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Market Research Dictionary - Index M


Slavic-Style Easter Eggs

Market Segmentation Reveals Target Markets aka the Golden Eggs

Botsman | Dreamstime © 2012

Index M contains definitions for marketing terminology, such as market segmentation, target market, mobile marketing, inbound marketing, multichannel marketing, and market share.

Market Share

Market Segmentation

Also Known As:

Sometimes the term market share is shown as one word -- marketshare. Either version is correct. Marketshare is most often used when a figure is reported. For instance, a company will say that it is focused on increasing its market share or share of the market. When it reports its actual figure, it is more likely to say, "Our marketshare is 84%."


What Is Market Share?

Market share represents a portion of the entire customer base for a particular service, product, or line of products. If a market researcher was asked to identify the market share for a particular product manufactured by a company, that market researcher might use a pie chart to represent the product market share as a whole. Each company that sells a particular product that falls into a certain category would show up as a "slice" of the market share pie for that product category. As with any pie chart, to the best of the market researcher's ability, the market share pie would illustrate the entire 100% of the market share -- company by company -- for that product category. In the real world, market share is not easy to determine. Companies may be very secretive with their actual market share numbers. Sometimes the best that a market researcher can do is extrapolate the market share values.

Market share is typically reported as a percentage and reflects the portion of a target market that is interested in a certain product or product line. In other words, there is an actual customer base for the product or product line. Increasing market share is not just a matter of selling more product, although that is a very important goal. An increase in market share often makes economies of scale available that can contribute to earnings and profit margins.

How Is Market Share Calculated?

Market share may be reported as revenue or unit sales from a specific market divided by the total possible revenue or unit sales in that market. Because the figure for the possible / available revenue or unit sales in a specific market must be estimated or extrapolated, it is common for a firm to use market research to arrive at that figure.

What Is Market Segmentation?

The term "market" has a number of uses, many of which originate from the world of finances. In market research, marketing, and advertising, the residual meaning of "market" is that some transaction is undertaken that is mutually beneficial. There is a seller and a buyer in these transactions. Grouped together, the buyers in the "market" (that is, those who are looking to buy a particular product or service) share some common attributes. And any large group of buyers in a market can be subdivided into smaller groups. These smaller--and different--groups of buyers are referred to as market segments, or sometimes target markets.

A process called market segmentation is used to discover how these different groups of buyers are alike and how they are distinct. When a market researcher is able to distinguish between groups of buyers based on their characteristics and preferences, they create a consumer persona for each group of buyers. As much as possible, a consumer persona shows how the group of buyers it represents has homogeneous ideas about products or services. Buyers (consumers, customers, and potential customers)can be identified by the most dominant service or product needs and desires they exhibit. Focusing on the dominant attributes of a group enables market researchers to make recommendations and provide data to support the direction of marketing and advertising campaigns.

Creating market segments can be interesting. It is a bit like the card game of match in which a player picks up two cards at a time from an array in which all the cards are face down on a playing surface. When market researchers play this match game to create market segments, they use sophisticated computer applications to compare data about consumers. Aggregate data on consumer demographics, economic status, geographical location, and behavioral attributes are sorted by computer algorithms. Finer and finer distinctions can be made using consumer data, until market researchers believe they have found the optimal groupings, or segments. These market segmentation steps help market researchers identify insights that are used to advertise to the market segments, or target markets.

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