Market Segmentation


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Market Segmentation

  1. 1. Market Segmentation<br />Market<br />Segmentation<br />
  2. 2. Introduction…<br />Companies cannot connect with all customers in large, broad or diverse markets.<br />Such markets can be divided into groups or segments with distinct need and wants.<br />A company needs to identity which segments it can serve effectively.<br />To develop best marketing plans, managers need to understand what makes each segment unique and different.<br />
  3. 3. Market Segmentation…<br />A market segment consists of a group of customers who share a similar set of needs and wants.<br />
  4. 4. Concept…<br />Segmentation means dividing the market into similar sub-markets by understanding the needs and expectations of customers.<br />Companies follow different marketing programs for different segments to maintain better relationship with customers.<br />Market segmentation is the first step in applying the marketing strategy.<br />
  5. 5. Definitions…<br />“Market segmentation is the process of dividing a potential market into distinct sub markets of consumers with common needs and characteristics.”<br />“Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments each of which tends to be homogeneous in all significant steps. – William J Stanton”<br />
  6. 6. <ul><li>For example… </li></ul>Kellogg's cereals, Frostiesare marketed to children. Crunchy Nut Cornflakesare marketed to adults. <br /> Both goods denote two products which are marketed to two distinct groups of persons, both with similar needs, traits, and wants.<br />
  7. 7. 2. Titan offer their watches in 4 brands for different customers characteristics.<br />Titan, Timex, Sonata & Fast track.<br />Timex<br />Titan<br />Fast Track<br />Sonata<br />
  8. 8. 3. Future Group operate in 4 different store formats depending on the category of customers.<br />Big Bazaar, Pantaloon, Central, Loot.<br />
  9. 9. Benefits of Segmentation…<br />Understanding the needs of Consumers <br />To adopt better positioning strategies.<br />Proper allocation of marketing budget.<br />Helps in preparing a better competitive strategy.<br />Different offerings in different segments enhance the sales.<br />Customer gets more customized product.<br />Provides opportunities to expand market <br />Encourages innovations<br />
  10. 10. Bases for Segmentation…<br />Consumer Market Segmentation is done on the basis of : <br />Geographic :Region<br /> City<br /> Rural & Semi-Urban<br /><ul><li>Demographic: Age</li></ul> Family Size<br /> Gender<br /> Income<br /> Occupation<br /> Education<br />
  11. 11. Psychographic : - Socioeconomic Classification<br /> - Lifestyle<br /> - Personality<br />Behavioral : <br /><ul><li>Occasions – Regular, Special
  12. 12. Benefits – Quality, Service, Economy, Speed
  13. 13. User Rate – Nonuser, ex-user, potential, first </li></ul> timer, regular.<br /><ul><li> Usage Rate – Light, medium, heavy
  14. 14. Loyalty – None, medium, strong, absolute
  15. 15. Attitude – Enthusiastic, positive, negative, </li></ul> towards indifferent, hostile<br /> product<br />
  16. 16. Industrial Market Segmentation is done on the basis of : <br />Demographic :<br /><ul><li>Industry : Which industry should we serve ?
  17. 17. Company size : What size of companies should we serve?
  18. 18. Location : What geographical areas should we serve ?
  19. 19. Operating Variables:
  20. 20. Technology : What customer technology do we focus on?
  21. 21. User/nonuser status : Heavy/medium/light users to serve?
  22. 22. Customer capabilities : Serve as per customer capability ?</li></li></ul><li>Purchasing Approach:<br /><ul><li>Purchasing function : Should we serve the companies with </li></ul> centralized /decentralized purchasing?<br /><ul><li>Power Structure : Should we serve companies which are </li></ul> engineering dominated or financially <br /> dominated or so on?<br /><ul><li>Existing Relationship: Should we serve companies with </li></ul> whom we have strong rel’n or serve <br /> he desirable ones ?<br /><ul><li>Purchasing Criteria : Should we serve companies that are </li></ul> seeking quality? Service ? Price ?<br />
  23. 23. Situational factors:<br /><ul><li>Urgency : Should we serve the companies that need </li></ul> quick and sudden delivery or service?<br /><ul><li>Specific application: Should we focus on certain application </li></ul> of or product rather than all <br /> specifications?<br /><ul><li>Size of order: Should we focus on large or small orders?</li></li></ul><li><ul><li>Personal Characteristics:
  24. 24. Buyer-Seller similarity :</li></ul> Should we serve the companies whose people and <br />valued are similar to ours?<br /><ul><li>Attitude towards risk :</li></ul> Should we serve risk-taking or risk-avoiding <br />customers?<br /><ul><li>Loyalty : Should we serve companies that show high loyalty</li></ul>to their suppliers?<br />
  25. 25. Service Industry Segmentation is done on the basis of : ?<br />
  26. 26. Criteria for Effective Segmentation…<br /><ul><li>Measurable :Size, purchasing power and other </li></ul>characteristics should be measured.<br /><ul><li>Substantial: </li></ul>-Segment should be large enough to serve<br />- Profitable enough to serve<br />- For e.g. It is possible and profitable for car <br /> manufacturer to manufacture cars for people with <br /> height below 4 feet.<br /><ul><li>Accessible :Effectively reached and served.</li></li></ul><li><ul><li>Differentiable :</li></ul> - Segments having different characteristics and <br />responds differently to different marketing mix <br />elements. <br />- E.g. If Unmarried and married women respond similarly <br /> to a saree sale, then they belong to same segment.<br /><ul><li>Actionable: </li></ul>- Effective programs can be formulated for attracting <br /> customers<br />- Regular changes can be possible made in the marketing <br />mix.<br />
  27. 27. Steps in Segmentation Process…<br />1. Need Based Segmentation :<br /> - Grouping customers depending on needs.<br />2. Segment Identification: <br />-Determine which demographic, lifestyle and usage <br /> behaviors make the segment distinct and identifiable.<br />3. Segment Attractiveness :<br />- Market Potential, market growth, competitive <br /> advantage of each segment<br />
  28. 28. 4.Segment Profitability :<br /> - Profitability analysis of the segment.<br />5.Segment Positioning:<br /> - Create ‘value positioning’ based on segment’s unique <br />needs and characteristics.<br />6. Segment ‘Acid Test’: <br />- Test attractiveness of each segment’s positioning <br /> strategy.<br />7. Marketing Mix strategy:<br />- Design a marketing mix<br />
  29. 29. Concepts to be understood…<br />1. Target Market:<br />After identifying various market segments, the marketer has to decide which segment offers greatest opportunity.<br />– This segment is the ‘Target Market’.<br /> It focus on selling a product or service to a specific market.<br />For e.gPepsi could define its target market as everyone who drinks a only cola beverage<br /> and not others drinks….<br />
  30. 30. 2. Market Target:<br />Once the firm identifies its target market, it now defines the marketing strategies for this particular market.<br />– This process is called ‘MarketTarget’ or <br /> ‘Market Targeting’.<br />-How the product should be?<br />-What should be the price?<br />-Which is the best way to promote the product?<br />-Where should be the product made available?<br />
  31. 31. 3. Positioning:<br /> “Act of fixing the place/position/image of the product offer in the mind of target customer.”<br />– Firm decided what parameters of the product has to be placed before the target customer.<br /> - It is more concerned with the customer’s perception of the product offer, compared to other product.<br /> The aim of<br />- The aim of positioning is to create a perception for the brand in the prospect’s mind so that is stands apart from competing brands<br />