What is a Fragmented Market?
In fragmentation, there are many different players in the market and each may have their own niche or specialty. As a result, it is easier for new companies to gain customers and enter the market. A fragmented https://www.day-trading.info/day-trading-in-a-bear-market-bulls-bears-haircuts/ market is a marketplace in which no one company dominates the industry. It is characterized by a large number of small and medium businesses that compete for customers in their respective niche markets.
New regulations can fragment markets by creating space for alternative products that comply with new rules. What we often find here is that compliance with the changed regulations becomes the new fragment’s unique selling point. The creation of the internet led to the music market – once dominated by generic radio stations and music channels – receiving a new fragment in the form of online streaming.
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 https://www.topforexnews.org/books/forex-trading-strategy-56/ 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 FOREX.com account and deposit some funds.
These multiple sections, that are characteristics of every market, point towards the fragmentation of the market. Market fragmentation, as it relates to market research, is important because it happens in every industry, both domestically and globally, and can determine brand positioning, marketing strategy, and most profitable investment product development. OpenSignal acknowledged that while this made it problematic to develop apps, the wide variety of models allows Android to enter more markets. Navigating the maze of market fragmentation can be complex, but understanding how to segment your customer base is a powerful way to steer through it.
- Fragmented market is here to stay and it would do well for businesses trying to enter such as market to understand it in detail.
- A business leveraging market fragmentation is also empowered to allocate their resources in a more cost effective way.
- Like any other market, fragmented market has its own set of challenges too.
- Spotify then used technology to offer personalized music experiences that fragmented the music industry even further.
- As a result, it is easier for new companies to gain customers and enter 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.
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.
How to identify a fragmented market
Spotify then used technology to offer personalized music experiences that fragmented the music industry even further. Market fragmentation happens when multiple competing firms offer highly-incompatible technologies or technology stacks, likely leading to vendor lock-in. Two common varieties of fragmentation are market fragmentation and version fragmentation.Fragmentation is the opposite of, and is solved by standardization. Shifts in the economy inevitably impact purchasing power, which itself creates new market segments.
Is market fragmentation good or bad?
Fragmented market is here to stay and it would do well for businesses trying to enter such as market to understand it in detail. Download your free copy now and start tailoring your strategies to meet the exact needs of every market segment.
New consumer preferences
For some businesses – especially the larger industry incumbents – market fragmentation often spells trouble. One big market transforming into multiple smaller ones will naturally lead to a rise in competition that can compromise a once dominant position for the clear leader. Just like globalization fuels diversity among people and within communities, it in turn does the same for the products and services being demanded.
However, something could be said for the fact that consumers fragment themselves whereas businesses segment consumers. Further, fragments are typically specific to products and services while segments can define other activities. The crux of the problem is a lack of awareness or acknowledgment of emerging market fragments. If a business doesn’t recognize these evolving niches or understand their unique dynamics, it can’t effectively adapt. And when these larger enterprises do notice the shift, their size and established ways of working can make it hard to pivot quickly – often leading to a disconnect with consumers. Effective market research is almost always a prerequisite for any company leveraging market fragmentation.
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.
Master your market: Download your free guide to customer segmentation
Advancements in technology will typically lower a market’s barriers to entry for new competitors and enable the creation of tailored products. We’ve quickly seen how the advent of online marketplaces and social media has empowered small businesses to reach specific customer groups more easily. The consumer push for products that align with their values and lifestyle is a major fragmentation driver. As new trends take hold and old ones fall out of favor, consumer preferences are in a constant state of flux – markets respond by splitting into niches. Recall how Henry Ford established assembly lines to make it easier and more efficient to build standardized vehicles. In other words, it avoids standardizing products to homogeneous groups and instead seeks to personalize them.
An example of a fragmented market would be the retail sector, where there are many small and medium-sized businesses vying for customers. Market fragmentation is the concept that all markets are diverse and over time break into distinct groups of customers (i.e., fragments)—especially as markets grow. For example, when an entirely new product is created, until consumers can spend enough time with it, it solves the needs of most early adopters.
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.