Customer segmentation is a major source of competitive advantage.docVIP

 PAGE \* MERGEFORMAT 7 Customer segmentation is a major source of competitive advantage Classical economic theory, the client market as perfectly competitive market. This perfectly competitive market theory is that there is an assumption of homogeneity of customer needs. Of this theory assumes a company’s strategic focus of attention in the realization of economies of scale and a large number of production companies. Through economies of scale through increased productivity and lower production costs, eventually leading to the industry into the price competition. The outcome of price competition is the industry unattractive. On the one hand, price competition and further large-scale production of enterprises into the trap. While large-scale production is a personal expense of the consumer demand for a price. Mass production of the enterprise continuous convergence between the products, but consumers may find their most wanted things. On the other hand, price competition, increased the threshold for the industry, so a lot of companies preparing to enter the industry discouraged. These two aspects make the industry lost its appeal. However, in the market clearly have different tastes there are different preferences of consumers. To their individual requirements to the industry, companies provided the basis for differentiation strategy. If the product differentiation successfully meet the special preferences or tastes of consumers, this product differentiation changes in consumer judgments of product value, consumers will be willing to pay higher prices to be the product. The higher price is the product differentiation caused by excess profits. Products that meet the specific needs of consumers not only to obtain higher prices paid by consumers, more critically, these consumers because they can not find similar products in the special value, reducing the migration of their products to competitors. Therefore, customer segmentation to improve customer loyalty.