Review Jurnal 2 manajemen pemasaran

7/23/2019 Review Jurnal 2 manajemen pemasaran

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Marketsofasinglecustomer: exploiting conceptual developments in market segmentation Ali Kara

Pennsylvania State University at York, York, Pennsylvania, USA, and Erdener Kaynak

Pennsylvania State University at arris!urg, Middleto"n, Pennsylvania, USA

At early stages of market development, many sellers made t#eir products availa!le for specific

customer groups$ %ailors for instance, made a different garment for eac# customer& and

s#oemakers made a special pair of s#oes for eac# pair of feet$ %#ese 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

consumer7s individual preferences, c#oice !e#aviours in t#e marketplace, as "ell as t#eireffective responses to marketing actions of firms )8rover and Srinivasan, +-& 9ind, +.-/$

%#erefore, firms offer a multitude of products and !rands to different market 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

#omogeneous group of people "it# similar type of needs6"ants/ is called market

segmentation;, "#ere customers "it# similar re(uirements )expectations/ and !uying

c#aracteristics are aggregated


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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 on t#e !asis of similarity of elasticities, marginal responses, or response function

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

computer and telecommunication tec#nologies and in#erent automation capa!ilities in

manufacturing allo" marketers to !ring out afforda!le individuali'ed versions of products$

%#e o!Dective of t#is paper is t#en to investigate and conceptuali'e t#e advancements in

segmentation t#eory$ 0t is argued in t#is paper t#at finer segmentation )GS/, t#e ultimate level of

internal differentiation, represents t#e final advancement in market segmentation anddevelopment studies$ 0n GS, markets are assumed to !e perfectly #eterogeneous, information and

manufacturing tec#nologies are !eing used extensively and strategically, and customi'ed

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 concept clearly$ Some of t#e most fre(uently used segmentation 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 aspectsand 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 clustered into a market segment t#at is different from t#e ot#er market segments$ 0n

segmentation, consumers "#o make up a particular market segment are assumed to !e

#omogeneous "it#in t#e segment and #eterogeneous across segments$ Some sc#olars 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#inJgroup similarity is #ig# and "#ose !et"een group similarity is lo" )9ind, +.-/$

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


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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 tec#nical and marketing expertise )Coyd and 9alker, +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 in "#ic# companies tailor t#eir marketing programs )products, advertising, 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!ase marketing *ata!ase marketing involves t#e collection of information a!out past,

current, and potential customers to !uild a data!ase to improve t#e marketing effort of a

company )S#ani and 4#alasani, +?/$ As part of its tec#nical coJoperation "ork in 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 )./ 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!aseis considered a strategic decisionJmaking tool for companies and pu!lic agencies$ nce potential

customers #ave !een identified, companies need to capture information a!out consumer

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


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connected to customer data!ases )4aruso, +?/$ Anot#er form of data!ase marketing is 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# individual and t#en eac# customer receives a customi'ed offering$ %#us, critical

components of interactive marketing are: data!ase management, statistical modelling, creating a

customer data!ase, production and accounting$ 0n data!ase marketing, companies use 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 )AMA/ and t#e Academy of Marketing

Science )AMS/, added relations#ip marketing track in t#eir annual meetings$ 2elations#ip

marketing com!ines elements of mass media advertising, sales promotion, pu!lic 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

marketplace, firms of all si'es and from different industries feel t#e need to form !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 t#is relations#ip "ork$ Accordingly, relations#ip marketing can !e defined as an

integrated and coordinated effort to identify, maintain, and !uild up a net"ork "it# individualconsumers 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: )+/

identifying, !uilding, and continuously updating a data!ase to store relevant information 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

calculating t#e lifetime value of t#at customer7s franc#ise and purc#ases$ %o serve t#eir

customers !etter Gord Motor 4ompany and Ma'da Motors 4orporation formed an alliance$ %#e

t"o companies coJoperate on ne" ve#icles and exc#ange valua!le expertise& 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$

Already, it is applying lessons from t#e Ma'da linkage to emerging relations#ips "it#

Folks"agen and @issan Motor 4ompany )%reece and Miller, +?/$ %#us, relations#ip marketingis mostly concerned "it# t#e longJterm relations#ip !et"een t#e organi'ation and a customer

)S#et# and Parvatiyar, +5/$ 0n fact, t#is o!Dective is also very clear in t#e definition of

marketing "#ic# includes in t#e concept of customer orientation;$ o"ever, relations#ip

marketing emp#asi'es t#e longJterm relations#ip t#e most #eavily$ %#e relations#ip itself

!ecomes an important attri!ute of t#e process rat#er t#an a transaction$


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Mass customi'ation %#e competitive environment in t#e +Bs #as c#anged drastically and

market tur!ulence #as also increased due to c#anges and transformations 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 and !eyond are: timeJ!ased competition& proliferating variety& DustJinJtime

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/&

flattened #ierarc#ies& computerJintegrated manufacturing& process reJengineering&

#eig#tened importance of services& fragmented markets& (uick response& flexi!le

manufacturing systems& data!ase marketing )Pine, +1, p$ 1/$ %#ese environmental c#anges

are affecting t#e "ay companies operate and deal "it# customers$ According to Kotler )+-/,

t#e mass market; is dead and segmentation #as no" progressed to t#e era of 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 systemstoget#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$ %#erefore, Pine proDects a 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 for flexi!ility and (uick responsiveness$ 0n an everJc#anging environment, 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 masscustomi'ation in many industries "#ic# #ave !een affected !y advances in manufacturing

tec#nology and developments in t#e information tec#nologies$ 0n t#e +Bs, companies

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 services around standardi'ed products or services& )?/ mass produce 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 concepts suc# as nic#e marketing, data!ase marketing, micro marketing, relations#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!Dective of all t#e concepts discussed a!ove is to recogni'e individual differences 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 segmentationfiner 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


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"ays of operationali'ing marketing concept, market segmentation provides effective guidelines

for a firm7s marketing strategy development and resource allocation among diverse product

markets )9ind, +.-/$ Market segmentation t#us plays a decisive role in t#e development of a

company7s positioning statement "#ic# is not#ing more t#an a com!ination of product

differentiation and market segmentation in lig#t of a given companies7 resources, o!Dectives and

competences$ Alt#oug#, so far, most sop#isticated segmentation tec#ni(ues #ave !een used, t#ere

are still some maDor (uestions needing to !e carefully ans"ered !y t#e researc#ers 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

marketing decision varia!les 0n ot#er "ords, #o" suscepti!le a given market segment 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 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 !icycles to t#eir demand$ According to t#is finer 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 customdesign 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# a computer and a video, Soft"are

Sports"ear, a 4onnecticut company, designs a custom s"imsuit for every "oman$ *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


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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!ase marketing, segmentation "ill evolve into a #ig#ly sop#isticated instrument, 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 segmentationconcepts is illustrated in Gigure ?$ Ever since t#e mass market split into a multitude 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 configuration for t#at customer$ %#is definition is significantly different from t#e

traditional definition of segmentation and it is relevant to almost all product and 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#ensive marketing data!ases& computeri'ed6flexi!le manufacturing 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 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

massJmarket communication to reac# an increasingly fragmented consumer !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, and purc#asing !e#aviours are crucial$ %#erefore, t#ere is a need for 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


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center/ is re(uired in order to segment or cluster t#e customers toget#er, and 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

understand an individual customer7s needs6"ants extensively !ut also to keep 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 needs, move production to t#e customer to provide pointJofJdelivery customi'ation,

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

customers "ill !e satisfied$ %#is reflects t#e necessity of t#e computeri'ed, flexi!le andinnovative manufacturing for GS to !e successful$ 9it# t#e emergence of GS, t#e num!er, variety

and assortment of products manufactured "ill !e su!stantially #ig#er t#an t#at availa!le under

traditional segmentation& t#erefore, GS "ill o!viously re(uire more flexi!ility 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 distri!ution systems Luick response to customer expectations is 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% is a very important concept introduced in t#e late +-Bs and it "ill #ave significantimplications on t#e integrated distri!ution systems of GS$ H0% focuses on implications for

reducing ra" materials and finis#ed goods inventories for manufacturers )Aggar"al, +-5&

Ansari and Modarress, +-3& utc#ins, +-3& Manooc#e#ri, +-/$ L2, on t#e ot#er #and, is a

vertical marketing system of manufacturing and distri!ution of goods "#ic# reduces 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, 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

facilitator not a delay process$ %#erefore, it is argued in t#is paper t#at previous concepts

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$ Gorinstance, 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


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"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 and Sasser7s study of nine industries, t#ey found t#at retaining

Dust 5 per cent more customers can !oost longJterm profits from ?5 to -5 per cent, depending on

t#e industry$$ ne of t#e most important advantages of GS over traditional segmentation

approac#es is t#e customer retention$ 0t is "ell accepted t#at to retain a customer is 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 respond to t#e 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

customers7 c#anging !e#avioural patterns, t#e more successfully it can adapt its products,

services, and delivery c#annels to satisfy t#eir needs$ %#e c#allenge is to design 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 universeof 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

advantage if a company delivers customi'ed goods on a mass scale$ Effectiveness "ill !e

accomplis#ed !y addressing t#e individual customer7s needs !etter and t#e customer

involvement in t#e development of marketing processes and practices "ill lead to greater

commitment of t#e consumer in t#e marketer7s programmes )S#et# and Parvatiyar, +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

competition after t#e ac(uisition of t#e customer$ P?: %#e more a company can deliver

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 competitive advantage$ A mutually satisfactory relations#ip makes it possi!le for

customers to avoid significant transaction costs involved in s#ifting supplier or service providerand 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


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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, cost savings "ill occur 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 advances of competitors$ 0n addition, firms can kno" "#ic# active customers 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 marketing efforts "#ere negotiations play an important role, !ut t#e speed of t#enegotiation 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

detailed nonJtraditional information collected from t#e customers t#roug# t#e t"oJ"ay

)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

information among t#e various functional departments of t#e organi'ation$ P5: Cesides t#etraditional 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$

Effective GS includes inputs )understanding customer expectations, !uilding partners#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 t#at companies t#at #ave rigid #ierarc#ical organi'ational structures 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 cutting, "it#out any mac#ine do"ntime$ %#e general message is, t#e 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

dependent on !ot# involvement and product class$ Assuming markets are perfectly

#eterogeneous, !y t#e emergence of GS, precision in satisfying t#ese #ig#ly diversified customer


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demands "ill increase and t#erefore satisfaction "ill lead to #ig#er customer loyalty$ Successful

operation of GS re(uires extensive use of information tec#nology and data!ases, flexi!le

manufacturing systems, and integrated distri!ution systems$ GS is not a futuristic 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 in t#e marketplace$ %#is may sound contradictory "it# t#e segmentation idea

!ecause one of t#e factors fre(uently emp#asi'ed in segmentation studies is t#at a segment

s#ould !e sufficiently large enoug# to direct marketing efforts to t#at segment;$ o"ever, it is

argued in t#is study t#at t#e main reason !e#ind t#at factor is profita!ility and if 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#eprofita!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$

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 adoptt#ese developments progressively$ Gor instance, it is currently feasi!le "it# t#e availa!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 loyalty as "ell as several ot#er !enefits$ %#ese include less competitive pressures,

more ideas from t#e customers in terms of product development, a more efficient and 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 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

nonJtraditional information as "ell as traditional marketing researc# data$ Additional

conceptuali'ation and empirical researc# is needed on t#e existence of suc# nonJtraditional

information$ o"ever, t#e collection of t#is information and maintaining a compre#ensive

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 notviolate 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


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of GS strategy$ %#e concepts and #ypot#eses developed #ere need to !e tested across cultures and

nations "it# diverse socioJeconomic, tec#nological and !e#avioural c#aracteristics 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 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# are a selection varia!le, algorit#ms for clustering, overlapping segmentation,

identification of consumers in eac# segment, etc$

Review Jurnal 2 manajemen pemasaran

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