Originally posted 2012-12-03 19:49:25.
Market Segmentation and Intellectual Property
Many businesses today take part in market segmentation, a practice of separating consumers based on their likes and needs. This allows the business to target products to particular groups of consumers, allowing for the maximization of sales. Market segmentation permits businesses to better understand and satisfy their customers by not treating all customers the same. Different customers have different needs, and therefore it is not as profitable to market a product to only a specific group of people.
Market segmentation maximizes profits and increases competitiveness, but another factor that helps with these two important goals of business is often overlooked: intellectual property. The World Intellectual Property Organization asserts that in most countries, over 90% of enterprises are small and medium-sized. Many of these companies, however, do not take advantage of the intellectual property system. By not taking advantage of this system, businesses are not capitalizing on their profits, and are decreasing competition.
Besides royalties, intellectual property helps maximize profits by making sure another company does not create cheaper counterfeits of a product of another company. Consider a company that creates a product and creates three different versions of this product, all geared towards different demographics. These versions all vary in price. If this company has no intellectual property rights protecting their products from being duplicated, what stops another company from taking the most expensive version of the product, duplicating it, and selling it at a cheaper price? Would consumers be more likely to buy the original product with the least features, or the duplicated product that is just as cheap but with more features? This dilemma would not only decrease sales for the company that did not bother to secure intellectual property rights but would also decrease competition among businesses.
Supplemental Source: http://www.netmba.com/marketing/market/segmentation/