The living standards measure as a market segmentation tool for selected retailers
De Jager, Nedia
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Businesses have realised that they cannot appeal to all consumers in the marketplace. Consumers are too numerous, geographically wide-spread, and too varied in their needs and buying practices. Furthermore, the business & themselves vary widely in their abilities to serve different segments of the market. Businesses consequently conduct market segmentation to identify the parts of the market that it can best serve and most profitably. Therefore, the goal of this study was to determine the actual target markets of selected retailers by means of the Living Standards Measure (LSM) tool, and to recommend improved marketing strategies based on the Media Groups Measure (MGM) tool. The objectives of the study were to describe market segmentation by emphasising its importance and discussing the market segmentation process. Further objectives include explaining the application of the LSM- and MGM-tools in identifying target markets and selecting media to reach these target markets, and to conduct an empirical investigation on the application of the LSM tool for the selected retailers. A market segmentation strategy concentrates the business' marketing efforts on consumers who have a similar interest in the business' values. Therefore, market segmentation enables the business to identify consumer needs more accurately. The aforementioned assists the business in creating a basis for developing products to satisfy consumer needs. The basis is developed by the identification of the attributes that are of value to consumers. Market segmentation furthermore assists in the development of an effective marketing mix, tailored to the business' strategy and objectives. A proper marketing mix can determine the promotional appeal, media choices, and the prices consumers are willing to pay. The LSM and MGM are only two of the variety of segmentation tools that can be used to segment a heterogeneous market. The LSM is a relatively new and unknown instrument - in comparison with other segmentation tools - and was specifically developed for the South African market. It is furthermore a multivariate segmentation tool, consisting of 29 household variables, which excludes discriminators such as race and income. The MGM-tool is used to obtain media consumption information on market segments. Its primary function is to assist businesses in selecting media that are most effective in reaching their target markets. The most important conclusions of this study are that the current target markets of Shoprite Checkers and Pick 'n Pay in Potchefstroom differs from their actual target markets. Gender and age do not differentiate shoppers significantly, and although race and income are not included as differentiators in the LSM index, these two variables correlate strongly with the various LSM-groups. Some of the most important recommendations include: The headquarters of both retailers should consider developing differentiated marketing strategies for stores in different locations. Shoprite Checkers and Pick 'n Pay (in Potchefstroom) should both target SU-LSM groups 6 to 10. Both retailers should adapt their marketing efforts in order to provide for the local market in Potchefstroom. The recommendations will enable the retailers to enhance their business and marketing efforts, and accordingly satisfy the needs of their customers.