Market Segmentation: A Key to Success for Pharmaceutical Companies
Market segmentation revolves around the process of dividing a market up into homogeneous segments and targeting each of them with a distinct product or message is now at the heart of marketing theory.
Rising costs and demands for affordable health care continue to challenge the traditional business assumptions and economics of the pharmaceutical industry. Also, this is raising internal development risks, costs, and time requirements for clinical trials. To add to the complexity, pharma markets have become fragmented as providers, patients, physicians, and payers look for focused solutions that have optimal safety and efficacy profits for a narrower population of patients. Additionally, the role of greater transparency, reference pricing, and changes in decision-making is essentially shifting decision-making authority away from individual physicians to healthcare administrators and payers.
These dynamics result in the complexity of product decision-making and continue to challenge the effectiveness of traditional commercial models in the pharmaceutical industry. This is where the role of market segmentation comes into play. The market segmentation process enables pharmaceutical companies to move beyond product features and benefits or brand position to see specific needs through the eyes of specific market segments and this is an essential component of success for pharmaceutical companies.
What is Market Segmentation?
Market segmentation is the process of segregating a market of potential customers into segments, or groups, based on various characteristics. The segments created to consist of customers who will respond similarly to marketing strategies and who share traits such as similar needs, interests, or locations. The sole objective of the market segmentation process is to be able to design a marketing strategy, mix or program that matches, and is as impactful as possible, for each specific segment. It helps companies spend their marketing and advertising budgets much more wisely. Also, it enables companies to refine their product or service offerings for specific segments. Businesses are more likely to be able to meet the needs of a smaller, targeted segment, and therefore be much more successful.
What are the Different Types of Market Segmentation?
Demographic segmentation
Demographic segmentation is one of the widest and simplest types of market segmentation used. Most businesses use it to get the right set of people to use their products or services. Target market segmentation generally divides a population based on variables. Demographic segmentation also has its own variables such as gender, age, income, family size, occupation, race, religion, and nationality. This type of market segmentation is most commonly used due to the fact that it has readily accessible information through existing customer relationships and can easily eliminate unnecessary data of the audience with just a few inclusions.
Behavioral segmentation
This is a type of target market segmentation that divides the population on the basis of their usage, behavior, and decision-making patterns. Behavioral segmentation divides your customers by their previous behavior in relation to your brand. It checks parameters including:
- Previous purchases
- Awareness of the business
- Patterns of purchase
- Usage level
- Knowledge of the product
- Rating of product or service
Psychographic segmentation
Psychographic segmentation is a type of market segmentation that uses activities of people, lifestyle, opinions, as well as interests to define a market segment. Psychographic segmentation is very similar to behavioral segmentation. But it also takes into account the psychological aspects of consumer buying behavior. These psychological aspects may be the consumer’s social standing, lifestyle as well as his activities, interests, and opinions.
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