Running head: RESEARCH PROPOSAL 1
RESEARCH PROPOSAL 9
Effect of Market Segmentation on Financial Performance for Technology Firms
Submitted to Northcentral University
Graduate Faculty of the School of Business in Partial Fulfillment of the Requirements for the Degree of
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San Diego, CA
Table of Contents
Statement of the Problem 4
Purpose of the Study 5
The technology industry is one among the most important industries in the world presently. Indeed, electronic devices have become an integral part of human life especially since the turn of the 21st Century. Besides electronics, technological improvements in areas like medicine have led to better and more effective treatment procedures for previously difficult diseases. Against this background, one can conclude that technology companies are essential in the present and future human existence. Similar to any other companies, technology companies face the need to adopt certain strategies that will enable them to exploit their full potential in terms of sales and revenue generation. One such strategy is market segmentation.
Venter, Wright and Dibb (2018) defined market segmentation as the dividing of “a target market” into smaller and better defined segments. For example, a technology company could divide its customer base along the lines of demographics, location, and needs. This way, the company is able to make better decisions for better customer satisfaction. In their analysis of market segmentation, Dolnicar, Grün and Leisch (2018) noted four types of market segmentation.
In the first place, there is demographic market segmentation such as in terms of age, income, location, annual income and more. The second type of market segmentation is psychographic segmentation. This entails segmentation of the market based on personality traits, values, lifestyles, priorities, attitudes and more. The third type is behavioral segmentation that entails purchasing habits, brand interactions, user status, and spending habits. Lastly, there is geographic segmentation, which entails segmenting markets in terms of ZIP code, country, climate, and whether the customers are urban or rural.
Market segmentation, according to Cross, Belich and Rudelius (2014) is especially crucial for marketing managers. The marketing department of an organization is responsible for pushing sales, and in turn, it influences the organization’s financial performance. In particular, marketing managers use the market segmentation strategy to create marketing messages that are stronger, as well as building a deeper customer affinity. In the end, the organization is able to service its customer base better, which leads to better financial performance. This assertion is in line with an analysis by Belás and Gabčová (2016) that established a positive correlation between customer satisfaction and financial performance of organizations.
The financial performance of organizations is critical to their existence, and as Rodriguez-Fernandez (2016) noted, it speaks volumes about the nature and effectiveness of the organization’s governance. However, many organizations find it difficult to understand the meaning and impact of market segmentation on their financial performance. Organizations are torn between using market segmentation to increase their competitive advantage or to use sub-markets to promote products/services such that they cater to the needs of different customer groups (Bruwer, Roediger & Herbst, 2017).
Organizations encounter various variables, some of them being controllable while others being uncontrollable. Controllable variables include price, advertisement, and product/service. The uncontrollable variables include consumer behavior, the economy, competition, and other extraneous variables. In the technology industry, market segmentation is essential for better financial performance. Technology firms identify segments in the market, the composition of the segments, as well as their needs. To this end, the technology firms encounter problems such as if market segmentation allows them to develop certain products/services. Another problem that organizations encounter is whether they should develop a promotional message for each market segment or not.
The purpose of this quantitative study is to establish the effect of market segmentation on financial performance for technology firms. Specifically, the study will focus on technology companies in the United States. Simple random sampling and document review will be used to collect quantitative data. The data that will be used in the study include financial statements of the selected companies in the 2018/2019 financial year and the market strategies that the companies use. The study will adopt a descriptive research design because it is ideal for describing phenomena (Bell, Bryman & Harley, 2018). Besides, a descriptive study does not require a researcher to manipulate any of the variables.
To examine the topic, two research questions will be guide the researcher during the study.
i. What kind of relationship exists between market segmentation and financial performance of technology firms in the United States?
ii. What effect does market segmentation has on the profitability of technology firms in the United States?
The following hypotheses will guide this study:
: There is a positive relationship between market segmentation and financial performance.
H10.: Technology firms that adopt a market segmentation strategy are more profitable than the ones that do not adopt this strategy.
According to Venter et al (2018), organizations perform market segmentation differently based on certain criteria. Depending on the criteria, the primary outcome desired is the ability to avoid the risks ineffective business strategies. Organizations such as technology firms divide their market based on certain characteristics that are key to better performance. Such organizations might create a generic strategy that is then replicated across all segments (Liu, Liao, Huang & Liao, 2019).
Specifically, dividing the customer base into smaller segments enables organizations to target the customers better and to respond to changes in tastes and preferences. Liu et al (2019) argued that the best criteria for market segmentation takes a multiple criteria approach. To this end, organizations combine “preference analysis and segmentation decision” to identify the best approach that will enable them to achieve the set objective such as financial performance.
The proposed method for this study is descriptive in nature. Since the goal of the study is to establish the effect of market segmentation on the financial performance of technology firms in the United States, the researcher will use available information like financial statements, earnings calls, and market sentiment to describe the phenomenon. In particular, the study will choose a specific technology company using a random sampling technique for use as a case study. The need for a random sampling technique is to ensure that the study achieves internal validity.
Data will be collected via questionnaires and by reviewing relevant documents. The need for questionnaires is to obtain information about the company’s strategy. In addition, the choice of questionnaires is because they are cheap to prepare and to administer. On the other hand, document review is the easiest way to get relevant information. The choice of this data collection method is also based on the fact that many American tech companies are publicly traded and that their financial information is easily retrievable from the internet.
The study will collect data primarily through document review and questionnaires. For the purposes of analysis, the study will use simple statistical analysis techniques as well as statistical analysis software.
This study intends to find out the effect of market segmentation on financial performance of technology firms based in the United States. The proposed research method is quantitative, with a descriptive study approach. The study will collect data through questionnaires and review of publicly available documents that have relevant information.
Belás, J., & Gabčová, L. (2016). The relationship among customer satisfaction, loyalty and financial performance of commercial banks. E+M Ekonomie a Management, 19(1), 132-147. doi:10.15240/tul/001/2016-1-010
Bell, E., Bryman, A., & Harley, B. (2018). Business research methods. Oxford university press.
Bruwer, J., Roediger, B. & Herbst, F. (2017). Domain-specific market segmentation: a wine-related lifestyle (WRL) approach. Asia Pacific Journal of Marketing and Logistics, Vol. 29 No. 1, pp. 4-26. https://doi.org/10.1108/APJML-10-2015-0161
Cross, J. C., Belich, T. J., & Rudelius, W. (2014). How marketing managers use market segmentation: An exploratory study. Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference, 531-536. doi:10.1007/978-3-319-13254-9_107
Dolnicar, S., Grün, B. & Leisch, F. (2018). Market Segmentation Analysis. In: Market Segmentation Analysis. Management for Professionals. Springer, Singapore
Liu, J., Liao, X., Huang, W., & Liao, X. (2019). Market segmentation: A multiple criteria approach combining preference analysis and segmentation decision. Omega, 83, 1–13. doi: 10.1016/j.omega.2018.01.008
Rodriguez-Fernandez, M. (2016). Social responsibility and financial performance: The role of good corporate governance. BRQ Business Research Quarterly, 19(2), 137-151. doi:10.1016/j.brq.2015.08.001
Venter, P., Wright, A., & Dibb, S. (2018). Performing market segmentation: A performative perspective. Marketing Performativity, 62-83. doi:10.4324/9781315300238-4