Market segmentation is the process of dividing the total market into relativelydistinct homogeneous sub-groups of consumers with similar needs orcharacteristics that lead them to respond in similar ways to a particularmarketing programme.A market segment is a portion of a larger market in which the individuals,groups, or organisations share one or more characteristics that cause them tohave relatively similar product needs.
Requirements for Effective SegmentationFive conditions must exist for segmentation to be meaningful:1. A marketer must determine whether the market is heterogeneous. If the consumers’ product needs are homogeneous, then it is senseless to segment the market.2. There must be some logical basis to identify and divide the population into relatively distinct homogeneous groups, having common needs or characteristics and which will respond to a marketing programme. Differences in one market segment should be small compared to differences across various segments.3. The total market should be divided in such a manner that comparison of estimated sales potential, costs, and profits of each segment can be done.4. One or more segments must have enough profit potential that would justify developing and maintaining a marketing programme.5. It must be possible to reach the target segment effectively. For instance, in some rural areas in India, there are no media that can be used to reach the targeted groups. It is also possible that paucity of funds prohibits the development required for a promotional campaign.
How Segmentation HelpsSegmentation studies are used to uncover needs and wants of specific groupsof consumers for whom the marketer develops especially suitable productsand services to satisfy their needs.
Bases for SegmentationA segmentation variable is a characteristic of individuals, groups ororganisations that marketers use to divide and create segments of the totalmarket.Segmentation descriptors fall under four major categories and includegeographic variables, demographic variables, psychographicvariables, and behaviouristic variables. Geographic variables focus on where the customers are located. Demographic variables identify who the target customers are. Psychographic variables refer to lifestyle and values. Behaviouristic variables identify benefits customers seek, and product usage rates.
Geographic variables Demographic variables Region Nation Gender Family sizeUrban, Rural State Age Occupation Race Family life cycleCity size Climate Religion IncomeTerrain Market density Social class Education Psychographic variables Behaviouristic variablesPersonality attributes Usage volume, OccasionMotives End useLifestyle Benefits sought Brand loyalty Price sensitivity Segmentation Variables
Geographic SegmentationGeographic segmentation focuses on dividing markets into different geographicunits, such as regions, nations, states, urban, rural, etc.
Demographic SegmentationDemographic characteristics are commonly used to segment the market.Factors such as age, sex, education, income, marital status, household lifecycle, family size, social class, etc., are used singly, or in a combination, tosegment a market.
Psychographics SegmentationWhen segmentation is based on personality or lifestyle characteristics, it iscalled psychographic segmentation.
Behaviouristic SegmentationDividing the market on the basis of such variables as use occasion, benefitssought, user status, usage rate, loyalty status, buyer readiness stage andattitude is termed as behaviouristic segmentation.
Demographic-PsychographicsSegmentation (Hybrid Approach)Demographic and psychographic profiles work best when combined togetherbecause combined characteristics reveal very important information abouttarget markets.
Segmentation Variables forOrganisational MarketsMain approaches to segment organisational markets can be grouped underfour heads: Geographic Location Customer Size Product Use Type of Organisation Buying Behaviour and Situation
Targeting Market SegmentsInstead of aiming a single product and marketing programme at the massmarket, most companies identify relatively homogeneous segments andaccordingly develop suitable products and marketing programmes matchingthe wants and preferences of each segment.
Segment Attractiveness and BusinessStrength FactorsThe attractiveness of a market segment can be evaluated based on thecompany’s current business strength and market potential assessment.
Product PositioningProduct positioning is a decision reached by a marketer to try to achieve adefined brand image relative to competition within a market segment. Productpositioning decisions are strategic decisions and have an impact on long-termsuccess of the brand.
Common bases used for positioning include: Features Benefits Usage Parentage Manufacturing process Ingredients Endorsements Comparison Pro-environment Product class Price/quality Country or geographic area
The Process of Determining thePositioning StrategySteps Need to be Taken to Reach a Decision about Positioning Identify Competitors Assessment of Consumers’ Perceptions of Competition Determining Competitor’s Position Analysing the Consumers’ Preferences Making the Positioning Decision
Writing a Positioning Statement or a ValuePropositionIt is a statement expressed clearly and in few words that identifies thetarget market for which the product is intended. It also specifies the productcategory in which it competes and highlights the unique benefit it offers.
How Many Differences to Promote?Successful positioning depends on effectively communicating the brand’sdifferential advantage.A USP is an outstanding advantage and the best strategy to create a product’sposition, provided it is not only persuasive for the consumers but alsosustainable.
Some popular positioning approaches are: Positioning by Corporate Identity Positioning by Brand Endorsement Positioning by Product Attributes and/or Benefits Positioning by Use Occasion and Time Positioning by Price-Quality Positioning by Product Category Positioning by Product User Positioning by Competitor Repositioning