Market Segmentation by Amitabh Mishra

Market
Segmentation
Dr. Amitabh Mishra 1

Three Phases of Marketing Strategy
Phase 2
Target Market and Marketing Mix Selection
Phase 3
Product/Brand Positioning
Phase 1
Market Segmentation

Market Segmentation
• “The process of dividing a potential market into
distinct subsets of consumers and selecting one or
more segments as a target market to be reached
with a distinct marketing mix”.

• The breaking down or building up of potential buyers into
groups called Market Segments.
• “The process of defining and subdividing a large
homogenous market into clearly identifiable segments
having similar needs, wants, or demand characteristics
is called Segmentation. Its objective is to design a
marketing mix that precisely matches the expectations of
customers in the targeted segment”.

Need/Benefits of Segmentation
• Segmentation Studies discover the needs and
wants of groups of consumers to develop
specialized products to satisfy group needs.
• Segmentation Studies used to identify the most
appropriate media for advertising.

• It Identifies opportunities & niches for new
product development.
• It Helps design marketing programs most
effectively for reaching homogenous groups of
buyers.
• It Improves allocation of marketing resources.

• It helps firms to overcome competition effectively

Factors affecting Market
Segmentation
• Measurability
– Size, purchasing power, and
profile of segment
• Accessibility
– Can be reached and served
• Substantiality
– Large and profitable enough to
serve
• Differentiability
– Respond differently
• Actionability
– Effective programs can be
developed
MEASURABLE
ACCESSIBLE
SUSBTANTIALDIFFERENTIABLE
ACTIONABLE

Discussion Question
• Considering the largest bank in your
college’s city or town:
– How might consumers’ needs differ?
– What types of products might meet their needs?
– What advertising media makes sense for the
different segments of consumers?

BASES FOR SEGMENTATION
(CONSUMER MARKET)

Bases For Segmentation
(Consumer Market)
• Segmentation strategy begins by selecting
the bases representing the core attributes of
a group of existing or potential customers.

Bases for Segmentation
• Geographic
• Demographic
• Psychological
• Psychographic
• Socio cultural
• Use-Related
• Usage-Situation
• Benefit Sought
• Hybrid

Geographic
• Nation
• Region
• State
• City
Demographic
• Age
• Gender
• Marital
Status
• Income
• Education
• Occupation.
• Generation
Psychological
• Personality
• Motivation
• Perception
• Learning
• Attitude
Psychographic
• Lifestyle

Behavioral
• Occasion
• Benefits
• Readiness
stage
Socio-
cultural
• Culture
• Religion
• Subculture
• Social class
• Family life
cycle
Use related
• User Status
• Usage rate
• Awareness
status
• Loyalty
status
Usage
situation
• Time
• Objective
• Location
• Person

• Demographic/Psychographic
• (Geo demographics)PRISM
NE
• SRI VALS

Geographic Segmentation
Punjab

Geographic Segmentation
• “The division of a total potential market into smaller subgroups on
the basis of geographic variables is called Geographic Segmentation”.
Ex-
• Nation,
• Region,
• State, or
• City
• Where customers live determines some aspect of consumption
behavior.

• “The theory behind Geographic Segmentation strategy is
that people who live in the same area share similar
needs & wants and that these needs and wants differ
from those of people living in other areas”
• Ex-
– Climate determine types of Clothing.
– Preference for tea, Skin cleaner, detergent differs across the
different states of India.
– Housing societies are segmented as- LIG, MIG, HIG.

Demographic
Segmentation

Demographic Segmentation
• In demographic segmentation market is divided in to groups on
the basis of variables such as-
– Age.
– Gender.
– Marital Status.
– Income.
– Education.
– Occupation.
– Generation.

• Demographic variables are the most popular
bases for distinguishing customer group. The
reasons are-
• Consumer’s want, preferences and usage rate are often
associated with demographic variables.
• It is easiest and most logical way to classify people.
• It is most cost effective.

AGE
• Products need often vary with consumer’s
age.
• Consumer’s wants and ability to pay
changes with age.

Hagen-Dazs ice cream focuses
on youngsters

Toothpaste companies produce special
toothpaste for kids

Entertainment doge of people change
With Age.

BABY BOOMERS
• Baby boomers is the largest Age segment of US population.
• It consist of 76 million people/consumers born between 1946
and 1964.
• They spend over 1 trillion annually , control large amount of
nation’s wealth and disposable income.
• As most of them reaching retirement age will also account for
most of the govt. expenditure on social security and medical
benefit.

GENDER
• Many products and services inherently designed for
either Male or Female.
• Gender segmentation has long been applied in-
– Clothing
– Hairstyling
– Cosmetics
– magazines

Special magazines for women, specially
designed scooter for girls.

Reebok produces
“Tone up” brand of
shoos for women
that help them
tone their body
Reebok Tone up

INCOME, EDUCATION & OCCUPATION
• Income is an indicator of the ability to pay for a product
or a specific version of a given product.
• Income segmentation is in practice for products
categories as-
– Automobiles
– Clothing
– Travel

• A person's occupation affects the goods and services
bought. For example-
– Blue-collar workers tend to buy more rugged work
clothes, whereas white-collar workers buy more
business suits.
– Computer software companies will design different
products for brand managers, accountants, engineers,
lawyers, and doctors.

Automobile companies produce different brand for
different income groups
NANO
KIZASHI
SX-4

Airlines offer different services for different class
of travelers
EconomyclassinaAirline
BusinessclassinaAirline

Indian Railways offer different services for
different class of travelers
General class
2nd sleeper class
1st class AC
1st class AC

Generation
• Each generation is profoundly influenced by
the time in which it grow up.
– Baby boomers (born between 1946 and 1964)
– Generation X (born between 1965 and 1981)
– Generation Y (born between 1981 and 2000)

BABY BOOMERS
• Baby boomers is the largest Age segment of US population.
• It consist of 76 million people/consumers born between 1946
and 1964.
• They spend over 1 trillion annually , control large amount of
nation’s wealth and disposable income.
• As most of them reaching retirement age will also account for
most of the govt. expenditure on social security and medical
benefit.

The Baby Boomer Experience
 They were first to see walk on the moon.
 They were first to experience new technologies as transistor
radios, television, mobile, space race
 they saw movements like civil rights, women, environment
 they saw assassinations of JFK, Robert Kennedy, Martin Luther
King
 US (Woodstock, Vietnam War), India (independence),
39Dr. Amitabh Mishra

Baby Boomer Tendencies
• Experimental
• Individualism
• Free spirited
• Social cause oriented

The generation X (1965-1981)
Generation X is consistently characterized by being the first American
generation to grow up as ‘latchkey kids’ having a set of parents working
outside of the home.
Generation X grew up with:
 Cold war
 A high divorce rate
 M TV
 The first wave of computers and modern technology

Experiences of Generation X
• The Chinese government killed protesters in
Tiananmen Square.
• The U.S. stock market crashed.
• The Chernobyl nuclear accident occurred.
• The Challenger space shuttle exploded.

Generation Y (1981-2000)
America's Generation Y has grown up around various phenomena
including-
– The Internet with online chatting,
– Wikipedia,
– YouTube and its numerous informational resources, digital video
and music,
– Underage drinking and
– iPods

Tendencies of Generation Y
 They are generally more financially savvy: saving for
retirement, and retirement benefits are very important
 Employee and employer loyalty have disappeared.
 Dress more casually
 Members of Generation Y are characterized as being
more racially and culturally tolerant than past
generations.

Psychological
Segmentation

• Psychological characteristics refer to the inner
and intrinsic qualities of individual consumers.
Consumers can be segmented in terms of-
– Personality
– Motivation
– Perception
– Learning
– Attitude

Attitude
Attitude is defined as
a learned tendency to
respond towards
something. People’s
response towards a
product may range
from – Enthusiastic,
Positive, Indifferent,
Negative, Hostile .

Psychographic
(Lifestyle)
Segmentation

Psychographic (lifestyle) Segmentation
• Also known as Lifestyle Analysis.
• Psychographic (lifestyle) variables include
(AIOs)-
– Activities,
– Interests, and
– Opinions.

•As an approach to construct the psychographic
profile, AIO research seeks consumer’s
responses to a large number of statements that
measure activities, interest and opinion.

AIO Inventories
AIO studies envisage a wide variety of variables
and measures the major dimensions shown
Activities
(statements related
to)
Interests
(statements related
to)
Opinions
(statements related
to)
Demographics
(statements related
to)
Work Family Themselves Age
Hobbies Home Social Education
Social events Job Politics Income
Vacation Community Business Occupation
Entertainment Recreation Economics Family size
Club member Fashion Education Geography
Community Food Products City size
Shopping Media Future Lifecycle
Sports Achievements Culture Dwelling

Example
• Table below presents a portion of
psychographic inventory designed to gauge
“techno-road-warriors,” business people
who spend high percentage of their
workweek on the road, equipped with
laptops, cellular, electronic organizers.

A portion of AIO Inventory used to identify
“Techno-road-warriors”
Instructions: Please read each statement and place an “x” in the box that best indicates how
strongly you “agree” or “disagree” with the statement.
I feel that my life is moving faster and faster,
sometimes just too fast.
If I could consider the “pluses” and “minuses,”
technology has been good for me.
I find that I have to pull myself away from e-mail.
Given my lifestyle, I have more of a shortage of
time than money.
S
I like the benefits of the Internet, but I often don’t
have the time to take advantage of them.
[1] [2] [3] [4] [5] [6] [7]
[1] [2] [3] [4] [5] [6] [7]
[1] [2] [3] [4] [5] [6] [7]
[1] [2] [3] [4] [5] [6] [7]
[1] [2] [3] [4] [5] [6] [7]
Agree
Completely
Disagree
Completely

Socio-Cultural
Segmentation

Socio-Cultural Segmentation
• Sociological (group) and Anthropological (cultural)
variables i.e Socio-Cultural variables provide further
base for market segmentation.
1. Culture
2. Subculture
3. Religion
4. Social class
5. Stages in Family life cycle

Culture
• Culture is the sum total of learned beliefs, values, and customs
that serve to direct the consumer behavior of members of a
particular society.
• Culture is the accumulation of shared meanings, rituals, norms,
and traditions among the members of an organization or society
and determines:
– Overall priorities consumer attaches to different activities and products
– Success or failure of specific products and services

TRADITIONAL AFRICAN DRESS
TRADITIONAL CHINESE DRESS
TRADITIONAL CHINESE FOOD
TRADITIONAL CHINESE FOOD

Subculture
• “ A distinct cultural group that exists as an identifiable
segment within a larger, more complex society/culture”
• “Subculture is any cultural patterning that preserves
important features of the dominant culture/society but
provides for values, norms, and behaviors of its own”.

• Every consumer belongs to many subcultures. Some important types of
sub cultural are:
1. Nationality
2. Ethnicity
3. Age
4. Geographic region
5. Religion
6. Racial

People from different geographical region may have different choices for products/services
AMITABH MISHRA, ASTT PROFF- AIMT,
GR. NOIDA
61
ASAMEES DRESSTAMIL DRESS KASHMIRI DRESS
People from different religion may have different choices for products/services

• There are 15 major languages spoken in
India.
E TV BANGLA E TV TELGU
People speaking different language may have different choices for many products/services

SOCIAL CLASS
• “Social class implies the hierarchy in which
individuals in a same class has the same degree of
status, whereas members of other class have either
higher or lower status”.
• Consumers in different social class vary in terms of
values, products preferences and buying habits.

• People in the same social class tend to have-
– Similar occupations,
– Similar income levels,
– similar lifestyles
– Share common tastes in clothes,
– Share common tastes decorating styles, and
leisure activities.
– equal social standing in the community.

FAMILY LIFE CYCLE
• This segmentation is based on premise that
many families pass through similar phases in
their formation, growth and final dissolution.
• At each stage, the family unit needs different
products and services.

Stages in Traditional Family Life Cycle
Bachelor hood
Honeymooners
Parent hood
Post-Parent hood
Dissolution

Family Life Cycle Advertising
Dr. Amitabh Mishra
Video cameras are
often purchased
by young
couples with
children.

Use-Related
Segmentation

• Such segmentation categorize product,
service or brand usage characteristic, such
as-
1. Rate of Usage
2. User status
3. Awareness Status
4. Brand Loyalty Etc.

Rate of Usage
• Customers can be segmented on the basis of usage rate of a product
category.
a) Heavy users
b) Medium users
c) Light users &
d) Non-users
• The profiling of heavy users allows this group to receive most marketing attention
(particularly promotion efforts) on the assumption that brand loyalty among these
people will pay heavy dividends.

Mobile companies decide their tariffs on the basis
of Rate of Usage

User status
• Every product has its-
a) Nonusers,
b) Ex-users,
c) Potential users,
d) First-time users and
e) Regular users.

A company cannot always rely on the regular
users, it has to attract the other types as well.
The key too attracting potential users, or
possibly, even non-users, is understanding the
reasons due to which they are not using your
product.

Brand Loyalty
• Consumers can be divided in to 4 groups according
to brand loyalty status-
a) Hard core loyal (Who buy one brand all the time)
b) Split loyal (Who are loyal to two or three brands)
c) Shifting loyal (Shift from one brand to another brand)
d) Switchers (Show no loyalty toward any brand)

• Marketers often try to identify characteristics of their
brand loyal customers so that they can direct their
promotional efforts to people with similar characteristics
in larger population.

J &J enjoys huge no. of hardcore loyal
consumers.

Usage-Situation
Segmentation

• Occasions or Situations often determines
what consumers will purchase or consume.
• The consumers are Segmented on the basis of
special occasions or situations. like-
– Time of consumption.
– Objective of consumption.
– Location of consumption.

Celebrations are advertised for festival gifts

This ad is targeting students, Who enter in to college from
the schools .

Mobile operators, Restaurants,
Bars Offer happy hours scheme
for some time.

Benefit
Segmentation

Benefit Segmentation
• “Segmenting on the basis of the most important and
meaningful benefit of the product or services that
will be most meaningful to the consumers”.
• Benefit segmentation can be used to position
various products with in the same product category.

• people buy something because it causes a benefit to
them.
ANS:- Whiter teeth,
QUES:- What benefit HAPPYDENT is
offering

less sugar, lose weight zero sugar, high energy
Healthy fruit juice
Sweetness without drawbacks of sugar
QUES:- What benefit following brands are offering

Band-aid
offers “flex”
as a
benefit to
consumers.

Hybrid
Segmentation

• “Marketers commonly segment the market by
combining several segmentation variables
rather than relying on a single segmentation
base”.
– Psychographic-Demographic Profiles
– Geo-demographic Segmentation
– SRI Consulting's VALS

Psychographic-Demographic Profiles
• Psychographic(lifestyle) and Demographic Profiles are highly
complementary approaches that work best when used together.
• Psychographic-Demographic Profiling has been widely used in the
development of advertising campaign to answer three questions:
– Whom should be targeted?
– What should we say?
– Where should we say it?

Geo-demographic Segmentation
• Geo-demographic segmentation was first developed
in the USA and UK some twenty years ago.
• It refers to “segmenting the population by
recognizing that people generally live in close
proximity to other people who are demographically
similar”

• “Geo-demographic is a hybrid segmentation
scheme based on premise that people who
live close to one another are likely to have
similar financial means, tastes, preferences,
lifestyle, consumption habit”.
“Birds of a feather flock together”

• The primary commercial use of this technique in US
was Claritas PRIZM NE classification.
• It is a widely used customer segmentation system
for marketing in the United States.
• The Claritas PRIZM NE system categorizes U.S.
consumers into 14 distinct groups and 66
demographically and behaviorally distinct types, or
"segments,”.

Few among them are-
01 Upper Crust
02 Blue Blood Estates
03 Movers & Shakers
04 Young Digerati
05 Country Squires
06 Winner's Circle
07 Money & Brains
08 Executive Suites
09 Big Fish, Small Pond
10 Second City Elite
11 God's Country
12 Brite Lites, Li'l City
13 Upward Bound
14 New Empty Nests
15 Pools & Patios

Movers & Shakers
• Movers & Shakers is home to America's up-and-coming business
class: a wealthy suburban world of dual-income couples who are
highly educated.
• They are typically between the ages of 35 and 54 and often with
children.
• Given its high percentage of executives and white-collar
professionals, there's a decided business bent to this segment:
Movers & Shakers rank number one for owning a small business
and having a home office.

New Empty Nests
• With their grown-up children recently out of the house,
New Empty Nests is composed of upscale older
Americans who pursue active-and activist-lifestyles.
• Nearly three-quarters of residents are over 65 years old,
but they show no interest in a resthome retirement.
• This is the top-ranked segment for all-inclusive travel
packages; the favorite destination is Italy.

Boomtown Singles
• Affordable housing, abundant entry-level jobs and a
thriving singles scene-all have given rise to the
Boomtown Singles segment in fast-growing satellite
cities.
• Young, single and working-class, these residents
pursue active lifestyles amid sprawling apartment
complexes, bars, convenience stores and
laundromats.

Bedrock America
• Bedrock America consists of young, economically challenged
families in small, isolated towns located throughout the nation.
• With modest educations, sprawling families and blue-collar jobs,
many of these residents struggle to make ends meet.
• One quarter live in mobile homes. One in three haven't finished
high school.
• Rich in scenery, Bedrock America is a haven for fishing, hunting,
hiking and camping.

SRI Consulting’s VALS System
•VALS segmentation combining Values and Lifestyle.
•The VALS theory and database were first applied to markets in 1978.
•VALS segmentation classify the American adult population in to 8 distinct segments.
1. Actualizers
2. Fulfilleds
3. Achievers
4. Experiencers
5. Believers
6. Strivers
7. Makers
8. Strugglers

VALS Framework

• When we examine the diagram from left to right there are 3
three primary motivations-
– Ideals motivated (these consumer segments are guided by
knowledge and principals)
– Achievement motivated (these consumer segments are looking
for products that demonstrate success to their peers)
– Self-expression motivated(these consumer segments desire
social or physical activity , variety and risk)

• From top to bottom the diagram reveals a
kind of continuum in terms of
– Resource &
– Innovation.
• On the top high resource and high
innovation.
• On the bottom low resource and low
innovation.

Innovators
Innovators are usually
successful, sophisticated, active,
“take charge” people with a
high self esteem.
Their purchases often reflect
cultivated tastes for relatively
upscale, niche oriented
products and services.
Here we’re considering the
niche market of upscale
segmentation by technology
adaptation.

Thinkers (motivated by ideals; high resources)
• They’re mature, satisfied, and
reflective people motivated by
ideals and who value order,
knowledge, and responsibility.
• They tend to be educated and
actively seek information in
decision making
• They seek durability,
functionality, and value in
products.

Believers (Motivated by ideals; low
resources
• They’re conservative,
conventional, and strongly
traditional people with concrete
beliefs.
• Believers are slow to change and
technology averse .
• Believers choose familiar
products and established brands

• Here we consider
Bisleri. As one of the
world’s most trusted
brands.

Achievers (Believers (Motivated by
achievements; high resources)
• Achievers are successful, goal oriented people who focus on career and
family.
• They favour premium products that demonstrate success to their peers.
• In this segment we can consider most of the premium timeless luxury
watches, such as-
– Rolex,
– TAG Heuer, and
– Omega.

Experiencers
Innovators are the
young, enthusiastic,
susesful, impulsive
people who seek
variety and
excitement. They
spend a
comparatively high
proportion of
income on fashion,
entertainment, and
socializing.

Strivers
They’re trendy fun loving
people who are resource
constrained. They favour
stylish products that
emulate the purchases of
those with greater
material wealth. They
favour stylish products
that emulate the
purchases of those with
greater material wealth

Makers
They’re
practical,
down to
earth, self
sufficient
people who
like to work
with their
hands. They
seek Indian
made
products
with a
practical or
functional
purpose.

Survivors
They’re elderly,
passive people
concerned
about change
and loyal to
their favourite
brands.
While to the
consumers it's
a beacon of
faith and trust,
competitors
look upon
them as an
example of
marketing
brilliance.

BASES FOR SEGMENTATION
(INDUSTRIAL/BUSINESS MARKET)

Major Segmentation Variables
for Business Markets
• “Industrial market segmentation is a scheme for
categorizing industrial/business customers to guide
strategic and tactical decision-making”.
• Segmenting industrial markets is different and more
challenging because of greater complexity in buying
processes, buying criteria, and the complexity of industrial
products and services themselves.

• Major segmentation variables for Business Market are-
– Demographic
– Operating Variables
– Purchasing Approaches
– Situational factors
– Buyers’ personal characteristics

Demographic
• Industry (Which industries should we serve?)
• Company size (What size companies should we
serve?)
• Location (What geographical areas should we
serve?)

Operating Variables
• Technology (What customer technologies should
we focus on?)
• User/Nonuser status (Should we serve heavy
users, medium users, light users, or nonusers?)
• Customer capabilities (Should we serve customers
needing many or few services?)

Purchasing Approaches
• Purchasing-function organization (Should
we serve companies with highly centralized
or decentralized purchasing organizations?)
• Power structure (Should we serve
companies that are engineering dominated,
financially dominated, and so on?)

Situational factors
• Situational factors:
– Urgency of order
– Product application
– Size of order

Buyers’ Personal Characteristics
• Buyers’ personal characteristics:
– Character,
– Approach

Market Segmentation by Amitabh Mishra

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