingly gly,, relati relations ons#ip #ip market marketing ing can !e define defined d as an integrated and coordinated effort to identify, maintain, and !uild up a net"ork "it# individual consumers and employees, and continuously strengt#en t#e net"ork for t#e mutual !enefits of !ot# sides, t#roug# interactive, individuali'ed and valueadded contacts continuously and over a long period of time; )S#ani and 4#alasani, +?/$ Cerry and Parasuraman )++, pp$ ?5, +11/ state t#at, relations#ip marketing is attracting, maintaining and > in multiJservice organi'ations > en#ancing customer relations#ips; and propose t#at relations#ip marketing concerns attracting, developing, and retaining customer relations#ips$ *oyle and 2ot# )+?, p$ 5/ indicate t#at t#e goal of relations#ip selling is to earn t#e position of preferred supplier !y developing trust in key accounts over a period of time;$ A more practice oriented definition is given !y 4opulsky and 9olf )++/$ According to t#em, relations#ip marketing is !ased on t#ree key elements: )+/ identifyi identifying, ng, !uilding, !uilding, and continuously continuously updating updating a data!ase data!ase to store store relevant relevant informati information on a!out customers& )?/ using innovative media to deliver differentiated messages to t#e customers& and )1/ tracking and monitoring t#e relations#ip "it# eac# customer, over a period of time, and calcul calculati ating ng t#e lifet lifetime ime value value of t#at t#at custom customer7 er7ss franc# franc#ise ise and purc#as purc#ases$ es$ %o serve serve t#eir t#eir customers !etter Gord Motor 4ompany and Ma'da Motors 4orporation formed an alliance$ %#e t"o t"o comp compani anies es coJo coJoper perat atee on ne" ne" ve#i ve#icl cles es and exc#a exc#ang ngee valu valua! a!le le expe expert rtis ise& e& Gord Gord in international marketing and finance, Ma'da in manufacturing and product development$ Gord is currently using its relations#ip "it# Ma'da as t#e pattern for Doint ventures around t#e "orld$ Alre Already ady,, it is appl applyi ying ng less lesson onss from from t#e t#e Ma'd Ma'daa linka linkage ge to emer emergi ging ng rela relati tion ons# s#ip ipss "it# "it# Folks"agen and @issan Motor 4ompany )%reece and Miller, +?/$ %#us, relations#ip marketing is mostly concerned "it# t#e longJterm relations#ip !et"een t#e organi'ation and a customer )S#et# )S#et# and Parvat Parvatiy iyar ar,, +5/$ +5/$ 0n fact, fact, t#is t#is o!Dect o!Dective ive is also also very clear in t#e defini definitio tion n of market marketing ing "#ic# "#ic# includ includes es in t#e concept concept of custom customer er orient orientati ation;$ on;$ o"ever o"ever,, relati relations ons#ip #ip market marketing ing emp#asi emp#asi'es 'es t#e longJt longJterm erm relati relations ons#ip #ip t#e most most #eavil #eavily y$ %#e relati relations ons#ip #ip itsel itself f !ecomes an important attri!ute of t#e process rat#er t#an a transaction$
Mass customi'ation %#e competitive environment in t#e +Bs #as c#anged drastically and market market tur!ulence tur!ulence #as also increased increased due to c#anges c#anges and transformatio transformations ns taking place in glo!al markets$ 4ompanies #ave felt significant pressures not only from domestic companies !ut also from glo!al or multinational companies$ Some of t#e features of t#e competitive environment of t#e +Bs +Bs and !eyond !eyond are: are: timeJ!a timeJ!ased sed compet competiti ition& on& proli prolifer ferati ating ng variet variety& y& DustJi DustJinJt nJtime ime production& regional marketing& continual improvement& s#ortening product life cycles& marketJdriven (uality& glo!ali'ation& net"orked organi'ations& micro marketing& increased customi'ation& lean production& cycle time reduction& total (uality management )%LM/& flatt flattened ened #ierar #ierarc#i c#ies& es& comput computerJ erJint integr egrate ated d manufa manufactu cturin ring& g& proces processs reJengi reJenginee neerin ring& g& #eig #eig#t #ten ened ed impor importa tance nce of serv servic ices es&& frag fragme ment nted ed mark market ets& s& (uic (uick k resp respon onse se&& flex flexi! i!le le manufacturing systems& data!ase marketing )Pine, +1, p$ 1/$ %#ese environmental c#anges are affecting affecting t#e "ay companies companies operate and deal "it# customers$ customers$ According According to Kotler Kotler )+-/, )+-/, t#e t#e mas masss mark market et;; is dead dead and and segm segmen enta tati tion on #as #as no" no" prog progre ress ssed ed to t#e t#e era era of mass mass customi'ation$ Mass customi'ation "as conceptuali'ed first !y *avis )+-./ and "as furt#er elucidated !y Pine )+1/$ 0t is !ased on t#e idea of tying computer!ased information systems toget#er "it# ne" modes of operation suc# as flexi!le manufacturing and DustJinJtime )H0%/ production and t#en using t#ose linked systems to make it possi!le to provide eac# customer "it# t#e attractive, tailorJmade !enefits of t#e preJindustrial craft era at t#e lo" cost of modern production$ Pine )+1/ talks a!out a paradigm crisis;, t#at mass production paradigm )"orld vie"/ can no longer explain or provide solutions to t#e pro!lems t#at today7s companies are facing$ facing$ %#erefore, %#erefore, Pine proDects a paradigm paradigm s#ift; or a c#ange in to a ne" game, a ne" set of rules; referring to t#e mass customi'ation$ According to Pine et al$ )+1/, mass customi'ation calls calls for flexi! flexi!ili ility ty and (uick (uick respon responsiv sivene eness$ ss$ 0n an everJ everJc#a c#angi nging ng enviro environme nment, nt, people people,, processes, units, and tec#nology reconfigure to give customers exactly "#at t#ey "ant$ As is illustrated in t#e list a!ove, t#e significant tur!ulence of t#e +Bs #as paved t#e "ay for mass custom customi'a i'atio tion n in many many indust industri ries es "#ic# "#ic# #ave !een !een affec affected ted !y advance advancess in manufa manufactu cturin ring g tec#nol tec#nology ogy and develop developmen ments ts in t#e inform informati ation on tec#no tec#nolog logies ies$$ 0n t#e +Bs, +Bs, compani companies es discovered t#at increased flexi!ility and responsiveness in t#eir manufacturing process #ave ena!led t#em to provide customi'ed goods and services "it# greater efficiency$ Pine )+1/ #as identified five !asic met#ods for mass customi'ing$ %#ese five approac#es provide a progression of stages t#at allo" a firm to s#ift fromproducing standardi'ed goods and services to mass customi'ation t#roug#out its key valueJadded activities$ %#e order of t#e five stages are: )+/ customi'e customi'e services around standardi'e standardi'ed d products products or services& services& )?/ mass produce customi'ed customi'ed services or products t#at customers can easily adapt to individual needs& )1/ move production to t#e customer to provide pointJofJdelivery customi'ation& )/ provide (uick response& and )5/ modulari'e components to customi'e end products and services$ 0n t#is paper, it is argued t#at t#e concept conceptss suc# suc# as nic#e nic#e marketi marketing, ng, data!as data!asee marketi marketing, ng, micro micro market marketing ing,, relati relations ons#ip #ip marketing, and mass customi'ation s#ould not !e treated as discrete concepts !ut rat#er !e seen as pieces of an integral part of marketing t#eory "#ic# offers "ays of !est satisfying individual consumer7s uni(ue needs and "ants "#ile yielding profits to t#e companies$ Since t#e overall o!Dect o!Dective ive of all t#e concept conceptss discus discussed sed a!ove a!ove is to recogni recogni'e 'e indivi individua duall differ differenc ences es among among customers and modify t#e offerings accordingly, !y using t#e logic of t#e segmentation t#eory, t#e aut#ors #ere argue t#at t#ose concepts are not any different from t#e efforts of reac#ing segmentsJofJone efficiently and profita!ly$ 0n ot#er "ords, t#e o!Dective of making segmentation finer or reac#ing t#e smallest unit of a market segment is to !e more successful in t#e ne" customi'ation era$ %#e finer segmentation: converting a market into its particles Ever since Smit#7s )+53/ classic article, market segmentation #as !ecome a dominant concept in marketing planning literature and practice$ Smit# defined segmentation as representing a rational and more precise adDustment of products and marketing efforts to consumer or user re(uirements$ Cesides !eing one of t#e
"ays of operationali'ing marketing concept, market segmentation provides effective guidelines for a firm7s marketing strategy development and resource allocation among diverse product markets markets )9ind, )9ind, +.-/$ Market segmentatio segmentation n t#us plays a decisive decisive role in t#e development development of a comp company any77s posit positio ioni ning ng stat statem emen entt "#ic "#ic# # is not#i not#ing ng more more t#an t#an a com! com!in inat atio ion n of prod product uct differentiation and market segmentation in lig#t of a given companies7 resources, o!Dectives and competences$ Alt#oug#, so far, most most sop#isticated segmentation tec#ni(ues #ave !een used, t#ere are are stil stilll some some maDo maDorr (ues (uesti tions ons need needin ing g to !e care carefu full lly y ans" ans"er ered ed !y t#e t#e rese resear arc#e c#ers rs and and practitioners alike "#o are interested in t#e furt#erance of market segmentation studies$ Some of t#ese (uestions "#ic# also #ave managerial implications are discussed !elo"$ o" sta!le are t#e market segments over time 8iven t#e assignment of an individual to a segment D, #o" likely is it t#at individual remains in t#e same segment over t#e given time period and under varying and c#anging circumstances %#e ans"er to t#is (uestion "ill depend on several factors suc# as, t#e !asis for segmentation, t#e volatility of t#e marketplace, and c#anging demograp#ic, socioJ economic and !e#avioural c#aracteristics of t#e consumer$ 9#at is t#e most appropriate unit of analysis for measurement )i$e$ an individual, a #ouse#old, a !uying centre/ %#e discrepancy !et"een t#e desired; and t#e actual unit of analysis can !e attri!uted primarily to t#e conceptual and met#odological pro!lems involved in market segmentation studies$ Several factors "ill !e at "ork #ere$ Among ot#ers, t#e nature of t#e product, difficulties in t#e identification of !uying centre, t#e significance of product for consumers, and measurements of individual consumers or #ouse#old7s opinions$ o" do t#e segments identified respond to t#e c#anges taking place in market marketing ing decisi decision on varia! varia!les les 0n ot#er ot#er "ords, "ords, #o" suscep suscepti! ti!le le a given given market market segmen segmentt is to"ards c#anges in marketing strategy varia!les$ Suscepti!ility or indifference on t#e part of consumers "ill !e determined !y a given market7s !e#avioural tendencies$ ne can mention several more (uestions, "#ic# can !e found in t#e market segmentation literature, !ut "#at is clear is t#at market segmentation is not a very refined "ay of differentiating parts of a market$ %#ere are apparent imperfections in market segmentation$ o"ever, t#ese are su!Dect to c#ange "it# t#e emergence of finer segmentation$ 9it# t#e use of computer and information tec#nology, companies "ill !e a!le to reac# t#e smallest unit > an individual consumer > of markets and alter or modify t#eir production according to t#e uni(ue needs and "ants of individual consumers$ Gor instance, using personali'ed production, a Hapanese !icycle manufacturer )@ational Panasonic Cicycle/ created almost +? million variations of !icycle )Moffat, +B/$ Grom t#e early +-Bs, t#e outlook for t#e #ig#ly competitive Hapanese !icycle industry looked !leak$ Sales of all models "ere dropping and prices "ere !eing forced do"n$ 4onsumer demand "as !eginning to fragment as ne" segments emerged$ 0n +-., @PC developed certain strategic targets for its !icycles in order to: create demand de mand for #ig# valueJadded products "#ic# met diverse individual needs& clearly distinguis# t#emselves from t#e competition& avoid producing any unsold stock or o!solete products& and prevent retail price cutting$ %o !e a!le to fine tune "it# customer demand, t#e company tailored tailored !icycles to t#eir t#eir demand$ demand$ Accordin According g to t#is finer segmentation segmentation approac#, t#e customer enters a cycle s#op "#ere #e6s#e is measured up on a special frame so t#e frame dimensions "ill !e custom !uilt, piece !y piece$ %#e customer can also c#oose from a "ide variety of design elements )see Gigure +/ )9est!rook and 9illiamson, +1/$ Cy using flexi!le manufacturing systems )GMS/, t#e met#od is !eing employed to s#rink smallJlot production Do!s to lots of one$ Similarly, 8M7s Saturn division uses a more personali'ed approac# in t#eir production and marketing strategy$ 4ustomers can go to local 8M dealers and essentially custom design t#eir o"n cars$ %#e 2it'J4arlton #otels keep a computer record, availa!le to all of its #otels, of any guest preferences$ 0f a guest asked for a special service, e$g$ foam pillo", t#ere "ill !e one ready for #im t#e next time #e c#ecks in$ 9it# 9it# a computer and a video, Soft"are Sports" Sports"ear ear,, a 4onnec 4onnectic ticut ut company company,, design designss a custom custom s"ims s"imsuit uit for every every "oman$ "oman$ *ell *ell 4omputer 4orporation makes more t#an +,BBB different configurations of personal computer systems, "#ose production is triggered only after a customer7s specific order is received$ 0n #is
article, As#more )+--/ explained t#at t#e product6service differentiation is t#e most common purely strategic; application of information tec#nology$ Also, Ii )+-./ argued t#at t#roug# data!as data!asee marketi marketing, ng, segmen segmentat tation ion "ill "ill evolve evolve into into a #ig#ly #ig#ly sop#is sop#istic ticate ated d instr instrume ument, nt, one advanced "ell !eyond traditional segmentation$ All t#ese developments actually represent a ne" type of market segmentation "#ic# is more refined and customi'ed$ %#is ne" conceptuali'ation of market segmentation can !e summari'ed in t#e follo"ing "ay: Giner segmentation is t#e markets of one& t#at is, it assumes #eterogeneity of t#e customers and t#erefore focuses on t#e needs and "ants of smallest unit of t#e market$ 0t meets t#e tailored needs of individual customers and doing so on a mass !asis, it revolutioni'es marketing and makes it feasi!le "it#in t#e limits of company resources$ 0t reduces inventories and related costs, and decreases t#e failure rate of strategic marketing decisions$ 0n t#is definition of GS, mass !asis means t#at t#e same large num!er of customers can !e reac#ed as in mass markets of t#e industrial economy, and simultaneously t#ey can !e treated as in t#e customi'ed markets of preJ industrial economies$ %#us, GS can !e vie"ed as t#e final level of market segmentation$ 0t converts a market into its particles$ %#e progressive development of t#e market segmentation conc concept eptss is illu illust stra rate ted d in Gigu Gigure re ?$ Ever Ever sinc sincee t#e t#e mass mass mark market et spli splitt into into a mult multit itude ude of demograp#ic, socioeconomic and !e#avioural fragments )particles/, marketers #ave !een looking for a !est model for understanding consumer desires, expectations, and !e#aviour$ 2educing inventories and related costs are directly related to t#e "ay t#at GS operates$ 0n GS it is assumed t#at production "ill not start until t#e customers place orders, "#ic# reduces or eliminates t#e inventories and t#erefore all related inventory carrying, order processing and financing costs are expected to decline$ *ecreasing failure rate of t#e strategic marketing decisions is related to t#e precision in understanding t#e individual customer needs and developing a uni(ue marketing strategy strategy configurati configuration on for t#at customer customer$$ %#is definition definition is significan significantly tly different different from t#e traditional traditional definition definition of segmentati segmentation on and it is relevant to almost almost all product and services services from #ouses to automo!iles as "ell as from clot#ing to #am!urgers, to !irt#day cards$ %#e features of finer segmentation 0n t#is study, GS is conceptuali'ed as a !etter and a more precise "ay of segmenting markets$ GS #as t#e follo"ing features: extensive information flo" and compre#ensi compre#ensive ve marketing marketing data!ases& data!ases& computeri'ed computeri'ed6flex 6flexi!le i!le manufacturi manufacturing ng systems systems )i$e$ GMS/& and integrated distri!ution systems )i$e$ H0%/$ %#ese t#ree interrelated features facilitate a finer segmentation process$ %#e !rief discussion of eac# feature of GS is offered !elo"$ Extensive information flo" and compre#ensive data!ases ver t#e last decade, t#e t#eory and practice of marketing, !ased on tec#nological advances and innovations, #ave developed more commitment to finer segmentation$ As a result, utili'ation of information sources availa!le to t#e marketers #as !ecome one of t#e most important features for GS to !e successful$ %o t#is t#is end, t#e ne"er tec#nologies are coming onJstream t#at deal "it# infinitesimal parts of t#e "#ole, "#ic# interest us in t#is researc#$ %#ey operate at suc# fast speeds and specificity as to ena!le t#e researc#ers and practitioners to see #o" t#e "#ole is actually present in eac# of one of t#e parts )*avis, +-./$ Most marketers already kno" t#at t#ey can no longer rely exclusively on t#e massJm massJmark arket et commun communica icatio tion n to reac# reac# an increa increasin singly gly fragme fragmente nted d consume consumerr !ase$ !ase$ %#e ne" data!ase marketing creates ne" means of dealing "it# t#e individual consumers in a "ay t#at a marketer understands and "ants to serve t#at individual consumer7s needs )2app and 4ollins, +B/$ Accordingly, in GS, it is assumed t#at t#e creation of ne" marketing data!ases or t#e en#ancement of t#e existing data!ases "it# ne" information on individual attitudes, interests, opinions, opinions, and purc#asing purc#asing !e#aviours are crucial$ %#erefore, %#erefore, t#ere is a need for testing testing t#e !asic #ypot#esis t#at t#ere is sufficient data availa!le in t#e market to provide researc#ers "it# clues )!eyond t#e customerJrelated !ackground information/ as to t#e likeli#ood of an individual purc#asing a specific company7s product$ %#is situation demonstrates t#e increased importance of information exc#ange or flo" t#at accompanies GS$ 0n traditional segmentation, information a!out some kno"n c#aracteristics of unit of analysis )individual, #ouse#old, company, or !uying
center center// is re(uir re(uired ed in order order to segmen segmentt or cluste clusterr t#e customers customers toget#er toget#er,, and t#en t#en on t#e assumption of #omogeneous clusters, marketing efforts are directed to capture t#ese specific segments or clusters$ o"ever, in GS, t#e continuous flo" of information is re(uired not only to unders understan tand d an indivi individual dual custom customer7 er7ss needs6" needs6"ant antss extens extensive ively ly !ut also also to keep keep track track of t#e c#anging nature of individual needs6"ants and respond to t#em (uickly in a responsive manner )proactive stance/, and to facilitate t#e production and delivery processes accordingly$ 4omputeri'ed manufacturing systems 0n order for GS to !e successful, mass customi'ation s#ould !e utili'ed$ %#e mass customi'ing of products "ill occur at various points along t#e line from design and fa!rication to t#e delivery )i$e$ customi'e services around standardi'ed products or services, mass produce customi'ed services or products t#at customers can easily adapt to individual individual needs, move production production to t#e customer to provide provide pointJofJde pointJofJdeliver livery y customi'at customi'ation, ion, provide (uick response, and modulari'e components to customi'e end products and services/$ %#e computeri'ed assem!ly line "ill !ring customi'ed products "it#in t#e reac# of t#e average person and, !y innovative and flexi!le manufacturing, specific needs6"ants of individual custom customers ers "ill "ill !e satisf satisfied ied$$ %#is %#is reflec reflects ts t#e necess necessity ity of t#e comput computeri eri'ed 'ed,, flexi! flexi!le le and innovative manufacturing for GS to !e successful$ 9it# t#e emergence of GS, t#e num!er, variety and assortmen assortmentt of products manufactured manufactured "ill !e su!stantia su!stantially lly #ig#er t#an t#at availa!le availa!le under tradit tradition ional al segmen segmentat tation ion&& t#eref t#erefore ore,, GS "ill "ill o!viou o!viously sly re(uir re(uiree more more flexi flexi!il !ility ity from from t#e manufacturing system$ n t#e ot#er #and, innovative manufacturingis very important !ecause some of t#e traditional manufacturing met#ods t#at "ill not !e adapta!le to GS "ill need to !e a!andoned$ 0ntegrated 0ntegrated distri!ution distri!ution systems systems Luick response to customer customer expectations expectations is essential essential in GS$ %#erefore, t#ere is a very great need for effective integration of p#ysical distri!ution systems in GS as is practised in DustJinJtime )H0%/; and (uick response )L2/; systems )0rastor'a, +-5/$ H0% H0% is a very very impo import rtant ant conce concept pt intr introdu oduce ced d in t#e t#e late late +-Bs +-Bs and and it "ill "ill #ave #ave signi signifi fica cant nt impli implicati cations ons on t#e integr integrate ated d distri distri!ut !ution ion syste systems ms of GS$ H0% H0% focuse focusess on implic implicati ations ons for reducing reducing ra" materials and finis#ed finis#ed goods inventories inventories for manufacturers manufacturers )Aggar"al, )Aggar"al, +-5& Ansari and Modarress, +-3& utc#ins, +-3& Manooc#e#ri, +-/$ L2, on t#e ot#er #and, is a verti vertical cal marketi marketing ng syste system m of manuf manufact acturi uring ng and distri distri!ut !ution ion of goods goods "#ic# "#ic# reduce reducess ra" material inventory level t#roug# retail delivery cycle time, minimi'es speculative finis#ed goods inventories, delivers finis#ed goods at t#e time of customer demand, and adDusts t#e form of goods to meet current consumer needs and preferences )8reen!erg, ++& 0rastor'a, +-5/$ Since production in GS "ill not start until t#e customer places an order, order, to reduce t#e lead time !et"een t#e placement of an order and actual p#ysical exc#ange, t#e distri!ution system #as to !e a facili facilitat tator or not a delay delay proces process$ s$ %#eref %#erefore ore,, it is argued argued in t#is t#is paper paper t#at t#at previo previous us concept conceptss discussed )micro marketing, data!ase marketing, relations#ip marketing, mass customi'ation/ are all related and #ave t#e same or similar o!Dective > to satisfy individual customer7s uni(ue needs6"ants is t#e !est "ay$ Gigure 1 illustrates t#ese interrelations among t#e concepts as "ell as important traits of eac#$ As may !e gleaned from Gigure 1, traditional market segmentation approac#es are !ased on !roadJ!ase segmentation criteria "#ic# may not differentiate customers effectively$ 9#at is needed is a more precise and individuali'ed segmentation !asis due to customer sop#istication and t#eir ever increasing demand for (uality products and services$ Alt#oug# t#e marketing o!Dective for t#e t#ree concepts is identical, t#e factors or issues t#at play an important role in ac#ieving t#e o!Dective for a given segmentation level are different$ Gor instance, in order for finer segmentation to !e practised or used, data!ase marketing, relations#ip marketing, mass customi'ation, computeri'ed information and manufacturing tec#nology s#ould !e incorporated and com!ined efficiently and effectively into t#e overall system$ Alt#oug# c#anges in t#e marketing practice can !e seen or experienced in real life, as is evidenced in t#e previous pages, t#ere is not yet a large !ody of literature availa!le to t#e researc#er on advancements in t#e segmentation concept$ ence, in t#e follo"ing pages, "e "ill develop some
"orking propositions for finer segmentation to !e tested at a later stage as "ell as to !e used as decision varia!les !y researc#ers and practitioners alike$ 2esearc# propositions for finer segmentation According to Cradley 8ale7s )+/ study of ?,.3 !usinesses )taken from t#e P0MS data!ase of %#e Strategic Planning 0nstitute/, gaining a mere 1 per cent in customer satisfaction can increase annual return on investment )20/ !y at least + per cent )8ale, +B/$ 0n 2eic##eld 2eic##eld and Sasser7s Sasser7s study of nine industries, industries, t#ey found t#at retaining retaining Dust 5 per cent more customers cu stomers can !oost longJterm profits from ?5 to -5 per cent, depending on t#e indust industry ry$$ $$ ne of t#e most most import important ant advant advantage agess of GS over tradit tradition ional al segmen segmentat tation ion approa approac#e c#ess is t#e customer customer retentio retention$ n$ 0t is "ell "ell accept accepted ed t#at t#at to retain retain a custom customer er is less less expensive t#an to ac(uire a ne" customer )2eic##eld and Sasser, +B/$ Also, t#e longer t#e customer stays "it# t#e company, t#e more profita!le t#is !ecomes to t#e marketer$ %#e longJ term relations#ips "it# customers "ill en#ance t#e value s#ares for !ot# parties$ %#e firms "ill !e fully a"are of t#eir individual customer needs t#roug# t#e information flo" "#ic# "ill ena!le t#em to satisfy t#ose needs more precisely and an d respond to t#e c#anging c# anging needs (uickly$ %#is effort "ill increase t#e loyalty of t#e customers immensely$ o"ever, customer retention is not enoug#$ Some longJlasting customer relations#ips, "#ere t#e customers are o!viously satisfied "it# "#at t#ey get, are not profita!le even in t#e long run, as Stor!acka )+1/ demonstrates in a recent study in t#e retail !anking industry$ %#erefore, segmentation !ased on customer relations#ip profita!ility analysis is a prere(uisite for customer retention decisions$ P+: %#e lifetime value of t#e customers to t#e company "ill !e maximi'ed$ 0n ot#er "ords, t#e customers "ill !e more loyal in GS t#an in t#e traditional market segmentation$ %#e !etter a company understands custom customers ers77 c#angin c#anging g !e#avio !e#avioura urall patter patterns, ns, t#e more more succes successfu sfully lly it can adapt adapt its produc products, ts, services, services, and delivery delivery c#annels c#annels to satisfy satisfy t#eir needs$ %#e c#allenge is to design strategies strategies t#at "ill appeal to dominant customer values at exactly t#e rig#t moment in t#e future$ Planners can greatly en#ance t#eir insig#t and po"er to anticipate c#ange !y exploring an expanding universe of c#allenging "#at if; scenarios$ 0nteractively playing "it# t#e computer, t#ey can deepen t#eir understanding of #o" real customers "ill !e#ave in t#e future and use t#at understanding to create innovative strategies and successful offerings )Greid, +5/$ GS "ill create competitive advant advantage age if a company company delive delivers rs custom customi'e i'ed d goods goods on a mass mass scale$ scale$ Effect Effective ivenes nesss "ill "ill !e accom accompl plis is#e #ed d !y addr addres essi sing ng t#e t#e indi indivi vidu dual al cust custom omer7 er7ss need needss !ett !etter er and and t#e t#e cust custom omer er involv involveme ement nt in t#e develop developmen mentt of market marketing ing proces processes ses and practi practices ces "ill "ill lead lead to greate greater r commi commitme tment nt of t#e consume consumerr in t#e market marketer7 er7ss progra programme mmess )S#et# )S#et# and Parvat Parvatiy iyar ar,, +5/$ +5/$ Alt#oug# companies "ill !e facing intense competition in t#e ac(uisition of ne" customers !ecause of t#e long lifetime value of eac# customer )more loyal customers/, !y t#e successful application of GS, t#e competitive pressures "ill !e eliminated in t#at specific part of t#e market, t#anks to !etter satisfied customers and t#e #ig#ly differentiated products$ 0n ot#er "ords, t#ere "ill !e intense competition until t#e ac(uisition of a ne" customer !ut almost no or very little comp compet etit itio ion n afte afterr t#e t#e ac(ui ac(uisi siti tion on of t#e t#e cust custom omer er$$ P?: P?: %#e %#e more more a comp company any can deli delive ver r customi'ed goods on a mass !asis, relative to t#eir competition, t#e greater t#eir competitive advantage$ n t#e ot#er #and, !ecause of t#e long lifetime value of t#e customers, t#ere "ill !e a very strong competition in t#e market place in terms of capturing ne" customers$ %#e more a company can deliver customi'ed goods on a mass !asis, relative to t#eir competition, t#e greater is t#eir t#eir compet competiti itive ve advant advantage age$$ A mutual mutually ly satisf satisfact actory ory relati relations ons#ip #ip makes makes it possi! possi!le le for customers to avoid significant transaction costs involved in s#ifting supplier or service provider and for suppliers to avoid suffering unnecessary (uality costs )8ronroos, +/$ 0nformation tec#nology c#anges !ot# t#e cost and t#e value of capturing marketing information from individual customer transactions, and of maintaining and "orking "it# #istorical data!ases !uilt from t#ese transactions )4lemons, +/$ Glexi!le manufacturing systems permit mass customi'ation or a massJscale customi'ed production of items to suit eac# individual customer7s specific re(uirements "it#out significantly affecting economies of scale and costs )S#et# and
Parvatiyar, +5/$ 0t is understood t#at t#ere "ill !e some cost increases in t#e area of !uilding information systems, information gat#ering, processing, filing, and #iring (ualified personnel$ o"ever, once t#e information systems and related core data!ases are esta!lis#ed, t#e contact cost "it# customers "ill !e reduced su!stantially$ Also, Also, cost savings "ill occur occu r on t#e inventories due to no or very small inventory costs$ Girms can identify profita!le customers, and can "oo t#em and "in more of t#eir !usiness& e(ually important, t#ey can defend t#eir !usiness against t#e t#e adva advance ncess of comp compet etit itor ors$ s$ 0n addi additi tion on,, firm firmss can can kno" kno" "#ic "#ic# # acti active ve cust custom omer erss are are unprofita!le and cost money to serve& t#us, in addition to kno"ing "#om to "oo, and "#om to defend, firms can also kno" "#ose !usiness to do"nsi'e, or to reprice )4lemons, +/$ %#e most important savings "ill !e ac#ieved !y t#e decreased failure rate of t#e strategic marketing plans$ %#erefore, !y t#e application of GS, t#e total marketing costs "ill !e no different from t#at of traditional market segmentation approac#es$ P1: %#ere "ill !e some cost savings and some cost increases !y t#e emergence of GS !ut overall marketing activities "ill !e more efficient "it# GS t#an t#e traditional segmentation activities$ %#e marketing efforts "ill !e some"#at similar to t#e industrial industrial marketing efforts efforts "#ere negotiations negotiations play an important role, !ut t#e speed of t#e negotiation process "ill !e muc# faster and settings )t#e places "#ere t#e negotiations take place or !uyer and seller meetings/ "ill !e remote in GS compared to t#e industrial marketing$ P: Cusiness negotiations "ill play a more important role as a marketing effort in GS t#an traditional market segmentation$ Cesides t#e traditional market researc# information, GS re(uires a more detail detailed ed nonJtr nonJtradi aditio tional nal inform informati ation on collec collected ted from from t#e custom customers ers t#roug t#roug# # t#e t"oJ"a t"oJ"ay y )interactive/ communication c#annels$ Girms can !egin to kno" t#eir customers, not solely !y "#at t#ey say on customer satisfaction surveys or during marketing researc# intervie"s, or !y "#at is inferred from t#eir psyc#ograp#ics and demograp#ics, !ut from "#at t#ey actually !uy from us, and "#en, and #o" t#ey pay for it )4lemons, +/$ Also, GS "ill re(uire s#aring of informatio information n among t#e various various functional functional departments departments of t#e organi'at organi'ation$ ion$ P5: Cesides Cesides t#e traditional marketing researc# data, t#ere "ill !e nontraditional information collected !y t#e interactive communication "it# t#e customers$ A successful implementation of GS strategy "ill depend on effectiveness in t#e s#aring of information "it#in various units in t#e organi'ation$ Effec Effectiv tivee GS includ includes es inputs inputs )under )underst standi anding ng custom customer er expecta expectatio tions, ns, !uildi !uilding ng partne partners# rs#ips ips,, empo"ering employees, and total (uality management/, outputs )customer satisfaction, customer loyalty, product (uality, and profita!ility/, and assessment )customer feed!ack and integration/$ ence, t#ere "ill !e structural c#anges in t#e organi'ational c#art of t#ose companies "#ic# adopt GS strategy$ GS re(uires flexi!ility and responsiveness to t#e customer needs and "ants$ 0t is argued argued t#at t#at compani companies es t#at t#at #ave rigid rigid #ierar #ierarc#i c#ical cal organi organi'at 'ation ional al struct structure uress may not !e successful in implementing GS strategy$ Summary and conclusions %#ere is an increasing trend for manufacturers and distri!utors alike to mass customi'e t#eir offerings$ As in clot#ing, some of t#e customi'ation #as !een going on for decades& "#at #as !een c#anged is t#e elimination of t#e "aiting periods$ 4A*64AM, for example, makes possi!le instantaneous c#anges in t#e specifications, customi'ed adDustments in garment garment cutting, cutting, "it#out any mac#ine mac#ine do"ntime$ do"ntime$ %#e general message message is, t#e advancements advancements in t#e information and manufacturing tec#nology, #eterogeneous market c#aracteri'ed !y divergent demand, and desires of customers for more precise satisfaction of t#eir varying "ants )diversity in t#e type of demand/ "ill lead to a nonJtraditional market segmentation$ %o t#is end, finer segmentation represents a more advanced "ay of segmentation, reac#ing t#e smallest clusters )particles/ t#at #ave ever existed in t#e marketplace$ GS may !e applica!le to almost all products and services from #ouses to cars as "ell as from clot#ing to #am!urgers and !irt#day cards$ o"ever, GS may re(uire more involvement !y t#e consumers and "ill most likely increase total costs for lo" involvement, s#opping, and convenience goods$ ence, t#e !enefits of GS may !e depe depend nden entt on !ot# !ot# invo involv lvem emen entt and and prod produc uctt clas class$ s$ Assum ssumin ing g mark market etss are are perf perfec ectl tly y #eterogeneous, !y t#e emergence of GS, precision in satisfying t#ese #ig#ly diversified customer
demands "ill increase and t#erefore satisfaction "ill lead to #ig#er customer loyalty$ Successful operat operation ion of GS re(uir re(uires es extens extensive ive use of inform informati ation on tec#no tec#nology logy and data!as data!ases, es, flexi! flexi!le le manufa manufactu cturin ring g syste systems ms,, and integr integrate ated d distri distri!ut !ution ion system systems$ s$ GS is not a futuri futurist stic ic vie" vie" of marketing !ut rat#er t#e reality for successful marketing strategy implementation$ 2elations#ip marketing #as already !een one of t#e most fre(uently discussed topics among academicians and practitioners$ @o matter "#at it is called, data!ase marketing, interactive marketing, or relations#ip marketing, t#e marketing o!Dective stays t#e same$ %#erefore, t#is paper investigated a vie"point "#ic# actually integrates market segmentation and nic#e marketing and claims t#at t#e final level in t#e segmentation and nic#ing efforts is to reac# t#e smallest market clusters t#at #ave ever existed existed in t#e marketplace$ marketplace$ %#is may sound contradictor contradictory y "it# t#e segmentati segmentation on idea !ecause one of t#e factors fre(uently emp#asi'ed in segmentation studies is t#at a segment s#ould s#ould !e sufficien sufficiently tly large enoug# to direct marketing efforts efforts to t#at segment;$ segment;$ o"ever, o"ever, it is argu argued ed in t#is t#is study study t#at t#at t#e t#e main main reas reason on !e#i !e#ind nd t#at t#at fact factor or is prof profit ita! a!il ilit ity y and and if t#e t#e tec#nological advancements allo" marketers to interact "it# a single customer and customi'e t#e message and t#e products according to a particular customer7s needs6"ants and still ac#ieve t#e profita!ility o!Dective, t#e sufficient si'e segment argument is no longer valid$ %#us, GS "ill !e "it#in t#e reac# of t#e maDority of t#e marketers "#o understand t#e importance of precision in marketing decision varia!les and strategy$ strategy$ 2ecommendations to marketers and policy makers %#e GS concept descri!ed in t#is paper s#ould !e vie"ed as a progressive development !ot# in tec#nology and marketing p#ilosop#y$ Alt#oug# tec#nology allo"s t#e marketers to use GS, t#e p#ilosop#y of t#e marketing team and coJ ordination among t#em "ill determine its success$ 0n ot#er "ords, if t#e "illingness of t#e management to implement GS is a!sent, tec#nological advancements alone are not enoug# for successful application of individuali'ed marketing$ Also, since one cannot expect to c#ange marketing p#ilosop#y s#arply in t#e s#ort term, it is recommended t#at marketers s#ould adopt t#ese t#ese develop developmen ments ts progre progressi ssivel vely y$ Gor instan instance, ce, it is curren currently tly feasi! feasi!le le "it# "it# t#e availa availa!le !le tec#nology to individuali'e t#e print media messages$ Also, it is possi!le to o!tain names and addresses of customers "#o use coupons$ ence, it is imperative to start implementing GS strategy progressively rat#er t#an suddenly adopting a full !lo"n version of GS in t#e near future$ %#e main t#rust of t#is approac# is to advance segmentation studies one step furt#er to t#e smallest unit of a segment$ Gully satisfying individual customer7s uni(ue needs6"ants "ill result in customer customer loyalty as "ell as several several ot#er !enefits$ !enefits$ %#ese include less competiti competitive ve pressures, pressures, more ideas from t#e customers customers in terms of product development, development, a more efficient efficient and effective effective distri!ution system, increased accuracy of marketing communication and promotion efforts, and more "ordJofJmout# promotion from t#e satisfied customers$ 0n s#ort, a finely tuned marketing programme "ill !e a result of GS$ %#is "ill also positively effect product development develop ment efforts of marketers and result in a s#ift in production strategy from producing generic products and services to tailoring products for particular customers$ Pro!lems and future researc# avenues ne of t#e maDor components of GS is t#e collection of nonJ nonJtr trad adit itio ional nal info inform rmat atio ion n as "ell "ell as tradi traditi tion onal al mark market etin ing g rese resear arc# c# data data$$ Addit dditio ional nal conceptuali'ation and empirical researc# is needed on t#e existence of suc# nonJtraditional informatio information$ n$ o"ever, o"ever, t#e collection collection of t#is information information and maintaini maintaining ng a compre#ensi compre#ensive ve data!ase may !e vie"ed as intimidating and t#reatening to consumers or violate t#eir privacy rig#ts$ An important issue #ere is "#et#er it is possi!le to find a middle point "#ic# does not violate t#e privacy of a customer !ut provides crucial information for t#e marketers to increase t#e effectiveness of t#eir offerings$ Empirical testing of t#e generated #ypot#eses is necessary$ o"ever, t#e results s#ould !e interpreted carefully !ecause it is expected t#at in t#e s#ort term su!stantial expenses "ill occur and t#e !enefits may not !e as tangi!le as one may expect$ %#is s#ould not !e vie"ed as a failure of t#e GS !ut rat#er an investment "#ose !enefits "ill !e apparent in t#e near future$ %#erefore, a longitudinal study is necessary to understand t#e results
of GS strategy$ %#e concepts and #ypot#eses developed #ere need to !e tested across cultures and nation nationss "it# "it# divers diversee socioJ socioJeco econom nomic, ic, tec#nol tec#nologic ogical al and !e#avio !e#avioura urall c#arac c#aracter terist istics ics for t#e generali'i!ility of t#e study$ As t#ere are su!stantial variations among nations and customer demand, t#e applica!ility of GS in t#e glo!al environment needs to !e examined in future studies$ @otes +$ Alt#oug# some sc#olars consider market segmentation as t#e disaggregation of o f a mass market into smaller #omogeneous groups, in t#is paper "e "ill use segmentation as t#e term aggregation of customers "it# similar needs and "ants into t#e same segment6cluster;$ ?$ Some of "#ic "#ic# # are are a sele select ctio ion n vari varia! a!le le,, algor algorit it#m #mss for for clus cluste teri ring, ng, overl overlapp appin ing g segm segment entat atio ion, n, identification of consumers in eac# segment, etc$
