Marketing often comes down to making your customers intelligent enough to buy your products or services. They have to understand what it is you’re selling, how it’ll help them, and how much better it is than any other solution. Market segmentation, is the selection of groups of people who will be most receptive to a product. The most frequent methods of segmenting include demographic variables such as age, sex, race, income, occupation, education, household status, and geographic location; psychographic variables such as life-style, activities, interests, and opinions; product use patterns; and product benefits.
Much segmentation involves combinations of these methods that can be targeted with a distinct marketing mix. The segmentation of a company’s market allows for a greater ability to reach its key customers in most cases. AM General’s Hummer began in 1979 with competition for the development of a High Mobility Multi-Purpose Wheeled Vehicle (HMMWV) to meet the Army’s highest standards. AM General’s prototype Hummer went to test in the Nevada desert in July 1980 – only 11 months from its design board beginnings.
After extensive evaluation, the Army awarded contracts for test vehicles to General Dynamics, Teledyne and AM General. Within 10 months, AM General delivered its Hummer prototypes to the Army proving grounds. After a five-month test period, the Hummer was judged as the superior technical offering. AM General was awarded the initial Hummer production contract in March 1983, calling 55,000 vehicles to be delivered over five years. Following the Hummer’s success and notoriety in the Persian Gulf War, AM General introduced a civilian vehicle in 1992.
Currently there are seven different civilian models available at more than 40 Hummer dealerships in the United States and 12 international distributors. AM General also supplies Hummers for use in heavy construction, mining, oil and gas exploration, fire and rescue, utilities and various government agencies. The Hummer was first classified as an organizational product and then became a consumer product. Based on what product classification the Hummer entails, the market segmentation should be tailored to the consumer and/or market segments it is marketing too.
The types of market segments currently existing for the Hummer in the consumer market are generally men with household incomes varying between 200,000 and 300,000 thousand dollars per year. Most of these men already own two or three cars. More doctors will purchase Hummers than lawyers. This market segment consists mostly of entrepreneurs as opposed to corporate conformists. The types of market segments in the b2b market are mostly associated with the government / military / US Army fleets.
AM General, producer of the Hummer, has also signed a number of licensing agreements for the use of the Hummer name-with Converse to market rugged footwear and with Timex to produce a “Hummer” watch. Which in turn leads to the market segmentation, which is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, there are clusters of needs. Market segments can have numerous, positive and negative outcomes. There are many pros and cons associated with the above market segments. For the consumer market, the demand is created by a very narrowly defined group of consumers.
A specific target market is positive thing for producers of a good such as a Hummer, however it is very limiting to the overall demand of the product. In other words, the vast majority of the US population has an annual household income of much less than 200,000 thousand dollars and is not lead by extremely successful entrepreneurs or doctors. AM General knows which type of consumer to target, but the number of consumers in the market is relatively small. Good news for the b2b market! If AM General can continue to satisfy the demands of the US military, then they are pretty much guaranteed a continuously existing market.
The market may shrink and expand from time to time, however the US government will continue to demand military vehicles as long as world peace ceases to exist. With the falloff in demand from the government segment, AM General should target the consumer market more heavily. With e-commerce booming and many entrepreneurs creating new innovative dot. com companies, there are men out there with money to spend! Because Hummers are more of a luxury item to own rather than a conventional form of transportation, the market would be similar to that of the Aston Martin or Jaguar type vehicles. This in turn will lead to the marketing mix.
The marketing mix includes a combination of product, packaging, price, channels of distribution, advertising, promotion, and personal selling to get the product in the hands of the customer. AM General’s marketing mix will differ between that for the consumer and that for the b2b segment. For b2b transactions, product will meet the specifications requested by the business (their needs). Place isn’t too important. Price is pretty much lacking competition for the most part, and will only be important as to what the government can afford (contracts? ). Promotion will not be a huge concern here, either.
Am General will need to provide information that will make the government realize that their products (vehicles) are strong, reliable automobiles by which the government will benefit from (they will aid in military defense and development). For consumers, AM General will have to work a little harder in the promotional area. The name and image of the vehicle alone will attract customers who wish to identify with this image. However, the consumers need to believe that any consumer can actually drive around a Hummer easily and safely, not by just the military. Price will be of significance.
Not many people will be able to purchase such an expensive, impractical vehicle. Place may be of importance as well. The Hummer may be more attractive to those living in certain types of terrain where they feel they can enjoy the luxury of the outstanding performance of a Hummer off road, in water, sand, etc. Does there need to be Hummer dealership on every corner in every city? No. Hummers should be available upon special request because their target market is so specific. If a consumer wants one, they will search for one. They won’t decide to drop by the dealership on their way home from work and work a deal!
Buying a Hummer is a major decision (for most of us, anyway). In-Conclusion in order to identify its potential buyers, corporations such as AM General should choose to segment or not to segment a particular market. A corporation that does not segment chooses a mass-market, the same product is offered to all customers. Corporations segment a market because different groups within the market have different needs. To thrive, the chosen segment must be identifiable and computable, lucrative, economically accessible, and exhibit a relatively standardized response function to the marketing efforts designed for it.
AM General should focus its efforts on target markets, or groups of customers with similar needs, rather than on the entire market. No single offer or approach to a market will therefore necessarily motivate or satisfy all buyers. The marketing concept holds that marketing will be more effective if it is tailored to the unique needs of each target market. Auto manufacturers are continually seeking information about changes in their industry and macro-environment.
