What is Market Segmentation?

Marketers use a wide variety of tools to come up with a marketing stratgey for the organization. The types of products available and introduced, the advertisements, distribution channels and customer touch points are all part of the game. However, a major area where companies fail to recognize is the different needs of the customers.

Categorizing similar needs of customers into clusters is called segmenting the market. The segments can be broken down in terms of customer income, unique needs, geographical conditions, social statuses, education, religion, ethnicity and the list goes on.

There are no rules set in stone to segment a market. As long as you are able to cluster a group of people with similar needs and wants, it can be called a market segment. Once you have segmented the market, the business can cater to each segement based on their unique needs.

Some popular market segments are as follows:

1) Geographic Segmentation

This is a scenario where the market is divided based on the geographical location of the customers. Global marketing heavily relies on this segmentation as they consider one nation to be a unique market. However, it is not mandatory to assume that one nation is one unique market. For an example; although India and Sri Lanka can be considered as very unique markets even though they are situated in close proximity, Denmark and Norway could be clustered together. But depending on the sensitivity of the product to cultural factors these segmentations could change.

2) Demographic Segmentation

This segmentation focuses on factors such as age, gender, education level, income level, religion, ethnicity etc. Age group is a popular segmentation method, for an example, in the confectionary, toys and education businesses. Gender plays a major role in the fashion industry. For an example if a business is looking at opening a clothing store in a city, it should conducted a census and find out the percentage of men and women in the area so it can better cater to the target market.

Likewise, a market can be segmented to any number of manageable sectors and then a business can better focus on one segment.

Depending on the needs of the segments a business can;
- provide one product to the entire market,
- provide one product to several like-minded segments, or
- provide a unique product to all segements of the market.

Importance of Market Segmentation

- better identify the unique and varying needs of a market
- can better cater to the unique needs of the market
- personalized products give more value to customers, hence more customer satisfaction
- easier to handle a smaller segment than handling the entire market
- chances of a product failing in a segment is less
- can focus the business's marketing more effectively to a segment

If you have further questions regarding market segmentation please comment them below.

Efficient Market Hypothesis (EMH)

This is the age of information, where information is more powerful than any weapon. The markets are changing rapidly and information is the key to identifying such changes and reacting to them in the best possible way. Information gives us the business a path to follow, targets to achieve and a competitive advantage, if used correctly.

Efficient Market Hypothesis (EMH) defines three levels of information availability in a market (mainly financial markets).

1. Strong Market
2. Semi-Strong Market
3. Weak Market

Strong Market

EMH says that in a strong market perfect information exists and is highly efficient in information distribution. This means that, in a market, all past information, present information, all disclosed information and all undisclosed information are publicly available. In practice, this is highly unlikely and could be concluded that such markets do not exist. If such markets exist, everybody would be making unlimited and continuous profits within markets, and that is not practical.

The prices of financial instruments trading in these markets will instantly reflect the availability of undisclosed information (insider information). 

Semi-Strong Market

EMH defines a semi-strong market as one with all past information, present information and all disclosed information. Typically this is the type of market that exists most of the time. Businesses will do anything to prevent important information leaking out to the market  since that gives their competitors an enormous advantage. So undisclosed information stays undisclosed and publicly hidden.

The prices of financial instruments trading in these markets will instantly reflect the availability of public information. 

Weak Market

EMH says that Weak Markets only give out the past disclosed information to the public. Decision making can be tough and rigid in these types of markets.

In these markets prices of financial instruments will only reflect based on the past information.

Sources : http://en.wikipedia.org/wiki/Efficient-market_hypothesis 

Business Strategy

We all have different ideas as to what strategy is. Some may think it is a tactic or other may think it is a plan. Well both of them are not far off, since an accepted definition for Strategy says ‘a course of action/plan that is developed or designed to achieve a set of objectives’. In simple words it is a set of rules and guidelines that will help us achieve some target we have set.

A Business strategy is pretty much the same, whatever the actions taken by a business to achieve its set objectives. A strong strategy is important for any business to distinguish themselves from the competition and face it. Also it is important to be aware of the competition’s strategy when preparing our strategy.

Business Strategy is mainly evaluated through the Rational Planning Model which is demonstrated as below.

Every bit of planning and organizing and strategizing in an organization should start with its mission and objective statements, because every action taken by the organization should eventually lead to achieving business’s mission and objectives. A corporate appraisal is carried out to understand the current position of the business both internally and externally. A preferred analysis method would be SWOT analysis. Then it is essential to generate strategic options which are in line with our business position and mission and objectives. In the next step those strategic options should be evaluated and the best option should be selected. Such strategy should then be implemented and reviewed and controlled as and when required.

A more detailed look into the each of the steps of the Rational Planning Model will be conducted in the articles to come. Keep in touch and comment for any questions and ideas.

Dealing with today's distinctly dicey market - 15 Rules For Investing Success In Any Market

Keep the following 15 rules in mind that could help you hold your head high in times of sudden losses or for general investing purposes:

1) Think twice protecting against the downside (price downs), before daring to look up (price ups) when picking shares.

2) The norm is "Volatility does not represent risk, but creates opportunity". This is true. But go through the numbers (financial statements) and decide on your free will.

3) Investing when a share is neglected or out of focus is the best. The prices will be low and will produce you with enough gains in the long run.

4) Buy companies with excess cash flow.

5) Watch out for value, then make sure the basic figures tell you a clear story about the future of the company.

6) When digging further, use a Warren Buffet-like discounted cash-flow method to help determine underlying value.

7) Ask yourself if you're prepares to buy the whole company for yourself if you could. If the answer is 'NO', probably you should move on.

8) Don't fall for the reputation of the company or the centuries of years it has been in existence. The market has numerous examples for incidents where such companies have fell overnight. Always look at the current performance.

9) Don't listen to the directors if the reports show a complete over turn. If the numbers do stack up, take what the directors say with a healthy dose of salt. The same goes for brokers' forecasts.

10) If directors are buying shares, keep your eyes open.

11) No matter how hard you try and no matter the market condition, you will make losses. Accepting that will ease your pain. The general norm is that in stock trading you should always be prepared to take 20% loss anytime.

12) Make sure you understand how the company makes its profits and the essence of what it does.

13) Stick to your investment strategy. Pay less attention to market gossip and hush hush..

14) John Maynard Keynes said: "The market can stay irrational longer than you can stay solvent". But this is only true if you've overdone it. Don't invest more than you can truly afford to lose. (Margin trading is really not necessary)

15) Last but not the least... BE PATIENT.. You bought a stock, it's prices are not moving? Hold on. A price can never stay the same forever. If there's nothing interesting to buy. Just wait. Don't just go tie yourself in some good-for-nothing shares. Always be patient. 

Published in Investing Strategy

When to Buy and Sell your Shares?

This has the been the most famous and age old question regarding Stock Trading. Simply due to the fact that 'When to Buy and When to Sell' is the core function behind stock trading and if you're an expert at deciding this, you can easily be a Pro at trading and end up unbelievably rich!!

Sorry to disappoint you though, but there's really no hard and core rule regarding when to buy and sell. That's the harsh and cold truth. Some may call it intuition, luck or sometimes pretty decent hard work and thought and decision making skills. However it is said and done, there are really a few basic things that you should know that could actually save your life in the stock market and hopefully not end up making losses for you. 

When to buy?

Actually most people think or it may seem very appealing to buy a stock which has it's price moving up. It may logically seem valid. The price is moving up so it will continue further more and when I have enough profit I'll sell it. Just like that. But that's not the correct way to approach the market. You should always focus on stocks that have decreasing price movements. or more like stocks that have lost it's market price and fallen down to a low value. Why? Simply because, if a share was performing well and had dropped to a lower level, it has a HUGE potential to reach back to it's previous price or even further more. A price that is already increasing only has a huge potential to drop. So always we should eye for stocks that have recently lost it's value. Buy them quickly and wait till the prices recover. You cannot loose this way, because the price was already down it wouldn't go any further down but only up. So guaranteed you will end up with a profit.

When to sell?

Buy and sell may seem like two opposites, and it is, but the same core rules as of buying shares apply for selling shares. This doesn't mean that you have to sell when the prices have dropped. The ideal time to sell a stock would be when it shows signs of dropping price. Now, if you picked a stock at a lower value as I've mentioned above any increase in price would earn you a profit, so when the stock shows even the slightest signs of dropping prices, sell them. Don't wait thinking it'll recover, just sell it. You won't loose anything since you bought at a lower price.

So that's about it.

This is NOT buying/selling recommendation. 

Further Reference: