Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference.Market segmentation helps the marketers to understand the needs of the target audience and adopt specific marketing plans accordingly. Organizations can adopt a more focused approach as a result of market segmentation.
2. Market: A set up where two or more parties engage in exchange of
goods, services and information is called a market. Ideally a market is a place
where two or more parties are involved in buying and selling.
• The two parties involved in a transaction are called seller and buyer.
• The seller sells goods and services to the buyer in exchange of money. There
has to be more than one buyer and seller for the market to be competitive.
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3. Types of Markets
• Physical Markets - Physical market is a set up where buyers can physically
meet the sellers and purchase the desired merchandise from them in exchange
of money. Shopping malls, department stores, retail stores are
examples of physical markets.
• Auction Market - In an auction market the seller sells his goods to one who is
the highest bidder.
• Non Physical Markets/Virtual markets - In such markets, buyers purchase
goods
and services through internet.
In such a market the buyers and sellers do not meet or3
4. Examples - Rediff shopping, eBay etc.
• Market for Intermediate Goods - Such markets sell raw materials
(goods) required for the final production of other goods.
• Black Market - A black market is a setup where illegal
goods like drugs and weapons are sold.
• Knowledge Market - Knowledge market is a set up which deals in the
exchange of information and knowledge based products.
• Financial Market - Market dealing with the exchange
of liquid assets (money) is called a financial market.
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5. Market Segmentation:
Segmentation refers to a process of bifurcating or
dividing a large unit into various small units which have more or
less similar or related characteristics.
Market segmentation involves dividing large,
heterogeneous markets into smaller segments that can be reached
more efficiently and effectively with products and services that
match their unique needs.
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6. • A market segment is a small unit within a large market comprising of like
minded individuals.
• One market segment is totally distinct from the other segment.
• A market segment comprises of individuals who think on the same lines and
have similar interests.
• The individuals from the same segment respond in a similar way to the
fluctuations in the market.
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8. 1.Geographic Segmentation
Geographic segmentation refers to the classification of market
in to various geographical areas. A marketer can’t have similar
strategies for individuals living at different places.
2.Demographic segmentation
Demographic market segmentation is one of the most common approaches to
segmenting markets. With this strategy, a company simply divides the larger
market
in to groups based on several defined traits . Age, race, gender, marital status,
occupation, education and income are among the commonly considered
demographics segmentation traits.
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9. 3.Psychographic segmentation
Psychographic segmentation means dividing the market into groups
based on social class, lifestyle or personality characteristics. Psychographics or
lifestyle segmentation has become increasingly common as companies look to
identify consumers based on interests and activities in lieu of demographics.
As an example of this strategy's benefits, consider the lifestyle of an
outdoor adventurer. Camping enthusiasts, for instance, typically have few
consistent demographic traits. Campers are a diverse group. Thus, marketers
would likely target a segment of outdoor hobbyists or campers for new camping
equipment through outdoor programs or magazines.
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10. 4.Behavioristic Segmentation:
In this method consumers are classified into market segments not the basis of
their knowledge, attitude and use of actual products or product attributes.The
following variables might be used for this purpose:
(а) Purchase Occasion:
• Buyers may be differentiated on the basis of when they use a product or
service. For example, air travellers might fly for business or vacation.
Therefore, one airline might promote itself as a business flyer while another
might target the tourists.
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11. (b) Benefits Sought :The major benefit sought in a product is used as the basis of
classify consumers.
• High quality, low price, good taste, speed, sex appeal are examples of benefits.
For example, some air travelers prefer economy class (low price), while others
seek executive class (status and comfort).
(c)User Status:
• Potential buyers may be classified as regular users, occasional users and non-
users. Marketers can develop new products or new uses of old products by
targeting one or another of these groups.
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12. Reasons why firms segment markets
Target markets Obviously the main reason is to help identify potential target
markets
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Market understanding Splitting the overall market into smaller groups helps managers
have a much greater understanding of the marketplace, as they
gain knowledge of differing consumer needs within the same
market
Marketing mix It is then easier to develop a marketing mix is based upon the
needs of a precise market
Competitive position It can be easier to compete against existing firms by focusing upon
a smaller, more defined, group of consumers
New opportunities Creative approaches to market segmentation may generate new
opportunities
Avoid mass-marketing In today’s environment, it is generally quite difficult to be
successful as a mass-marketer.
More offerings Firms are better able to position multiple products in the same
overall market by defining and understanding multiple segments.
Niche marketing Some firms find success as niche marketers(pursuing very
narrowly defined segments) and this specialized approach
becomes their basis of their competition advantage
14. • a) Measurable: The size, needs, purchasing power, and characteristics of the
customers in the segment should be measurable. Quantification should be
possible.
• b) Divisible: The segments should be differentiable. There must be clear-cut
basis for dividing customers into meaningful homogeneous groups. They
should respond differently to different marketing mixes. There should be
differences in buyer's needs, characteristics and behaviour for dividing in
groups.
• c) Accessible: The segment should be reachable and serviceable. It should be
accessible through existing marketing institutions, such as distribution
channels, advertising media and sales force. There should be middlemen to
distribute the products
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15. • d) Substantial: The segment should be substantial. It should be large enough in
terms of customers and profit potential. IT should justify the costs of
developing
a separate marketing mix.
• e) Actionable: It should be actionable for marketing purposes. Organizations
should be able to design and implement the marketing mix to serve the chosen
segment.
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17. Three main activities of target marketing are segmenting,
targeting and positioning. These three steps make up what is commonly referred to
as the S-T-P marketing process. Companies and marketers use this step-by-step
approach to target marketing to figure out which segments offer the best profit
potential and how to effectively market to them.
SEGMENTATION
Segmenting means breaking up the market into smaller,
homogeneous segments. Within S-T-P, it is a virtual brainstorming step whereby
the business considers all possible market segments. Segmenting strategies include
demographics, lifestyle, geographic and behavioral approaches. Demographics
segmentation means you break up markets based on personal traits like age, race,
marital status, gender and income.
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18. segmenting means you divide customers by hobbies and interests.
Geographic segmentation makes local, state, regional, national or
international markets key. Behavioral segmenting is based on such things as
usage patterns and benefits sought from the product.
TARGETING
Following the brainstorming of possible segments in step one,
the next step is to pick a select market to target or focus on. Companies often
focus on one market segment at a time with marketing and ad campaigns.
Whichever market is the most attractive from a profit
standpoint or long-term potential is usually selected first. Factors including
size of the market, growth potential and competitive intensity impact the
perceived opportunity in targeting a given market.
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19. POSITIONING
Positioning is how the company wants the targeted market to
perceive its brand or product. Some companies make quality a key positioning
message and try to market their product as top quality for the target market
segment. Other qualities commonly used to differentiate include service, unique
features, environmental friendliness, family friendliness, safety, reliability,
durability and low cost. The key is to stand out from competitors with a unique
message that appeals to the interests of the targeted market.
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