Market segmentation


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market segmentation, its benefits, and bases of market segmentation. by mithisood

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Market segmentation

  1. 1. <br /> PRESENTATION <br /> ON<br /> MARKET SEGMENTATION<br />153035728980<br />Submitted to: Submitted by:<br />Miss. Surbhi ma’m Ritu<br /> MBE 1st SEM. <br /> Roll. No- 8122<br />What is MARKET? <br />A market is a place which allows the purchaser and the seller to invent and gather information’s and lets them carry out exchange of various products and services. In other words the Meaning of Market refers to a place where the trading of goods takes place. The place can be a market place or a street market. A market is thus by definition comprises people or business with potential interest, purchasing power and willingness to spend the money to buy a product or service that satisfies need. The following diagram illustrates this concept.<br />Example: Tata’s have started producing a Mercedes Benz car here in India. Many individuals have a need for car but they may not need a luxury car like Mercedes. They are happy with a santro or Chevy spark or Maruti. Some might be interested in a luxury car, but may not be interested in Mercedes as it may attract the attention of tax authorities. They may prefer luxury cars like Honda city, Ford Fiesta, Octavia and so on. Some may be interested in Mercedes but they are not able to afford a price of Rs.32lakh. Thus, the market for Mercedes is a very small portion of luxury car markets, which is a small portion of the total car markets<br />MARKET SEGMENTATION-<br />Market segmentation can be defined as the process of dividing a market into different homogeneous groups of consumers.<br />According to Philip kotler “market segmentation is the subdividing of market into homogenous sub set of customers, where any subset may conceivably be selected as market target to be reached with distinct marketing mix.<br />Benefits of Market segmentation-<br />Market segmentation offers the following potential benefits to a business:<br />Better matching of customer needs: Customer needs differ. Creating separate products for each segment makes sense.<br />Enhanced profits for business: Customers have different disposable incomes and vary in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits<br />Better opportunities for growth: Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being sold an introductory, lower-priced product<br />Retain more customers: By marketing products that appeal to customers at different stages of their life, a business can retain customers who might otherwise switch to competing products and brands.<br />Target marketing communications: Businesses need to deliver their marketing message to a relevant customer audience. By segmenting markets, the target customer can be reached more often and at lower cost.<br />Bases for segmentation- <br />Geographical bases.<br />Demographic bases.<br />Psychographic bases. <br />Behaviour bases<br /> Geographical segmentation-<br />This is the most common form of market segmentation, wherein companies segment the market by attacking a restricted<br />Geographic area. Potential customers are in a local, state,<br />Regional or national market place segment. If a firm selling a product such as farm equipment, geographic location will remain a major factor in segmenting your target markets since their customers are located in particular rural areas.<br /> <br />Example: Geographic decides the product consumption pattern. Southern are found of coffee and north Indians like Tea. People down south use talc excessively, and apply it even on face, perhaps aspiring to fairer like their counter part in the north. When we sale our product to international market. Products are made according to their need. Rasna international gives instant syrup when dissolves in glass of water, and does not contain a lot of sugar. Complexion creams like fair and lovely sells only in India. <br />Segmentation of customers based on geographic factors<br />are:<br />1. Region-<br /> Segmentation by continent / country / state / district / city.<br />2. Size-<br /> Segmentation on the basis of size of a metropolitan area as per its population size.<br />3. Population density- <br /> Segmentation on the basis of population density such as urban / sub-urban / rural etc.<br />4. Climate- <br />Segmentation as per climatic condition or weather.<br /> Demographic Segmentation-<br />Demographic segmentation uses various population measures including age, sex, income, nationality, education, and occupation as the basis for dividing people into specific markets. Demographic segmentation is easy to measure and is widely used.<br />The following four variables are examples of demographic factors used in market segmentation:<br /><ul><li>Age- This demographic variable is often used to divide markets. For clothing department store, demographic segmentation based on age works well.</li></ul> E.g. - Amul has segmented his product in different age group. <br /><ul><li>
  2. 2. For kids: Amul kool, chocolate milk, Nutramul energy drink.
  3. 3. For Youth: Amul cool kafe.
  4. 4. For women’s and older people: Amul calci+, Amul Shakti energy drink
  5. 5. Gender- Dividing a market into different groups based on sex, has long been common for many products including cosmetics, clothing and magazines.
  6. 6. Example: Emami segmented its product in gender. ,
  7. 7. Women’s: Naturally fair
  8. 8. Men: Fair and handsome
  9. 9. Occupation- Market segmentation by occupations is also effective because of associated lifestyles.
  10. 10. For example, business people are targeted by the travel and clothing industries since they do more traveling and purchase more business clothing.
  11. 11. Life cycle stage- Dividing a market into different groups based on which stage in the life cycle, presented in the table below, reflects the fact that people change the goods and services they want and need over their lifetime.</li></ul>Life-cycle stagesBachelor Stageyoung, single people not living at homeNewly Married Couplesyoung, no childrenFull Nest Iyoungest child under sixFull Nest IIyoungest child six or overFull Nest IIIolder married couples with dependent childrenEmpty Nest Iolder married couples, no children living with themEmpty Nest IIolder married couples, retired, no children living at homeSolitary Survivor Iin labour forceSolitary Survivor IIRetired<br />Psychographic segmentation-<br />Psychographic segmentation divides the market into groups based on social class, lifestyle and personality characteristics. It is based on the assumption that the types of products and brands an individual purchases will reflect that persons characteristics and patterns of living.<br /> Example-Consider a company that manufactures high end luxury cars. This is a product that cannot be afforded by people from every income group. Only individuals falling in high income groups are realistic customers of this specific product. That is the primary basis of segmentation for the car manufacturer, that forms the basis of their marketing plan.Within the high income bracket, the car manufacturer must now decide how he should go about the segmentation process. He will analyze the habits and lifestyles of his existing customers, and even those of the customers of his direct rivals. Soon he will see that some customers use these luxury cars as status symbols, some use them as utility vehicles, and some use them for long distance drives. Understanding the usage of a particular vehicle will provide the basis for the marketing of a product. Users who prefer long drives will be shown the highlighted fuel efficiency of the vehicle, people who use the car sparingly just for prestige purposes will be told about the excellent looks and prestige of the car model and the brand, and people who use them for other purposes will be informed about the interior space, the handling, the braking system etc. The art of marketing is such that the marketer needs to highlight that part of the commodity that appeals most to a particular customer, and tell him the features of the product and how it will benefit him, as a part of the advertising process. <br />Social class- Social class is a strong determinant of individual purchasing preferences in consumer goods as well as in services such as education, travel and tourism. Social class ranges from the lower class, to middle to the upper class. The classes can be further stratified into upper lower, upper middle and upper.<br />Personality traits- This is a method of segmenting markets based on a perception of how differences in consumer personalities affect buying behavior. Products and services will be marketed in a manner which will appeal to these personality traits. For example, those who are considered more conservative are perceived as desiring products having darker colours and more reserved styles of dress.<br />Lifestyle- A person`s lifestyle can best be defined as how that person adapts to and interacts with the environment. Some people may be more artistic or entrepreneurial than others. <br /><ul><li>Example:
  12. 12. Café Coffee Day
  13. 13. CCD has estimated that presently 60% of the footfalls in its 300 outlets belong to students between the ages of 15 to 24 years. The CCD are targeting students and trying to establish a space in their lives.</li></ul>Behavioural segmentation-<br />Behavioural segmentation is possibly the most useful way to segment the market as it is based on consumers' knowledge of, attitude towards, uses for, and response to a product (Kotler). After all, marketing is about finding out what people need and want and then developing a product that satisfies those needs.<br />Behavioural bases for segmentation include:<br />Purchase occasion- Markets can be segmented on the basis of when and why people buy. <br />For example, you might purchase a bottle of wine for an evening meal at home, for a dinner party, to take to a BYO restaurant, for cooking, for cellaring, or for a gift. No doubt you would buy a different type and quality of wine for each occasion or purpose. <br />Benefits sought- Benefit segmentation as 'the process of grouping customers into market segments according to the benefits they seek from the product'.<br />Example- Nestle has found a separate segment Atta noodles as distinct from the Maida noodles. <br /> <br />Usage rate and user status- Usage-rate segmentation as 'dividing a market by the amount of product bought or consumed'.<br /> Example- newer products such as light beers and premium beers are targeted at non-traditional markets, such as younger people and females. <br />Loyalty status- Completely loyal consumers are those that would not consider buying another brand or visiting a different outlet.<br /> Example- I tend to be more loyal for service products, such as my hairdresser and my doctor.<br />Attitude- An attitude as a 'learned tendency to respond consistently towards a given object'. People's attitude toward the product can be 'enthusiastic, positive, indifferent, and negative. Frankly, it is a waste of time trying to convince people with a negative attitude toward the product to buy it. <br />Example- Shampoos, soap and all FMCG products buying behavior segmentation is used.<br />Advantages of market segmentation-<br />Various advantages of market segmentation are:-<br /><ul><li>Helps distinguish one customer group from another within a given market.
  14. 14. Facilitates proper choice of target market.
  15. 15. Facilitates effective tapping of the market.
  16. 16. Helps divide the markets and conquer them.
  17. 17. Helps crystallize the needs of the target buyers and elicit more predictable responses from them ; helps develop marketing programmers on a more predictable base; helps develop market offer that are most suited to each group.
  18. 18. Helps achieve the specialization required in product; distribution, promotion, and pricing for matching the customer group and develop marketing offers and appeal that match the need of each group.
  19. 19. Makes the marketing effort more efficient and economic.
  20. 20. Helps concentrate efforts on the most productive and profitable segment, instead of frittering them over irrelevant, or unproductive, or unprofitable segment.
  21. 21. Helps spot the less satisfied segments and succeed by satisfying such segments.
  22. 22. Brings benefits not only to the marketer but also to the customer as well.
  23. 23. When segmentation attains high sophistication, customers and companies can choose each other and stay together.</li></ul>Disadvantages –<br />- Costs in actually finding out who to target.<br /> - Increased costs to develop variations of the product.<br />- Higher stock holding costs.<br />- Higher advertising and other costs.<br />- increase market segmentation.<br />- Consumer backlash<br />- Limits general popularity anonymous.<br /> References –<br />From book of Marketing management by –<br />Philip kotler,<br />Mithileshwar jha<br />From internet-<br /><br />Wikipedia.<br />