Marketing

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Sawsan Monir Abd El-Aziz * 20142629
Market segmentation is the process of dividing a broad consumer or
business market, normallyconsistingof existingand potential customers, into
sub-groups of consumers (known as segments) based on some type of shared
characteristics such as shared needs, common interests, similar lifestyles or
even similar demographic profiles.
Many ways to segment a market have been identified. Business-to-business
(B2B) sellers might segment the market into differenttypes of businesses or
countries.While business to consumer (B2C) sellers might segment the market
into demographic segments, lifestyle segments, behavioral segments or any
other meaningful segment.
Market segmentation assumes that different market segments require
differentmarketing programs,different offers, prices,promotion, distribution
or some combination of marketing variables.
Many marketers use the S-T-P approach; Segmentation→ Targeting →
Positioningto provide the frameworkfor marketingplanningobjectives.That
is, a market is segmented, one or more segments are selected for targeting,
and products or services are positionedin a way that resonates with the
selected target market or markets.
The four bases for segmenting consumer market are as follows:
A. Demographic Segmentation
B. Geographic Segmentation
Market segmentation

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C. PsychographicSegmentation
D. Behavioural Segmentation.
A. Demographic Segmentation:
Demographic segmentation divides the markets into groups based on variables
such as age, gender, family size, income, occupation, education, religion, race
and nationality. Demographic factors are the most popular bases for
segmenting the consumer group. One reason is that consumer needs, wants,
and usage rates often vary closely with the demographic variables. Moreover,
demographic factors are easier to measure than most other type of variables.
1 .Age:
It is one of the most common demographic variables usedto segment markets.
Some com-panies offer different products, or use different marketing
approaches for different age groups. For example, McDonald’s targets children,
teens, adults and seniors with different ads and media. Markets that are
commonlysegmentedby age includes clothing, toys,music, automobiles,soaps,
shampoos and foods.
2 .Gender:
Gender segmentation is used in clothing, cosmetics and magazines.
3 .Income:
Markets are also segmented based on income. Income is used to divide the
markets because it influences the people’s product purchase. It affects a
consumer’s buyingpower andstyle of living. Income includes housing, furniture,
automobile, clothing, alcoholic, beverages,food, sporting goods, luxurygoods,
financial services and travel.
4. Family cycle:
Product needs vary according to age, number of persons in the household,
marital status, and number and age of children. These variables can be

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combined into a single variable called family life cycle. Housing, home
appliances, furniture, food and automobile are few of the numerous product
markets segmented by the family cycle stages. Social class can be divided into
upper class, middle class and lower class. Many companies deal in clothing,
home furnishing, leisure activities, design products and services for specific
social classes.
B. Geographic Segmentation:
Geographic segmentationrefers to dividinga marketinto differentgeographical
units such as nations, states, regions, cities, or neighborhoods. For example,
national newspapers are publishedanddistributedto differentcities in different
languages to cater to the needs of the consumers.
Geographic variables such as climate, terrain, natural resources,andpopulation
density also influenceconsumer productneeds.Companies may divide markets
into regions because the differences in geographic variables can cause
consumer needs and wants to differ from one region to another.
C. Psychographic Segmentation:
Psychographic segmentation pertains to lifestyle and personality traits. In the
case of certain products, buying behavior predominantly depends on lifestyle
and personality characteristics.
1. Personality characteristics:
It refers to a person’s individual character traits, attitudes and habits. Here
markets are segmented according to competitiveness, introvert, extrovert,
ambitious, aggressiveness, etc. This type of segmentation is used when a
product is like many competing products,and consumer needs for products are
not affected by other segmentation variables.
2. Lifestyle:
It is the way people live and spend their time and money. Lifestyle analysis
provides marketers with a broad view of consumers because it segments the
markets into groups based on activities, interests, beliefs and opinions.
Companies making cosmetics, alcoholic beverages and furniture’s segment
market according to the lifestyle.

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D. Behavioral Segmentation:
In behavioral segmentation, buyers are divided into groups based on their
knowledge of, attitude towards, use of, or response to a product. Behavioral
segmentation includes segmentation based on occasions, user status, usage
rate loyalty status, buyer-readiness stage and attitude.
1. Occasion:
Buyers can be distinguished according to the occasions when they purchase a
product, use a product, or develop a need to use a product. It helps the firm
expand the product usage. For example, Cadbury’s advertising to promote the
product during wedding season is an example of occasion segmentation.
2. User status:
Sometimes the markets are segmented basedon user status, thatis, on the basis
of non-user, ex-user, potential user, first-time user and regular user of the
product. Large companies usually target potential users, whereas smaller firms
focus on current users.
3. Usage rate:
Markets can be distinguishedbased on usage rate, that is, on the basis of light,
medium and heavy users. Heavy users are often a small percentage of the
market, but accountfor a high percentage of the total consumption. Marketers
usually prefer to attract a heavy user rather than several light users, and vary
their promotional efforts accordingly.
4. Loyalty status:
Buyers can be divided based on their loyalty status—hardcore loyal (consumer
who buy one brand all the time), split loyal (consumers who are loyal to two or
three brands), shifting loyal (consumers who shift from one brand to another),
and switchers (consumers who show no loyalty to any brand).
5. Buyer readiness stage:
The six psychological stages through which a person passes when deciding to
purchase a product. The six stages are awareness of the product, knowledge of
what it does, interest in the product, preference over competing products,

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conviction of the product’s suitability, andpurchase. Marketingcampaigns exist
in large part to move the target audience through the buyer readiness stages.
Good pricingstrategy helps you determine the price point at which you can
maximize profits on sales of your products or services.When setting prices,a
business owner needs to consider a wide range of factors includingproduction
and distribution costs, competitor offerings,positioningstrategies and the
business’ target customer base.
While customers won’t purchase goods that are pricedtoo high, your company
won’t succeed if it prices goods too low to cover all the business’ costs. Along
with product, place and promotion, price can have a profound effect on the
success of your small business.
Here are some of the various strategies that businesses implementwhen setting
prices on their products and services.
1. Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors.
Premiumpricingis often most effective in the earlydays of a product’s life cycle,
and ideal for small businesses that sell unique goods.
Because customers need to perceive products as being worth the higher price
tag, a business must workhardto create a value perception. Alongwith creating
a high-quality product, owners should ensure their marketing efforts, the
product’s packagingand the store’s décor all combine to support the premium
price.
2. Pricing for Market Penetration
Pricing strategies

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Penetration strategies aim to attract buyers by offering lower prices on goods
and services. While many new companies use this technique to draw attention
awayfrom their competition, penetration pricingdoes tend to resultin an initial
loss of income for the business.
Over time, however, the increase in awareness can drive profits and help small
businesses to stand out from the crowd. In the long run, after sufficiently
penetrating a market, companies often wind up raising their prices to better
reflect the state of their position within the market.
3. Economy Pricing
Used by a wide range of businesses including generic food suppliers and
discount retailers,economy pricingaims to attract the most price-conscious of
consumers. With this strategy, businesses minimize the costs associated with
marketing and production to keep product prices down. As a result, customers
can purchase the products they need without frills.
While economy pricing is incredibly effective for large companies like, the
technique can be dangerous for small businesses.Because small businesses lack
the sales volume of larger companies,theymaystruggle to generate a sufficient
profit when prices are too low. Still, selectivelytailoringdiscounts to your most
loyal customers can be a great way to guarantee their patronage for years to
come.
4. Price Skimming
Designedto helpbusinesses maximize sales on new products andservices, price
skimming involves setting rates high during the introductory phase. The
company then lowers prices gradually as competitor goods appear on the
market.
One of the benefits of price skimming is that it allows businesses to maximize
profits on early adopters before dropping prices to attract more price-sensitive
consumers. Not only does price skimming help a small business recoup its
developmentcosts, but it also creates an illusion of qualityand exclusivitywhen
your item is first introduced to the marketplace.
5. Psychology Pricing

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Psychology pricing refers to techniques that marketers use to encourage
customers to respond on emotional levels rather than logical ones.
For example, setting the price of a watch at $199 is proven to attract more
consumers than setting it at $200, even though the true difference here is quite
small. One explanation for this trend is that consumers tend to put more
attention on the firstnumber on a price tagthan the last. The goal of psychology
pricing is to increase demand by creating an illusion of enhanced value for the
consumer.
6. Bundle Pricing
With bundle pricing, small businesses sell multiple products for a lower rate than
consumers would face if they purchased each item individually. Not only is
bundling goods an effective way of moving unsold items that are taking up
space in your facility, but it can also increase the value perception in the eyes of
your customers, since you’re essentially giving them something for free.
Bundle pricingis more effective for companies thatsell complimentaryproducts.
For example, a restaurant can take advantage of bundle pricing by including
dessert with every entrée sold on a particularday of the week. Small businesses
should keep in mind that the profits they earn on the higher-value items must
make up for the losses they take on the lower-value product.
7. Absorption pricing
Method of pricing in which all costs are recovered. The price of the product
includes the variable cost of each item plus a proportionate amountof the fixed
costs.
8. Decoy pricing
Method of pricingwhere the seller offers at leastthree products,and where two
of them have a similar or equal price. The two products with the similar prices
shouldbe the most expensive ones,and one of the two shouldbe less attractive
than the other. This strategy will make people compare the options with similar
prices,and as a result sale of the more attractive high-priceditem will increase.
9. Pay what you want

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Pay what you want is a pricingsystem where buyers pay any desired amount
for a given commodity, sometimes includingzero. In some cases, a minimum
(floor) price may be set, and/or a suggested price may be indicatedas
guidance for the buyer. The buyer can also select an amount higher than the
standardprice for the commodity.
Givingbuyers the freedom to pay what they want may seem to not make much
sense for a seller, but in some situations it can be very successful. While most
uses of pay what you want have been at the margins of the economy, or for
special promotions, there are emerging efforts to expand its utility to broader
and more regular use.
10. Competition Pricing
Competition Pricingis Setting a price in comparison with competitors. In reality
a firm has three options and these are to price lower, price the same or price
higher than competitors.
Eg. Some firms offer a price matching service to match what their competitors
are offering. Others will go further andrefundbackto the customer more money
than the difference between their price and the competitor's price.
11. Product Line Pricing
Pricing different products within the same product range at different price
points.
An example wouldbe a DVDmanufacturer offeringdifferentDVDrecorders with
different features at different prices e.g. A HD and non HD version. The greater
the features and the benefit obtained the greater the consumer will pay. This
form of price discrimination assists the company in maximizing turnover and
profits.
12. Cost Plus Pricing
The price of the productis production costs plus a set amount("markup") based
on how much profit (return) that the company wants to make. Although this
method ensures the price covers production costs it does not take consumer
demand or competitive pricinginto accountwhich could place the company at
a competitive disadvantage.

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For example, a product may cost £100 to produce and as the firm has decided
that their profit will be twenty percent they decide to sell the product for £120
i.e. £100 plus 100/100 x 20.
13. Cost Based Pricing
This is like cost plus pricingin that it takes costs into accountbut it will consider
other factors such as market conditions when setting prices.
Cost based pricing can be useful for firms that operate in an industry where
prices change regularly but still want to base their price on costs.
14. Value Based Pricing
This pricing strategy considers the value of the product to consumers rather
than the how much it cost to produce it. Value is based on the benefits it
provides to the consumer e.g. convenience, well-being, reputation or joy.
Firms that produce technology, medicines,andbeautyproducts are likelyto use
this pricing strategy.
The Consumer Adoption Process is a 5 step mental process by which all the
customers/consumer go through while adoptinga productfrom learningabout
a new product to becoming a happy loyal user of that product or to
decline/reject the product completely. The process of a consumer of moving
from a cognitive state toward the emotional state and finally reaching towards
the behavioral or conative state is another way to explain Consumer Adoption
Process.
Stage 1 – Product Awareness
This first stage is about creatingawareness that a product is in the market. It is
importantthatcompanydevelops a successful avenue for consumers to become
Consumer Adoption Process

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aware of the product. If consumers do not know that the product exists, than it
might as well not exist!
Create marketingmaterial. These can be one-sheets,video teasers,images,and
landing pages. Make these marketing materials easily accessible. Utilizing
creativityand wit is a great way to engage consumers in this awareness stage.
As an example, movie teasers are designed to inform the audience and
customers that a movie will be released soon, but it doesn’t provide them in-
depth information about the movie.
Stage 2 – Product Interest
In this stage consumers are ready to learn more about companies product and
/ or service. Organizations must guide the consumer through the interest stage
by providing easily accessible information on the product.
Among the methods used in the todays business landscape include a website
describing the product, blog posts, tutorial or instructional videos,white papers,
and other sources of info that the potential consumer can discover and review.
Stage 3 – Product evaluation:
The process of consumer examination, comparison and evaluation of the
product before making a purchase decision. The Consumer behavior varies in
intensityaccordingto the need, the price of the product, features of the product
and the value that the product delivers.
Stage 4 – Product trial:
The customer tries out the new product to test assumptions regarding the
product. The trial can be a trial purchase, a test drive, or a trial at a shop.
The trail is the most important stage as the entire product acceptance and
rejection depends upon the trail phase. The company can provides free sample
and trail products as part of the marketing campaign. Free sampling is very
important as this will the consumer expectations about the product.
Stage 5 – Product Adoption

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When the consumer enters the product adoption phase, he/she is ready to
purchase companies product. This is the critical stage that businesses need to
get their consumers to. When the customer is here, marketers need to make the
payment process simple, intuitive, andpain free. In addition, you needto ensure
that the consumer can easily obtain the product.
The customer buying process (also called a buying decision process) describes
the journey your customer goes through before they buy your product.
1. Problem/need recognition
This is often identified as the first and most important step in the customer’s
decision process. A purchase cannot take place without the recognition of the
need. The need may have been triggeredby internal stimuli (such as hunger or
thirst) or external stimuli (such as advertising or word of mouth).
2. Information search
Having recognizeda problemor need, the next step a customer may take is the
information search stage, in order to findout what they feel is the best solution.
This is the buyer’s effort to search internal and external business environments,
in order to identify and evaluate information sources related to the central
buying decision. customer may rely on print, visual, online media or word of
mouth for obtaining information.
3. Evaluation of alternatives
Individuals will evaluate different products or brands at this stage on the basis
of alternative product attributes – those which have the ability to deliver the
benefits the customer is seeking.
Buyer decision making process

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A factor that heavilyinfluences this stage is the customer’s attitude. Involvement
is another factor that influences the evaluation process. For example, if the
customer’s attitude is positive andinvolvementis high, then they will evaluate a
number of companies or brands;but if it is low, only one companyor brandwill
be evaluated.
4. Purchase decision
The penultimate stage is where the purchase takes place. Philip Kotler (2009)
states that the final purchase decision may be ‘disrupted’ by two factors:
negative feedback from other customers and the level of motivation to accept
the feedback.
For example, having gone through the previous three stages, a customer
chooses to buy a new telescope. However, because his very good friend, a keen
astronomer, gives him negative feedback, he will then be bound to change his
preference. Furthermore, the decision may be disrupted due to unforeseen
situations such as a sudden job loss or relocation.
5. Post-purchase behavior
In brief, customers will compare products with their previous expectations and
will be either satisfied or dissatisfied.
Therefore, these stages are critical in retainingcustomers.This can greatlyaffect
the decision process for similar purchases fromthe same companyin the future,
having a knock-on effect at the information search stage and evaluation of
alternatives stage. If your customer is satisfied, this will result in brand loyalty,
and the Information search and Evaluation of alternative stages will often be
fast-tracked or skipped altogether.
On the basis of being either satisfiedor dissatisfied, it is common for customers
to distribute their positive or negative feedback about the product.
This may be through reviews on website, social media networks or word of
mouth. Companies should be very careful to create positive post-purchase
communication, in order to engage customers andmake the process as efficient
as possible.

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