Segmentation & Differentiation

There are basically two segmentation mechanisms: a) the screening mechanism and b) the self-selection mechanism.

When segmenting a market, in the first phase the traditional screening mechanism will probably be the most appropriate. Normally this mechanism can only create segments of large or intermediate amplitude, that is, macro-level segments. However, if in a second phase the objective is to create increasingly restricted segments, that is, micro-level segments, such as market niches or direct sales to small groups, the self-selection mechanism will certainly be the most appropriate. This last mechanism makes it possible to significantly reduce consumer surplus in relation to the first mechanism, thus increasing the potential for increasing companies' revenues. The latter is more suitable for companies whose production is inflexible, that is, RM-type businesses.


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