Market Segmentation And Long Tail Theory

Market segmentation is one of the important methods to help enterprise managers select the most attractive market opportunities. Through market segmentation, enterprises can segment the target market and make temporary decisions, which makes the selection process of enterprise managers easier to operate. The concept of market segmentation is Wendell R Smith) in the mid 1950s.

The market is the sum of commodity exchange relations, which can be subdivided. The market segment should be divided according to the diversity and difference of consumers' demand, motivation and purchase behavior, rather than simply according to product varieties and product series.

The sub market after market segmentation is more specific, and it is easier to understand the needs of consumers. Managers can determine their own service objects, namely target markets, according to their own business ideas, policies, production technologies and marketing forces. For smaller target markets, it is convenient to develop special marketing strategies. At the same time, in the subdivided market, information is easy to understand and feedback. Once the consumer's demand changes, enterprises can quickly change their marketing strategies and formulate corresponding countermeasures to adapt to the changes in market demand and improve their adaptability and competitiveness.

The long tail theory, proposed by American Chris Anderson, is a new theory emerging in the Internet era. According to the long tail theory, because of the factors of cost and efficiency, people could only pay attention to important people or important things in the past. If these people or things were described with a normal distribution curve, people could only pay attention to the "head" of the curve, and ignore most people or things that are at the "tail" of the curve and need more effort and cost to pay attention to.

For example, when selling products, manufacturers focus on a few so-called "VIP" customers, and are "too busy" to take into account ordinary consumers who are in the majority in number. In the network era, as the cost of attention is greatly reduced, people may pay attention to the "tail" of the normal distribution curve at a very low cost, and the overall benefits of paying attention to the "tail" may even exceed the "head". A famous website is the largest online advertiser in the world, but it does not have a large customer, and its income comes from small and medium-sized enterprises ignored by other advertisers. The network era is an era that focuses on the "long tail" and gives play to the "long tail" benefits.

When the space and channels for commodity storage, circulation and display are wide enough, the production cost of commodities drops sharply so that individuals can produce, and the sales cost of commodities drops sharply, almost any product that previously seemed to be in low demand will be bought as long as it is sold. The common market share of products with low demand and sales volume can be compared with or even greater than that of mainstream products. For example, a large bookstore can usually place 100000 books, but a quarter of the book sales of Amazon Online Bookstore come from books ranking after 100000. The sales proportion of these "unexpected" books is growing at a high speed, and it is estimated that they will account for half of the whole book market in the future, which means that when consumers face unlimited choices, there have been significant changes in what they really want and the channels they want to obtain.

An airline is very interested in people who have never flown (segmentation criteria are customer experience). Those who have never taken an airplane can be subdivided into those who are afraid of flying, those who don't care about flying and those who have a positive attitude towards flying (the subdivision standard is attitude). Among those who hold a positive attitude, they also include those who have high income and are able to fly (the subdivision standard is attitude). So the airline concentrated its efforts on developing high-income groups who had a positive attitude towards flying, but had not yet flown.

Through market segmentation, enterprises can analyze and compare the purchase potential, satisfaction and competition of each market segment, explore market opportunities that are conducive to the enterprise, enable the enterprise to make timely decisions on production and relocation sales, or prepare new product development plans according to the production technology conditions of the enterprise, and carry out necessary product technology reserves, Grasp the initiative to update products and open up new markets to better meet the needs of the market.

The Internet can help enterprises to segment the market well. Online sellers have begun to establish a data warehouse to input customers' names, prospects and many other information, from which marketers can conduct data mining to discover new market segments and niches. For example, there will be hundreds of websites serving specific groups in the future, such as those targeting specific market segments, mothers and children of newborn babies, the elderly, Hispanics, etc., to provide customers with information, shopping and interaction opportunities. In the future, specific market supplies will be provided to potential customers, which is the effective application of market segmentation and long tail theory.

The purpose of market segmentation of enterprises is to achieve greater economic benefits by positioning customer demand differences. The differentiation of products will inevitably lead to the corresponding increase of production costs and marketing expenses. Therefore, enterprises must make a balance between the income from market segmentation and the increased cost of market segmentation.

The "long tail theory" is ubiquitous, which is considered to be a complete rebellion against the traditional "two eight law". The two eight law has always been used to define the mainstream of business management and calculate the efficiency of input and output, which runs through the whole life and commercial society. In marketing, in order to improve efficiency, business operators are used to focusing on 20% of the mainstream goods that 80% of their customers buy, and strive to maintain 20% of the mainstream customers who buy 80% of their goods. In fact, 80% of them are long tails. Today, with the help of the Internet, the "28 Law", which is regarded as the traditional business bible, has begun to be changed. The economic driving model shows a trend of changing from the mainstream market to the non mainstream market.

The traditional market curve is in line with the 80/20 iron rule, in order to seize the 80% profit Best seller In the market, the enterprises of the same industry are fighting against each other in a murky way. At the same time, the so-called hot goods are more and more unworthy of their names. Although consumers are still fascinated by the hot goods, the economic power has changed. These capricious consumers are scattered in all directions, because the market has been subdivided into countless different fields. The emergence of the Internet has changed this situation, making 99% of the products of enterprises have the opportunity to sell. The long tail of the market curve has also turned over, becoming a new profit growth point that enterprise managers can place high hopes on, Enterprise managers should make good use of market segmentation and long tail theory.

case

More than half of the handicrafts in an exhibition hall outside the Guangzhou Fair are rattan products, and there are many unique products on display, such as rattan wine racks, rattan houses for pets, and furniture. Creative design and refined craftsmanship should have attracted a lot of foreign businesses for them, but why are they so neglected? Is the product really so unattractive?

In order to attract foreign buyers, the organizer of the guild tried everything possible: free buffet, free tour bus, free Internet access, even "buyers' party", samba dance, etc. Even so, a foreign businessman who has only stayed in Guangzhou for two days has no leisure to enjoy the so-called "samba dance". What can attract foreign businessmen is actually only the goods they want to find. What are the goods they are looking for? They can only look at the exhibition stands one by one, and they must be careful to find the products they want from a lot of rattan products. The whole venue is exhausted. No wonder foreigners are not interested in so many "hardware" and "services" that are justifiable.

How can customers find the products they need with relatively low information cost? Instead of looking at baby products, you should spend 90% of your time looking at unrelated products. From the perspective of market segmentation, consumers buy hotel supplies, stationery and pet supplies, and few consumers are specialized Buy rattan products Because the classification based on the use of products is more consistent with the consumers' search habits, the first thing to modify should be the product classification and breakdown catalog of the exhibition.

Exhibitors said: "There are 20 or 30 kinds of products in one booth, just as this rattan enterprise has produced wine racks, pet products, and furniture, will they go to different crafts exhibitions, furniture exhibitions, and hotel supplies exhibitions? Of course, if they want to meet customers in so many industries, they can do so. But can a small rattan manufacturer with only 100 people meet the needs of so many markets? The problem is that our manufacturers want to meet customers in all industries too much. "We can produce all kinds of models, as long as customers place orders and design". Everyone tries to meet more customers with this mentality, but in the end, no one can. A French businessman once walked around and sighed: "Chinese people like to put many kinds of things together, like a big platter!" He was puzzled at that time why there are so many stores in China in the same place, each store has similar products, but they are all kinds of things. In France, most of them are franchised stores. The product categories are clearly divided, and people also know where to buy things, which is very convenient.

The manufacturer also failed to give a clear orientation to the products, and there appeared a screen to hinder more effective trade. Nowadays, more and more attention is paid to market segmentation in the market competition. As long as we can catch a "crack market" consumer group, we can open a competitive market. For these special groups, the production of products is based on the specific conditions and requirements of this group, and the needs of this group can be addressed as far as possible in the design. Enterprise managers are most worried about the problem of customer sources. "If we subdivide the market, our customers will be few..." The practice of "market segmentation" has not really been accepted by enterprise managers, because the discovery and development of each market need to take risks, and it is the safest way to follow the original business model.

　　 Google Its success lies in finding and casting a long tail. Take AdSense, which accounts for half of Google, for example. Its customers are millions of small and medium-sized websites and individuals. For ordinary media and advertisers, the value of this group is too small to mention, and the amount of money they can provide is even less impressive. But Google has brought together a large number of these groups and formed a very considerable economic profit by providing personalized and customized advertising services. At present, the market value of Google has exceeded 100 billion dollars, and it is considered as the "most valuable media company", far exceeding those traditional old media.

Many markets that conform to the long tail theory present new opportunities. At the same time, the Internet provides a hotbed for their development. The products with small demand are finely divided, thus extending the channel. This model of "no goods, no sales, no time, no sales" provides consumers with unlimited variety of choices. Compared with the traditional artificial limited choice, this unlimited choice focuses more on the needs of customers and the experience of customers. This segmentation has made Apple's iTunes online music store a huge success. If consumers only want to listen to one song, why force them to buy the whole CD? Two years ago, Apple saw through this business opportunity and provided users with genuine single sales on its website. It is the difference between 99 cents and 15 dollars that makes Apple have sold 500 million singles at present, and the sales of its MP3 player iPod are also rising.

Market segmentation analysis is also a study of consumers' thinking. According to consumers' purchase intention, motivation and attitude, a behavioral science based method and a benefit based market segmentation method are adopted. The division is based on the main benefits consumers seek from products. Each group will have specific requirements for certain products/services/relationships, Enterprises can provide services according to their particularity. At the same time, if the tail is long enough, it will become a tower of sand and produce unexpected and amazing effects. The long tail theory is a good theoretical fulcrum for it to find a business model.