Market Segmentation

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Principle of segmentation
Basis and types of segmentation of product and service sector segments in detail

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Market Segmentation

  1. 2. <ul><li>Principle of segmentation </li></ul><ul><li>Basis and types of segmentation of product and service sector segments in detail </li></ul>
  2. 3. <ul><li>According to Philip Kotler, “Market segmentation is the sub dividing of market into homogenous subsection may conceivably be selected as a market target to be reached with a distinct marketing mix. </li></ul>
  3. 4. <ul><li>Efficient use of marketing recourses </li></ul><ul><li>Better understanding of customer needs </li></ul><ul><li>Better understanding of the competitive situation </li></ul><ul><li>Accurate measurement of goals and performance </li></ul>
  4. 5. <ul><li>Geographic segmentation </li></ul><ul><li>Demographic segmentation </li></ul><ul><li>Economic Segmentation </li></ul><ul><li>Pshyographic segmentation </li></ul><ul><li>Buyer behaviour segmentation </li></ul><ul><li>Volume segmentation </li></ul><ul><li>Benefit segmentation </li></ul>
  5. 6. <ul><li>Segment selection = f(Value, Cost) </li></ul><ul><li>The value (sales volume) of a segment as a marketing choice is a function of four other factors </li></ul><ul><li>Value=f(U, F,C, D) </li></ul>
  6. 7. <ul><li>The tourism market can be segmented by using variables like </li></ul><ul><li>Age group </li></ul><ul><li>Number of trips taken per annum/season </li></ul><ul><li>Income and education </li></ul><ul><li>Purpose of the trip </li></ul>
  7. 8. <ul><li>Characterestics </li></ul><ul><li>Travelling on business(demographic segmentation) </li></ul><ul><li>Visiting clients within a defined area around the hotel( geographic segmentation) </li></ul><ul><li>Willing to pay a certain daily room rate(user response) </li></ul>
  8. 9. <ul><li>It can be segmented on the basis of </li></ul><ul><li>Geographical areas </li></ul><ul><li>Product related factors </li></ul><ul><li>Size of the customer, and </li></ul><ul><li>Type of buying situation </li></ul>
  9. 10. <ul><li>Services Market </li></ul><ul><li>Agriculture forestry and fishing </li></ul><ul><li>Manufacturing industries </li></ul><ul><li>Transportation, communication and other public utilities. </li></ul><ul><li>Construction </li></ul><ul><li>Mining and quarrying </li></ul>
  10. 11. <ul><li>Customer size </li></ul><ul><li>Purchasing methods and policies </li></ul><ul><li>Geographical location </li></ul><ul><li>Kind of organisation </li></ul><ul><li>As competition intensifies organisations should differentiate their products meaningfully to customers. </li></ul>
  11. 12. <ul><li>In developed economies growth is slowing in industries such as banking, insurance, hospitality and education. </li></ul><ul><li>A market niche that may seem narrow to offer sufficient sales represents a substancial market when viewed globally. </li></ul><ul><li>Competive strategy may take different routes </li></ul>
  12. 13. <ul><li>Strategic marketing means STP marketing i.e. segmenting, targeting & positioning the product/ services for gaining operational efficiency. </li></ul><ul><li>In marketing terms, focus means providing a relatively narrow product mix for a particular market segment- a group of buyers who share common characteristics, needs purchasing behaviour or consumption patterns. </li></ul>
  13. 14. <ul><li>Market focus is the extent, to which a firm serves few or many markets, whereas service focus describes the extent to which a firm offers few or many services. </li></ul><ul><li>A fully focused organization provides a very limited range of services to a narrow & specific market segment. </li></ul>
  14. 15. <ul><li>Finally, many service providers fall into the unfocused category because they try to serve broad markets & provide a wide range of services. </li></ul><ul><li>As you aware focusing requires a company to identify the market segment that it can serve best with the services it offers. </li></ul>
  15. 16. <ul><li>Firms that are in tune with customer requirements may choose to employ a needs-based segmentation approach, focusing on those customers whom research shows to value specific attributes. </li></ul><ul><li>A strategy of mass customisation offering a service with some individualized product elements to a large number of customers at relatively low price-may be achieved by offering a standardized core product but tailoring supplementary service elements to fit the requirements of individual buyers. </li></ul>
  16. 17. <ul><li>A market segment is composed of a group of buyers who share common characteristics, needs, purchasing behavior, or consumption patterns. </li></ul><ul><li>Effective segmentation should group buyers into segments in ways that result in as much similarity as possible on the relevant characteristics within each segment. </li></ul><ul><li>A target segment is one that a firm has selected from among those in the broader market & may be defined on the basis of several variables. </li></ul>
  17. 18. <ul><li>An important marketing issue for any business is to accept that some market segments offer better opportunities than others do. </li></ul><ul><li>Target segments should be selected not only on the basis of their sales & profit potential but also with reference to the firm’s ability to match or exceed competing offerings directed at the same segment. </li></ul><ul><li>To select target segments & to design effective positioning strategies, value of current & prospective customers within different market segments is most important. </li></ul>
  18. 19. <ul><li>A company, therefore has to decide which segments of the market constitute its target audience. </li></ul><ul><li>It concentrates on the knowing, understanding & meeting the requirements of those segments of the market only. Marketing personnel call this “Niche marketing.” </li></ul><ul><li>The segmentation of the total market is based on several factors like Income of the household, the age group of consumers, Level of education, Size of the City or town of their residence, climate of the place etc. </li></ul>
  19. 20. <ul><li>In deciding the range of products & services, a company keeps in mind the requirements of the customers who constitute their target group. </li></ul><ul><li>They need to develop products to meet the expectations of their target group, promote these to the same target group in a manner that will specially appeal to them. </li></ul><ul><li>The understanding of market segments will be useful & necessary to understand the expectations of different segments. </li></ul>
  20. 21. <ul><li>Defence versus Offense </li></ul><ul><li>Using Research to Develop a product/Service Concept for a specific segment </li></ul>
  21. 22. <ul><li>Understand potential customers </li></ul><ul><li>Pay proper attention to particular areas </li></ul><ul><li>Formulate marketing programmes </li></ul><ul><li>Select channels of Distribution </li></ul><ul><li>Understand competition </li></ul><ul><li>Use marketing resources efficiently </li></ul><ul><li>Design marketing mix- product, price, place & promotion </li></ul>
  22. 23. <ul><li>Market Segmentation </li></ul><ul><li>User characteristics: These may vary from one person to another, reflecting demographic & psychographic characteristics. </li></ul><ul><li>Techno graphics: A term recently trademarked by technology consulting firm Forester Research- that group’s customer according to their willingness & ability to use the latest technology. </li></ul>
  23. 24. <ul><li>User behaviour relates to how a product is purchased, delivered & used. </li></ul><ul><li>Among such variables are: </li></ul><ul><li>When & where purchase and consumption takes place. </li></ul><ul><li>The quantities consumed </li></ul><ul><li>Frequency & Purpose of use </li></ul><ul><li>Occasions under which consumption takes place </li></ul><ul><li>Availability of alternate delivery systems </li></ul>
  24. 26. <ul><li>Dr. S. Shajahan BFSc., MBA, Ph.D., is a  Associate Professor & Founder Head-Accelerated Learning Centre of IIM Shillong, Founder co-ordinator, CRM Today Inc. ,India Chapter . </li></ul><ul><li>… working as a strategic marketing, </li></ul><ul><li>CRM, Retailing  &  Branding </li></ul><ul><li>consultant of  several corporate houses since 1997. </li></ul>
  25. 27. <ul><li>He has Written 12 books and published 125 research papers of national and international repute. Most of his books are listed as text book/ reference books for the MBA programme of Indian and overseas Universities. </li></ul><ul><li>His professional life divides between teaching, writing and consultancy. Dr.Shajahan has keen interest in academic research and UGC has awarded fellowship for his research work. </li></ul>
  26. 28. <ul><li>Dr.Shajahan won several awards and citations . This includes listing by American Biographical Society, USA as the successful academicians from Asia in their millennium Directory of Distinguished Leadership in 2000 for publishing the maximum articles/papers, Honoured by Indian Society for Training and Development(ISTD) , New Delhi as Title of the year award for his book International Business Text and cases in February 2009, Enrolled as Resource person for SPSS , USA </li></ul>
  27. 29. <ul><li>And panel consultant / Associate Member, Subcommittee on Education and Management(Lot-9) of European Union/ADE Berlin since 2005,MBA Examination paper setter and Inspection commission member for affiliation of new courses for half a dozen universities in India. He is also reviewer of Journal of Asian case research from National university of Singapore </li></ul>
  28. 30. <ul><li>Dr.Shajahan has devised certificate ( CRM) and </li></ul><ul><li>Diploma programmes( SERM) and associated modules, lesson and cases for ALC ,IIM Shillong ,Indian Institute of Plantation management Bangalore, ICFAI University Hyderabad , University of Madras MBA-DLP and IGNOU since 2000.He can be contacted: drss@iimshillong.in /shaangrila@gmail.com </li></ul><ul><li>blog: www.alciims.blogspot.com </li></ul><ul><li>and web link : http://www.iimshillong.in/academics/profile-shajahan.asp </li></ul>
  29. 31. <ul><li>1.KOTLER, PHILIP, Marketing management, 13 th edition, Pearson Education 2008 </li></ul><ul><li>2.S.SHAJAHAN, Applied cases in Marketing </li></ul><ul><li>PRIMUS books, NEW DELHI 2009 </li></ul><ul><li>3.S.SHAJAHAN, Strategic Marketing-Text &Cases under IT enabled environment in Indian perspective,VIVA books, NEW DELHI 2009 </li></ul><ul><li>4.S.SHAJAHAN, Services Marketing- Text & cases, 2 nd Edition Himalaya Publishing House(P) LTD 2007 </li></ul>

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