Market fragmentation Wikipedia

Make no mistake, these big guns will still often do very well and maintain more than enough influence for one business – look at Starbucks in the fragmented coffee industry – but fragmentation will pose a threat to their market share. The impact of that threat can be mitigated through regular market research, helping a business stay well acquainted with their evolving market. Market fragmentation isn’t random; it’s typically the result of various evolving forces within the marketplace. Here’s a breakdown of the major causes and real-world examples of their impact. Market fragmentation is the concept that a marketplace can divide into many small markets, each containing customers with distinct preferences or requirements. The basic idea behind the concept of market fragmentation is that every market reflects different buyer needs and wants, is composed of different segments and responds differently to marketing.

Once peripheral players, discount chains like Aldi and Lidl tapped into the fragmenting grocery market by drawing customers away from traditional supermarkets – placing their focus on lower prices, not variety and brands. By identifying and capitalizing on a market fragment before anyone else does, a company can carve out a niche for itself to operate in with less competition and more visibility. This first-mover advantage means that a business can establish strong ties with its customer base early on and set the stage for robust brand loyalty – which itself can often lead to word-of-mouth promotion and repeat purchases.

Marketing can then take this information to micro-target or adopt advertising with specific elements that appeal to their fragment in question. On the upside, fragmentation can be a catalyst for competition and innovation, often resulting in international and emerging markets bonds better quality products and services for more customers. Companies are pushed to up their game, think creatively and personalize their offerings to stand out. Going back several steps, market fragmentation creates new companies altogether.

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  1. For some businesses – especially the larger industry incumbents – market fragmentation often spells trouble.
  2. Smaller companies that focus on distinct fragments can focus their efforts on building relationships with a unique set of consumers—and making those consumers feel special.
  3. You can also look at the amount of innovation and R&D in a market to get a sense of whether it is fragmented or not.
  4. In other words, it avoids standardizing products to homogeneous groups and instead seeks to personalize them.
  5. Thanks to the fragmentation of markets, businesses can develop a local marketing strategy that will help them to gain a competitive edge over larger businesses.

‘How to Drive Profits with Customer Segmentation’ is your free guide to mastering this craft. Leveraging market fragmentation can be a game-changer for businesses – particularly nimble and adaptable startups and smaller companies. It’s a fragment of the groceries market that has grown in response to stricter food safety and farming regulations, and consumer demand for food products free of things like pesticides. With an in-depth understanding of the concept of a fragmented market, businesses have a better chance of dealing with the challenges that the market offers and thus succeed. Download the infographic below to see an agile solution that provides tangible answers that enable you to build products and content that speak directly to your evolving consumer fragments.

Market segmentation is a strategic tool companies use to deliberately divide a broad market into manageable, targeted groups based on specific characteristics like demographics or behavior. Market fragmentation, on the other hand, occurs naturally as consumer interests and market conditions evolve, leading to a scattered landscape of niche groups. Watching for new entrants in fragmented markets can provide trading opportunities, especially if they appear poised for growth. To begin trading fragmented markets today, first open a account and deposit some funds.

Defining Market Fragmentation

Fragmentation becomes a greater factor over time as a market grows, so it’s no surprise that today we can see many that are heavily fragmented. Instead of one or two dominant chains serving identical products, today there’s a whole range of smaller niches, from artisanal spots to specialty bean roasters, and themed cafes to coworking spots. The fragmented market is defined as a marketplace where no single organization has enough influence to move the industry in a single direction. Fragmented market consists of several small and medium organizations that compete with one another and with large organizations, but there is no one single company that dominates the entire market. Businesses generally need to establish a brand reputation that not only resonates throughout the marketplace but also sets it apart from its competitors.

What is a Fragmented Market?

New submarkets are created and new businesses are launched to cater to them – often leveraging globalized supply chains to make it all happen. Other examples of a fragmented market include clothing retailers, businesses selling furniture, agriculture, plant nurseries and landscaping, book publishing, bulk building supplies and others. Market fragmentation often spells trouble for an industry’s big guns – the giants who’ve long relied on casting a wide net to catch as many customers as possible. These larger enterprises, with their mass-market strategies, suddenly find that their one-size-fits-all approach starts to look a little out of touch.

It provides the insights needed to identify the unique needs, preferences and habits of a specific target audience. Once a business understands its chosen fragment, it can effectively personalize itself to that particular group. A business leveraging market fragmentation is also empowered to allocate their resources in a more cost effective way. That’s because, instead of trying to cater to everyone and spreading themselves too thin, they can tailor their products, services and marketing efforts to resonate deeply with a well-defined audience.

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Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about. While on the other hand, concentration allows companies to establish a strong foothold in the market. A concentrated market also makes it easier for an existing player to dominate the market and increase their profits. You can also look at the amount of innovation and R&D in a market to get a sense of whether it is fragmented or not.

For example, an economic recession will increase demand for cheaper, higher-value goods. Like any other market, fragmented market has its own set of challenges too. Market fragmentation and market segmentation are two sides of the same coin, but crucially they’re not the same thing.

Leveraging market fragmentation

Some brands still choose to appeal to the masses, but market fragmentation can make that difficult and lead to disadvantages when it comes to mass marketing efforts and achieving brand loyalty. As a result, market fragmentation can pose more of an obstacle for larger companies, or those with a greater market share. Smaller companies that focus on distinct fragments can focus their efforts on building relationships with a unique set of consumers—and making those consumers feel special. It can increase competition, innovation, and the personalization of products. But it can be a challenge for brands who don’t know what market fragments to go after or those that don’t have the means to do so—but there are solutions to help with that. Market research provides the means to identify and hone in on a fragment and understand their specific preferences and habits as compared to the rest of the market.

These demo accounts do not require payment and provide virtual funds, enabling you to test out trading with live prices. Version fragmentation happens when a firm offers multiple incompatible versions or variations of a single product, either in tandem or over time as a result of accumulated changes to product specification. Fragmented markets provide more choice, catering to a wider array of tastes and preferences. It means people can find products or services that feel like they were made just for them, rather than settling for something generic.






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