In order for one to successfully analyze the broad but specific topic that Market Segmentation is, marketing and economics are the two core areas that ought to be concentrated upon and conceptualized as they touch squarely on the topic. The accompanying theories with which it comes will help us get a much clearer insight into what marketing segmentation actually entails.
The theory of interest rates otherwise known as the segmented markets theory argues that there exists an independence in the way short-term and long-term markets act and that the maturity preferences of investors are fixed, and that there is a distinction in the markets of short-term and long-term rates whereby each has its unique buyers and sellers who are not interchangeable.
The second theory and which I find equally as important to this topic as the first one is the theory of liquidity preference which sees investors as risk-fearing and as a result will ask for premium for securities that take long to mature. The premium will Increase at a decreasing rate as a result of downward pressure from the interest-rates decrease in volatility while at the same time maturity-term increases. This further aggravates the fears of the investors.
Market Segmentation would not be studied exhaustively without a look at its relation with the labor markets theory or the neo-classical economic theory where buyers and sellers compete openly with one another and where its functions are similar to those of other markets. Workers would rather idle instead of working and there are differences in human capital. Different jobs demand different qualifications and attract different pay.
Market Segments are identifiable from other segments due to their division into parts of organizations and people with some or entirely same characteristics that make them to ask for products, services and prices that are similar. This division into lots of organizations and/or people with commonness in their needs forms the consumer group.
This consumer group will equally have similarities in their demand for products, prices and subsequently the function of these products. The above named characteristics thus make the uniqueness of Market Segmentation from other segments: The division into groups of consumers.
This segmentation has its positive as well as negative sides for the market in terms of the different amounts the different consumer groups are charged. The marginalization of minorities on racial lines, which has its basis on the labor markets segmentation theory, sees to it that much as the market would like to pay the workforce different wages for the same job and same qualification, it also should be prepared to put up with different prices for the same item to these differently paid workers. This is a classical case of skewed market segments that exist in the market.
Recognizing customer needs is very crucial in the market segment. This ensures that the seller survives the turbulent waters of the ever changing market trends. The different segments with different groups of buyers asks for different groups of different sellers. The basis of this assertion is the theory of interest-rates. The situation in this case therefore demands that products and services be tailor-made so as to suit the demands of the customers. For example if a customer prefers short-term interest-rates then the seller will have to comply and provide exactly what the customers demand from him or else he will get out of business. This implies that for short-term interest-rates customers, give short-term interest-rates and for long-term interest-customers, give long-interests.
The fact that labor market segmentation theory does not focus on the individual but rather groups as an entity while the theory of liquidity preference focuses on the Individual and his relation and interest rates in the market segmentation is a pointer to how markets, economic and labor, function is an intricate web with various people with varying interests but all managing to function together in a mutual relationship.
Individuals interact with the structures of institutions in the market segments no matter what their form of employment is and whichever their gender or race although there are primary and secondary segments which are of great consideration in the entire market segmentation set-up. These are basically the key points in the very crucial field of market segmentation, together with its theories that keep it going and which whose study makes us get an insight into how they interrelate, how interest-rates dictate the investors’ plans while venturing into the tricky affair that that the investment and job market is.
The segmented market is therefore a highly competitive market and survival tactics ought to be devised and employed in every step depending on the kind of customer one is dealing with failure to which the seller will close shop. The categorization of customers and workers on the basis of race in the segmented market is very unfair not only to the worker who gets a pay lower than his correctly colored counterpart, but also to the seller himself. This hurts business besides reducing the market segments into a man-eat-man society. All the same, Market Segmentation provides an opportunity to competitive able and willing people to succeed.