Modeling of market segmentation for new IT product development

Abstract

Businesses from all Information Technology sectors use market segmentation[1] in their product development[2] and strategic planning[3]. Many studies have concluded that market segmentation is considered as the norm of modern marketing. With the rapid development of technology, customer needs are becoming increasingly diverse. These needs can no longer be satisfied by a mass marketing approach and follow one rule. IT Businesses can face with this diversity by pooling customers[4] with similar requirements and buying behavior and strength into segments. The result of the best choices about which segments are the most appropriate to serve can then be made, thus making the best of finite resources. Despite the attention which segmentation gathers and the resources that are invested in it, growing evidence suggests that businesses have problems operationalizing segmentation[5]. These problems take various forms. There may have been a rule that the segmentation process necessarily results in homogeneous groups of customers for whom appropriate marketing programs and procedures for dealing with them can be developed. Then the segmentation process, that a company follows, can fail. This increases concerns about what causes segmentation failure and how it might be overcome. To prevent the failure, we created a dynamic simulation model of market segmentation[6] based on the basic factors leading to this segmentation.