THE EFFECTS OF MARKET SEGMENTATION OF SALES PERFORMANCE OF A BREVERAGE INDUSTRY

ABSTRACT

The basic aim of this research is to examine the impact of market segmentation on sales performance in the beverage industry. The study is guided by three specific objectives which are to examine the effect of Geographic market segmentation, demographic market segmentation, and Psychographic market segmentation on the sales performance of beverage industry. Descriptive research design was adopted for this study. In order to achieve the objectives of this study, primary source of data was used. The primary data used for this study was obtained directly from respondent through the administration of structure questionnaires to Marketers in the beverage industry.Data analysis was done using Statistical Package for Social Sciences (SPSS version 21.0) and Microsoft excels to generate quantitative reports which were presented in the form of tabulations, percentages, mean and standard deviation. The study further shows that an increase use of the different types of market segmentation is associated with higher levels of employee performance. The variables geographical segmentation has positive significant effect on sales performance. While demographic and psychographic segmentation though they have a positive but they have an insignificant effect on sales performance.

Key words: Market Segmentation and Sales performance.

CHAPTER ONE

INTRODUCTION

Introduction

Institutions such as banks, insurance companies, brewery industries, beverage industries are mostly interested in an increase in their performance. Performance analysis play a major role in determining how well a company is in general. Performance is one of the words which their definition is very flexible as everyone places the concept that suits best, and letting the context take care of the definition. Nevertheless in general terms performance can be seen as the result of activities (e.g. of an organization) over a given period of time. (Illmer, 2011). Sales performance describes the trend of collections in terms of revenue when comparing different periods (AKPOBO, 2015).This study therefore entitled; The effect of   marketing segmentation on sales performance on beverage industry is divided into five main chapters. Chapter one of the study is made up of the introduction where elements of the background, statement of the problem, research questions, objectives and hypothesis are discussed. Chapter two is the review of literature where conceptual, theoretical and empirical literature are been reviewed. It concludes with the research gap. Chapter three is the methodology, chapter four is the data analysis and discussion of results. The last chapter is the conclusion and recommendation.

1.1 Background of the Study

In every society, consumers are the most important thing to consider while operating as any business. The satisfaction of these consumers now becomes the firm’s ultimate goal. In order to achieve this market it takes a lot of marketing strategies. Historically, procedures and sellers have had to compete in the marketplace through what has been known as product differentiation, a method in which a manufacturer intentionally differentiates its product from competitors in the view of customers. This product differentiation technique can achieve some success, but not enough to provide optimum benefits to both producers/sellers and customers. The weakness of this approach is most likely attributable to the fact that it was developed haphazardly and without taking into consideration the quirks of the consumer. Following disappointment with the product differentiation method, marketing scholars and practitioners have come to rely increasingly on the market segmentation strategy.

The role of marketing in explaining sales business performance has received significant attention throughout the history of the marketing discipline. The need to link marketing with sales performance has become more urgent as marketers have been forced to defend the value of their activities and budgets during the current global recession. (Morgan, 2011) Over the past two decades, researchers have considerably enhanced conceptual understanding of the role of marketing in enabling firms to create and sustain competitive advantage. Recent advances in the marketing– finance interface have also begun to provide more empirical evidence of the impact of specific marketing activities and different types of marketing related assets on firms’ accounting and financial market performance (Morgan, 2011).

Bowen (1998) describes market segmentation as the actual process where a business personnel or marketer identifies segments of market then dividing the wide customer base into small groups or sub-groups that consist of prospective and existing customers. According to Davis (1987), market segmentation can be explained as a process that is consumer-oriented and that it can be practiced to almost any kind of market. In segmenting or dividing markets, researchers normally look for mutual characteristics like common interests, common needs, common demographic characteristics or similar lifestyles.

Beane & Ennis (1987), sate that marketing segmentation is one among the strategic methods that researchers use to gather information. Beane & Ennis (1987) further explain that marketing segmentation is the most used method of strategic approach for customizing services and products. According to Beane & Ennis (1987), in order to customize services and products a marketer has to rely on information and knowledge about the targeted customer so as to build strong relationships. So as to provide customized services a marketer is required to understand different kinds of customers through having the information and knowledge like responsiveness to marketing efforts and purchasing patterns of customers (Beane & Ennis, 1987)). Segmentation is one of those methods to acquire that knowledge and information.

Dickson & Ginter (1987) argues that a company has to set marketing segment that are large enough to meet their financial needs and its product. Segments can be chosen according to psychographic, demographics, geographic location or behavior. In the process of segmentation, the company should consider the reachability of the segment in promotional means (Dickson and Ginter, 1987). Customer loyalty, customer satisfaction and customer retention are the crucial intermediate objectives companies to successfully achieve liberalized markets (Dickson & Ginter, 1987). This is to show that marketing segmentation is a method that companies are most likely to use to strive in a competitive environment that results from slow growth of markets. In such cases marketing segmentation will be implemented so as to maintain market share through retaining their current customer’s rather than trying to get new customers. In the process of improving retention, companies engage in a variety of actions that also include customer satisfaction programs, customer loyalty (Sasser et al 1994) and customer complaint management (Fornell & Wernerfelt, 2003). According to Speed and Smith (1992) the application of segmentation in a company improves customer loyalty, customer satisfaction and customer retention.

According to Rust et al (1995) market segmentation is important because it helps to determine the way to operate according to customer demands. Rust et al (1995) further explain that the primary goal of market segmentation is concur and retain the customers. Business men in any company should put efforts in acquiring new customers but should also focus on how to keep those customers; this can be achieved through market segmentation (Rust et al, 1995). Despite this, industries have been not been active in using marketing segmentation into their advantage.

The literature of marketing in the last four decades has been absorbed in the concept of segmentation. According to Yankelovich & Meer (2006) for a long time companies have been trusting on marketing segmentation as a tool that can help them to effectively sell their services and products if it is properly applied because it enables them to get more information about their customers. Recently, more of marketing literature has looked at segmentation at a new perspective by narrowly it and centering on individuals rather than a homogenous group or a segment (Rust & Kannan, 2003). This trend has developed in the last decade, resulting customer-centered orientation as the focus of market research from product-centered orientation (Rust & Kannan, 2003).

Dent (1991) in his study, it showed that mass marketing was the trend in the 1960s and by 1970s researchers began to focus at market segmentation. In the years of 1980s, companies began to concentrate in niche marketing and in 1990s it concentrated on individual marketing. The trend of individual marketing existed to 2000s and longer. Hyatt (2005) customization or individualization trend is also apparent in businesses in the electronic environment, changing specific paradigms from traditional e-commerce to e-service (customer-centric concept), such as from commodities to customization, from mass marketing to one-to-one marketing, and from brand equity to Customer Equity (Rust & Kannan, 2003).

In the ongoing years, researchers have been evaluating marketing segmentation with other marketing programs to find out if other marketing programs are as effective as using marketing segmentation. A large number of business personals believe that marketing segmentation is the most effective than other marketing programs however this belief it is unclear despite decades of market research because it is not easy to collect relevant and complete information about market segments (Yankelovich & Meer, 2006).

The division of a market into different homogenous groups of consumers is known as market segmentation. The marketing concept calls for understanding customers and satisfying their needs. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike. One of the main reasons for engaging in market segmentation is to help the company understand the needs of the customer base. Often the task of segregating consumers by specific criteria will help the company identify other applications for their products that may or may not have been self evident before.

1.2 Statement of the Problem

Every company is always interested in the volume of its sales. This is due to the fact that an increase in sales is generally considered to be an increase in profit by the company, (Rotich, 2016). The beverage industry is facing challenges in maintaining the growing sales performance due to changing consumer preference, increasing competition and other external factors. To sustain growth and profitability, the beverage companies need to identify and address the underlying drivers of sales performance.

According to studies by different scholars like Sasser et al (1994), Rust and Kannan (2003) and Yankelovich and Meer (2006) have stated that market segmentation is important in increasing the sales of a company because it helps to determine the way to operate according to customer demands. This helps the marketer to improve sales performance. Many researches have been done to elaborate market segmentation and scholars have implied that the five basis of market segmentation (geographical, demographic, behavior, benefit sought, psychographic and consumer loyalty) are reliable tools for marketers to influence sales, investigate and measure on the possible sales performance that a company will achieve.

Despite the existence of many studies on market segmentation, scholars have not focused or directly shown the influence of the five basis of market segmentation (geographical, demographic, behavior, benefit sought, psychographic and consumer loyalty) towards sales performance making this belief unclear despite decades of market research.  In response to this problem, this study has investigated on the bases of marketing segmentation (geographical, demographic, benefit sought, psychographic and consumer loyalty) as the knowledge gap on the role of marketing segmentation on sales performance, and therefore is aimed at answering the following research questions:

1.3 Research Questions

1.3.1 Main Research Question

What is the effect of market segmentation on the sales performance of beverage industry.

 1.3.2 Research Question

Specifically, this study shall address the following questions;

• What is the influence of geographic market segmentation on sales performance of beverage industry?
• What is the role of demographic market segmentation on sales performance of beverage industry?
• What is the influence of psychographic market segmentation on sales performance of beverage industry?