What is Marketing Segmentation?“ Market segmentation is the process of dividing a market into distinctsubgroup of consumers with distinct needs, characteristics, orbehavior, who might require separate products or marketing mixes.” - Philip Kotler.A true market segment meets all of the following criteria:a. It is distinct from other segments (different segments have different needs).b. It is homogeneous within the segment (exhibits common needs).c. It responds similarly to a market stimulus, and it can be reached by a market intervention.
Need for SegmentationIf all consumers were alike and had the same background, educationand experience, mass marketing or undifferentiated marketing wouldbe logical strategy. But companies today understand that they cannotappeal to all buyers in the market or at least not to all buyers in thesame way. Moreover companies themselves vary widely in theirabilities to serve different segments of the market.
Requirements For Effective SegmentationTo be maximally useful market segments must exhibit the followingcharacteristics: a) Measurability – The degree to which the size and the purchasing power of the segments can be measured. b) Accessibility – The degree to which the segments can be effectively reached and served. c) Sustainability – The degree to which the segments can survive in the market. d) Action ability – The degree to which effective programs can be formulated for attracting & serving the segments.
What is Market Aggregation ?Well market aggregation also known as mass marketing or undifferentiatedmarketing, is simply marketing a product to the largest audience possible thisleads to heavy exposure of the brand and product. This also leads to reducedcost in marketing the product. Usually undifferentiated marketed products aresimple and seen as necessities such as toothpaste.
Bases for segmenting.The first step in developing a market segmentation strategy is to select themost appropriate bases on which to segment the market. The marketer willhave to try different segmentation bases or segmentation variables, alone or incombination, to find the best way to view the market structure. a) Segmenting Consumer Markets. b) Segmenting Business Markets.
Geographic segmentationThe market is segmented according to geographic criteria- nations,states, regions, counties, cities, neighborhoods, or zip codes. Acompany may decide to operate in one or few geographical areas,or to operate in all areas but pay more attention to geographicaldifferences in needs and wants.E.g.: Woolens sold in North India and limited segments in the southlike Bangalore, Ooty & others cold places.Tractors and fertilizers sold in rural areas while PCs/laptops sold incities.
Demographic segmentation.It divides the market into groups based on variables such as age, gender,family size, family life cycle, income, occupation, education, race, generationand nationality. Demographic factors are the most popular bases ofsegmenting customer groups. One reason is that consumer needs, wantsand usage rates vary closely with demographic variables. Another is thatdemographic variables are easier to measure than most other types ofvariables.E.g.: Garments – children’s clothing, womens wear, men’s wear.Airlines – Economy Class & Business class.Fridge – Different size are 180, 230 litres for different family sizes.
Psychographic Segmentation This divides buyers into different groups based on social class, life styles, or personality characteristics. People in the same demographic group can have very different psychographic make-up. In psychographics, lifestyle and attitude are core bases from the segmentation angle, since buyer behavior predominantly depends on them in the case of certain products. E.g.: Raymonds, Reid & Taylor – suiting for the elite class. Titan watches – fast track watches meant for teenagers for casual and stylish look.
Behavioral SegmentationIn behavioral segmentation, consumers are divided into groups accordingto their knowledge of, attitude towards, use of or response to a product.OccasionsSegmentation according to occasions. We segment the market according tothe occasions.BenefitsA powerful form of segmentation is to group buyers according to thedifferent benefit that they seek from the product.Users statusNonusers, ex-users, first time users, etc.
User RateMarkets can also be segmented into light, medium and heavy users. Heavyusers are often a small percentage of the market but account for a highpercentage of total consumption.Loyalty statusA market can also be segmented by consumer loyalty. Consumers can beloyal to brands, stores and companies. Buyers can be divided into groupsaccording to their degree of loyalty.
Multiple/ Hybrid marketing Marketers increasingly use segmentation bases to indentify smaller, better defined target groups. Companies often begin by segmenting their markets using a single base, then expand using other bases. One good example of multiple or hybrid segmentation is ‘geo- demographic segmentation’, which uses both geographic and demographic bases.
Segmenting Business MarketsIndustrial markets can be segmented with many of the same variables used in theconsumer market segmentation. Business buyers can be segmented geographically,demographically or by benefits sought, user status, usage rate, loyalty status.Business marketers also use some additional variables such as:Operating Variables – Technology. User-non-user-status.Purchasing approaches – Centralized/ Decentralized. Purchasing power structure. Purchasing Policies, criteria.Situational factors – Urgency. Specific application. Size of order.Personal characteristics – Buyer seller similarity. Attitude towards risk. Loyalty.
Benefits Of Market Segments• Adjustment of activity • Standardization• Allocation of resources • Market Share• Better Positioning • Innovation• Marketing Programs • Risk production• Better evaluation. • Sales Value• Early Decisions.• Saves volume.• Profits