Market segmentation involves dividing a market into distinct groups that share common characteristics to concentrate marketing efforts and gain a competitive advantage. It can be categorized into several types including geographic, demographic, psychographic, price, and media segmentation, each with its unique approaches and applications. Effective segmentation requires careful analysis and avoiding common mistakes such as creating too many segments or targeting all segments without a clear focus.

1. MARKET SEGMENTATION
When the term “market segmentation” is used, most of us immediately think of
psychographics, lifestyles, values, behaviors, and multivariate cluster analysis
routines. Market segmentation is a much broader concept, however, and
pervades the practice of business throughoutthe world.
What is market segmentation? At its most basic level, the term “market
segmentation” refers to subdividing a market along some commonality, similarity,
or kinship. That is, the members of a market segment share something in
common. The purpose of segmentation is the concentration of marketing energy
and force on the subdivision (or the market segment) to gain a competitive
advantage within the segment. It’s analogous to the military principle of
“concentration of force” to overwhelm an enemy. Concentration of marketing
energy (or force) is the essence of all marketing strategy, and market
segmentation is the conceptual tool to help achieve this focus. Before discussing
psychographic or lifestyle segmentation (which is what most of us mean when
using the term “segmentation”), let’s review other types of market segmentation.
Our focus is on consumer markets rather than business markets.
Geographic Segmentation
This is perhaps the most common form of market segmentation, wherein
companies segment the market by attacking a restricted geographic area. For
example, corporations may choose to market their brands in certain countries,
but not in others. A brand could be sold only in one market, one state, or one
region of the United States. Many restaurant chains focus on a limited geographic
area to achieve concentration of force. Regional differences in consumer
preferences exist, and this often provides a basis for geographic specialization.
For example, a company might choose to market its redeye gravy only in the
southeastern U.S. Likewise, a picante sauce might concentrate its distribution and
advertising in the southwest. A chainsaw company might only market its products
in areas with forests. Geographic segmentation can take many forms (urban
versus rural, north versus south, seacoasts versus interior, warm areas versus
cold, high-humidity areas versus dry areas, high-elevation versus low-elevation

2. areas, and so on). These examples also reveal that geographic segmentation is
sometimes a surrogatefor (or a means to) other types of segmentation.
DistributionSegmentation
Different markets can be reached through different channels of distribution. For
example, a company might segment the “tick and flea collar” market by selling
the product to supermarkets under one brand name, to mass merchandisers
under another brand, to pet stores under another brand name, and to
veterinarians under yet another brand name. This type of distributional
segmentation is common, especially among small companies that grant each
channel a unique brand to gain distribution within that channel. Other examples
of distributional segmentation would be an upscale line of clothing sold only in
expensive department stores, or a hair shampoo sold only through upscale beauty
salons.
MediaSegmentation
While not common, media segmentation is sometimes a possibility. It is based on
the fact that different media tend to reach different audiences. If a brand pours
its entire budget into one media, it can possibly dominate the segment of the
market that listens to that radio station or reads that magazine. Media
segmentation is most often practiced by companies that have some control over
the media and can somehow discouragecompetitors fromusing that media.
Price Segmentation
Price segmentation is common and widely practiced. Variation in household
incomes creates an opportunity for segmenting some markets along a price
dimension. If personal incomes range from low to high, the reasoning goes, then a
company should offer some cheap products, some medium-priced ones, and
some expensive ones. This type of price segmentation is well illustrated by the
range of automotive brands marketed by General Motors historically. Chevrolet,
Pontiac, Oldsmobile, Buick, and Cadillac varied in price (and status) along a clearly
defined spectrumto appeal to successively higher income groups.

3. Demographic Segmentation
Gender, age, income, housing type, and education level are common
demographic variables. Some brands are targeted only to women, others only to
men. Music downloads tend to be targeted to the young, while hearing aids are
targeted to the elderly. Education levels often define market segments. For
instance, private elementary schools might define their target market as highly
educated households containing women of childbearing age. Demographic
segmentation almost always plays somerole in a segmentation strategy.
Time Segmentation
Time segmentation is less common but can be highly effective. Some stores stay
open later than others, or stay open on weekends. Some products are sold only at
certain times of the year (e.g., Christmas cards, turkeys, fireworks, cranberry
sauce). Chili is marketed more aggressively in the fall, with the onset of cooler
weather. Football is played in the fall, basketball in the winter and spring, and
baseball in the spring and summer (or at least this used to be the pattern). The
Olympics come along every two years. Department stores sometimes schedule
midnight promotional events. The time dimension can be an interesting basis for
segmentation. In addition to the foregoing, markets can be segmented by
hobbies, by political affiliation, by religion, by special interest groups, by sports
team loyalties, by universities attended, and hundreds of other variables. You are
only limited by your marketing imagination.
Psychographic or Lifestyle Segmentation
Lastly, we come to psychographic (or lifestyle) segmentation, based upon
multivariate analyses of consumer attitudes, values, behaviors, emotions,
perceptions, beliefs, and interests. Psychographic segmentation is a legitimate
way to segment a market, if we can identify the proper segmentation variables
(or lifestyle statements, words, pictures, etc.). Qualitative research techniques
(focus groups, depth interviews, ethnography) become invaluable at this stage.
Qualitative research provides the insight, the conceptual knowledge, and the
consumer’s exact language necessary to design the segmentation questionnaire.
Typically, verbatim comments from consumers are used to build batteries of
psychographic or lifestyle statements (these two terms are used interchangeably).
A large representative sample of consumers (generally, 1,000 or more) are then

4. asked about the degree to which they agree or disagree with each statement. For
example, if you were designing a market segmentation questionnaire for an
airline, you might conduct a series of depth interviews to help design the
questionnaire. You probably would include a behavioral section (frequency of
flying, how purchased tickets, who traveled with, cities flown to, where sat,
airlines flown, money spent on airline tickets, etc.). You would include a major
section on attitudes toward air travel (motivations for air travel, fears related to
air travel, positive emotions of flying, attitudes about airline employees, checking
luggage, buying tickets, and so forth). You would also want to include a section on
perceptions of the different airlines; that is, their “brand images.” You could go
further and add a section on media consumption, or personal values, as well. It is
at this point that you realize the questionnaire is too long, and you have to make
some hard decisions about whatquestions or statements to include.
The method of data collection is very important, because the questionnaire is so
long (often 45 to 90 minutes in length). The telephone is not recommended for
segmentation studies because of questionnaire length. Moreover, the various
rating scales and attitudinal statements are difficult to communicate by phone,
and the resulting phone data tends to be “insensitive” and rife with “noise.” In-
person interviews or Internet-based interviews, or even mail surveys, are much
better. Rating scales and attitudinal statements can be seen and fully
comprehended by respondents. Seeing is much better than hearing, and it
produces more accurate answers. The Internet is especially valuable for
segmentation studies, since respondents can take the survey at a time of their
own choosing, when they can give it their full, undivided attention. A mail survey
offers some of the same advantages, but without the questionnaire controls,
checks, and safeguards built into an Internetsurvey.
Analytical Methods
Most segmentation analyses are based upon various types of “cluster analysis,” a
set of well-defined statistical procedures that group people according to the
proximity of their ratings. Unfortunately, cluster analysis (regardless of its many
types and forms) has inherent limitations and seldom yields coherent market
segments. Cluster analysis routines ignore the pattern of respondent ratings and
rely primarily upon the proximity of respondent ratings. Too often this leads to
clusters, or market segments, that don’t seem to make much sense when
crosstabulated against the original segmentation variables. Another limitation of

5. clustering approaches is that all statements are treated as equal; whereas, in
truth, some statements might be much more important than others in explaining
consumer behavior in a particular productcategory.
A better way to achieve a good psychographic segmentation is to first identify the
statements that are more important (i.e., the statements that tend to explain or
cause specific consumer behaviors). Correlation analysis and regression can be
used for this purpose. Factor analysis is also a powerful technique to identify the
statements and groups of statements that account for much of the variance in the
attitudinal data set. Directly and indirectly, these techniques can help you identify
the most important statements (i.e., attitudes, perceptions, values). Then, these
statements become the inputs to the final segmentation analysis. Many different
methods can be used to “cluster” or group the statements at this point. The final
step is to attach a segment code to each market segment identified and then
crosstab all of the questionnaire variables by the segments. You must then study
the segments and the attitudes/statements that make up each segment to make
sure they make sense and hang together. If the segmentation results don’t make
sense, then you have to go back, change some of your assumptions or methods,
rerun the analysis, and repeat the crosstab exercise to apply the “common sense”
validity check.
Common Mistakes inMarket Segmentation
Segmentation studies tend to be large and complicated, so it’s easy for errors and
mistakes to be made. Someof the mostcommon mistakes:
1. Segmenting a segment. For example, someone might want to segment the
market for widgets among 18- to 24-year-olds who live in Vermont and buy
brand XYZ. As is evident, the client is asking that a tiny sliver of the market
be segmented. True, this tiny sliver can be segmented, but rarely are the
resulting segments of any value, because they are just too small. General
rule: segment the whole market, including all age groups. The market
should be broadly defined for a segmentation analysis to be most effective.
In other words, don’t preordain the results by sampling restrictions.
2. Overlooking the “universals.” Many attitudinal statements in the
questionnaire will not show up in the final segments, because they tend to
be the same across all segments. Statements that everyone agrees with, or

6. everyone disagrees with (we call them “universals”) cannot explain much in
the multivariate analyses. Variables have to move up and down for the
multivariate analysis to work. The highest rated variables, and the lowest
rated, are likely to fall out of the multivariate analyses. However, you
should always look at these universal statements. Any one of them might
be the basis for a positioning or a strategy that would appeal to everyone. If
you find something unique that appeals to everyone, the heck with
segmentation. Go for the whole hog.
3. Creating too many segments. There is a practical limit to the size of
segments that companies can effectively target. If you create more than
four or five market segments, you run the risk that the resulting segments
will be too small to target, at least by mass media. This is not always true,
but it is a good rule of thumb.
4. Targeting all segments. So you have carefully subdivided your target
market into five mutually exclusive psychographic segments, and your boss
tells you to develop a marketing plan to attack each segment. If all of your
marketing is direct mail, and you can identify the addresses that belong to
each segment, then you can attack all segments (assuming your product is
relevant to all segments). But, if you use broadcast media in marketing your
product, it is very difficult to target multiple segments because of media
“spillover.” What you say to one segment will be muddled and confused by
the different messages targeted to other segments.
5. Confusing the results. Segmentation studies are large and complicated,
with enormous amounts of data. It is easy to get lost in this treasure trove
of answers and come up with confusing and baffling results.
6. Overlooking the basics. The dazzle and glitter of the advanced, rocket-
science multivariate analyses attract everyone’s attention. No one ever
opens up the crosstabs and looks at the answers to the hundreds of
questions asked. Often, hidden in plain view in the plain old crosstabs are
tremendous findings that could form the basis for new or improved
marketing strategies, advertising campaigns, or new products. Rarely does
anyone analyze this basic data, however.

7. 7. Targeting people instead of dollars. A market segment might represent a
large percentage of the population, but a small part of the market. Always
look at the dollar potential of market segments, not just the number of
people in the segments.
No mutually Exclusive Segments
Virtually all segmentation work, historically, has been based upon the assumption
of mutually exclusive market segments. The mutually exclusive model, however,
does not always apply to psychographic or lifestyle segmentation (since most of
us hold many overlapping and/or conflicting beliefs and attitudes). Therefore, it is
wise to develop two distinctly different segmentation solutions: one based upon
mutually exclusive segments and one based upon overlapping segments. Both of
these segmentation “solutions” should be crosstabulated by the original
questionnaire variables to identify which type of solution yields the most
meaningful (and actionable) marketsegments.
Final Thoughts on Marketing Segmentation
The concept of market segmentation is sound. It’s a way to apply greater
marketing energy or force to a subset of the market. A great deal of money is
wasted on psychographic segmentations that never lead to any marketing
actions. If you segment the market by psychographics, there are several essential
uses of the segmentation: first, target your brand to the largest segment with
relevant brand fit (or even target two closely related segments) by media
advertising and message. That is, the advertising message is the way to reach the
psychographic segment (rarely can a psychographic segment be defined by
demographics or geography). Second, segmentation can provide the guide rails
for brand positioning. That is, positioning assumes, or takes place in relation to, a
target market segment; you are positioning your brand in relation to a market
segment. Third, the segmentation can define opportunities for new products
targeted to each psychographic segment. That is, the market segments can be a
template for new product development. For example, if you find that 15% of the
U.S. population belongs to a “safety first” segment when it comes to buying cars,
then you can design and build the safest car in the world to target this segment.
So psychographic segmentation’s greatest value lies in positioning, targeting via
advertising message, and defining new product opportunities. Go forth and

8. segment.

9. MISSION AND VISION
Mission (purpose) =defines why you are in business and whatyou are doing now.
Vision = defines what you want your business to be or be known for. It’s useful to
develop a 1, 3 and 5 year vision to ensure you can progress to where you want to
be through well defined measurablesteps:
Example:
One year: By December 30, 2010, Masterful Marketing will be offering quality
information products in addition to coaching services that make up 20% of the
overall revenuefor the company.
Three year: By December 30, 2013, Masterful Marketing will be recognized as one
of the top three marketing brands for small businesses in the United States.
Goals
Goals are well-defined, targeted statements that give you clarity, direction and
focus. It is important for the small business owner to define what you need to do
to achieve your vision in measurable and realistic terms. If a marketing goal is to
“increase visibility for your Website”, then you need to include by when and
specific criteria with which you can measure your results. Ideally, you should have
only 2 or 3 goals that you want to work towards in a 3-6 month timeframe. Any
more than that, you risk taking on too much and achieving nothing.
A common approach to developing your goals is to use the formula for the five
characteristics of well developed goals – S.M.A.R.T.
Specific – What exactly are you trying to accomplish? The more specific you can
be, the morelikely the goal will be accomplished.
Measurable – How do you know if you are successful? Answer the questions
“How much?”, “How Many?”, and “By When?”

10. Attainable – Is this realistic based on the resources you have or can acquire to
achieve them or a major obstacle to success? The best goals should encourage
you to reach, but not so far as to involve unavailable resources or unrealistic
expectations.
Relevant – Will this goal help you reach your vision? Setting goals that do not
align themselves with your ultimate outcome will divert your attention from
those that help you get whereyou want to go.
Timely – What is the deadline for this effort? Without having specific time frames
associated with each goal, you most likely will not achieve them because the day
to day interruptions will take over.
STRATEGIC INTENT : A readily grasped declaration of the course that the
management of a business plans on taking the company in over some future time
frame. The strategic intent of a business needs to be easily understood by every
member of the firm so that all staff can be working toward a consistent overall
goal.
Strategic Intent is a management concepts defined by its authors Hamel and
Parahalad ('89) as: an ambitious and compelling dream that energizes; which
provides the emotional and intellectual energy for the journey to the future.
SI has 3 components:
- Sense of Direction. A particular point of view about the long-term market or
competitive position that a firm hopes to build over the coming decade or so.
Compare: CorporateVision.
- Sense of Discovery. An SI holds out to employees the promise of exploring new
competitive territory. Compare: Storytelling.
- Sense of Destiny. An SI has an emotional side; it is a goal that employees
perceive as inherently valuable. Compare: CorporateMission.

11. STRATEGICPLANNING :
STRATEGIC EVENT
FUNCTIONS OF STRATEGY
CORPORATELEVEL OF STRATEGY
DIVISIONAL STRATEGY
STRATEGICAUTHORITY
STRATEGICCONTROL AND EVALUATION
Functions of strategic management
Formulating businessstrategy
1. Creating a mission
2. * Set the mission objectives of the company
3. * Selecting the methodology for mission formulation
4. * Formulation of Mission
5. * Preparation of a project for implementation of the mission
6. * Implementation of the mission of the company
7. Formulation of rules defining the position of the company's political, legal, economic, social,
technological, natural environment
8. * Determination of reasons for the existence in terms of business environment
9. * The observation and analysis of environmental variability
10.* Forecasts of changes in the environment
11.* Identification of opportunities and threats
12.* Determination of the objects of the company and its changes
13.* Simplification of company policy
14.* Implementation of company policies
15.Determining the purpose of company
16.Developing a strategy for the company as a whole

12. 17.* Definition of policy options
18.* An analysis of policy options
19.* Description of the selection criteria and selection of policy option
20.* The project of the strategy for functional areas of company
Strategic Segmentation
1. Identification of the strategic segments
2. Developing a coherent market segment strategy
3. Creating a decentralization policy
4. Designing and implementing policy and strategy for chosen segments
Building and using a modelof strategic control
1. Define the model assumptions
2. Selection of criteria for the evaluation
3. Empowerment of control functions
4. Improving the strategic control model

13. Levels of Strategy
Strategy may operate at different levels of an organization -corporate level,
business level, and functional level. The strategy changes based on the levels of
strategy.
Corporate Level Strategy
Corporate level strategy occupies the highest level of strategic decision-making
and covers actions dealing with the objective of the firm, acquisition and
allocation of resources and coordination of strategies of various SBUs for optimal
performance. Top management of the organization makes such decisions. The
nature of strategic decisions tends to be value-oriented, conceptual and less
concrete than decisions at the business or functional level.
Business-Level Strategy
Business-level strategy is – applicable in those organizations, which have different
businesses-and each business is treated as strategic business unit (SBU). The
fundamental concept in SBU is to identify the discrete (separate) independent
product/market segments served by an organization. Since each product/market
segment has a distinct environment, a SBU is created for each such segment. For
example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and
a variety of petrochemical products. For each product group, the nature of
market in terms of customers, competition, and marketing channel differs.
There-fore, it requires different strategies for its different product groups. Thus,
where SBU concept is applied, each SBU sets its own strategies to make the best
use of its resources (its strategic advantages) given the environment it faces. At
such a level, strategy is a comprehensive plan providing objectives for SBUs,
allocation of re-sources among functional areas and coordination between them
for making optimal contribution to the achievement of corporate-level objectives.
Such strategies operate within the overall strategies of the organization. The
corporate strategy sets the long-term objectives of the firm and the broad
constraints and policies within which a SBU operates. The corporate level will help

14. the SBU define its scope of operations and also limit or enhance the SBUs
operations by the resources the corporate level assigns to it. There is a difference
between corporate-level and business-levelstrategies.
Related Core competency
For example, Andrews says that in an organization of any size or diversity,
corporate strategy usually applies to the whole enterprise, while business
strategy, less comprehensive, defines the choice of product or service and market
of individual business within the firm. In other words, business strategy relates to
the ‘how’ and corporate strategy to the ‘what’. Corporate strategy defines the
business in which a company will compete preferably in a way that focuses
resources to convert distinctive competence into competitive advantage.’
Corporate strategy is not the sum total of business strategies of the corporation
but it deals with different subject matter. While the corporation is concerned with
and has impact on business strategy, the former is concerned with the shape and
balancing of growth and renewal rather than in marketexecution.
Functional-Level Strategy
Functional strategy, as is suggested by the title, relates to a single functional
operation and the activities involved therein. Decisions at this level within the
organization are often described as tactical. Such decisions are guided and
constrained by some overall strategic considerations. Functional strategy deals
with relatively restricted plan providing objectives for specific function, allocation
of resources among different operations within that functional area and co-ordi-
nation between them for optimal contribution to the achievement of the SBU and
corporate-level objectives. Below the functional-level strategy, there may be
operations level strategies as each function may be divided into several sub
functions. For example, marketing strategy, a functional strategy, can be
subdivided into promotion, sales, distribution, pricing strategies with each sub
function strategy contributing to functionalstrategy.

15. Marketing and strategy models and concepts
1. BCG MATRIX: The BCG matrix or the growth share matrix is one of the most
popular marketing strategy models, used to classify products as cows, dogs,
stars and question marks. Based on the classification, the correct marketing
strategy can be decided.
2. Ansoff Matrix: Deciding the future of your company and your products is
always difficult. The Ansoff’s matrix helps marketing managers decide the
future strategies which they can implement at product level or brand level
as well.
3. GE McKinsey matrix: If you want to analyze your business portfolio, or if
you want to enter in a different industry altogether, then the GE McKinsey
matrix helps you make the right decision through its 9 cell approach.
4. Porter’s five forces model: When you consider an existing industry, then
there are five forces existing within that industry as per Michael Porter.
These five forces vastly influence the players existing within that industry as
well as the players trying to enter or exit fromthe industry.
5. Gap analysis: There will always be gaps in an organization when your
operations are in progress. If you want to improve your operations and
expand your business, or you want to achieve any other objective, Gap
analysis is the best marketing and strategy tool.
6. Product market expansion grid: A synonym to the Ansoff’s matrix, the
product market expansion grid helps marketers decide whether to expand
products, or expand marketor to adopt an altogether different tactic.
7. Porter’s value chain: Most companies add value to their products through
a nine step linear process which is known to be the value chain devised by
Michael porter. The porter’s value chain is a very popular concept in the
manufacturing as well as services industry.
8. Product life cycle: One of the most popular theories of marketing, the
product life cycle theory explains the four stages through which a product
goes in its life.
9. Pricing strategies: One of the most interesting topics of marketing and
sales. Pricing is probably the most important P of the marketing mix today.
How do your price your products or services? This article delves in 5 main
and severalsmaller pricing strategies and tactics.

16. 10.New product development: A new product involves a lot of investment in
terms of time and money. But more importantly, it should turn out as per
the market demand. Hence there is a seven step process for proper new
productdevelopment.
11.Situation analysis: Any company trying to change things has to first
undertake a situation analysis to understand where the company currently
stands and accordingly, whatsteps it can take to improveits situation.
12.SWOT analysis: The top concept for internal analysis and analysing what
the firm is doing right, and where it is going wrong. The SWOT analysis is
one of the most widely applied concept of marketing. And it is so flexible
that it can be used in personal life or for that matter any decision making as
well.
13.Marketing mix: Understanding the marketing mix is at the crux of making
any marketing plan or marketing strategy for the company. The marketing
mix is the interaction point between your marketing efforts and the
customer. And it is the mostdynamic concept of marketing over time.
14.Service marketing mix: Services are very different from products mainly
because of their intangible, heterogeneous and perishable nature. Hence
the service marketing mix has 3 more P’s above and beyond the normal
marketing mix.
15.Sustainable competitive advantage: Most companies devise a number of
different strategies and plans, all because they can have a sustainable
competitive advantageover competitors.
16.Competitor analysis: Before implementing any competitive strategy, you
need to analyse your competition. This concept presents a 7 step process to
analysecompetition.
17.Competitive profile matrix: A most useful matrix used to design the
complete competitive profile for an individual company. This matrix helps
the firm take the right decisions based on competition and how it will
respond.
18.Making a marketing strategy: How do you make a marketing strategy? It is
by considering the 10 different factors mention in this article which help in
the creation of long term as well as shortterm strategy.
19.Family Life cycle: How does a family decide which products it wants? And if
you want to launch multiple products, how do you optimize the

17. consumption? It is by observing the various stages of the family life cycle
and accordingly thinking of launching the right products.
20.AIDAS Theory: The best theory of selling, the AIDAS theory explains how to
rope customers in and how, in 5 stages, the lead can be converted from a
prospectto a customer to a repeat customer.
21.PEST analysis: Whenever entering a new country or a different region
altogether, there are several external business and environment factors
which need to be considered to establish business. PEST analysis helps you
with analysis of these factors.
22.PESTLE analysis: An extension of the PEST analysis, PESTLE analysis also
considers the legal and environmental challenges.
23.SMART objectives: How do you define your goal and objectives? It is by
using the SMART objectives method. It is a productivity concept most
usefulfor marketing managers.
24.Consumer decision making: This article explains the seven steps of
consumer decision making in great detail. The concept of consumer buying
behavior is at the heart of marketing.
25.Values attitudes and lifestyle: Consumer decision making is a tough science
for marketers and a lot of decisions are made on the basis of Values,
attitudes and lifestyle of people.
26.AIO: Similar to the above concept, Attention, Interest and Desire are three
important intangible elements of customer buying behavior.
27.Customer satisfaction levels: Customer satisfaction and delight is
something which each marketer strives for. So it is important that the
marketer knows aboutthe five types of customer satisfaction levels.
28.Product adoption: How does a customer adopt a product? Or how are
different products adopted based on the product life cycle? The same can
be explained by the productadoption concept.
29.Diffusion of Innovation: Innovative products generally hang in a balance
because if they are not accepted in the market, then they fail. Thus, the
study of diffusion of innovation is important when launching an innovative
product.
30.Value chain analysis: Porter’s value chain explains how value is added to a
product from the start to the end of the production cycle. Value chain
analysis is a 9 step analytical process on how to add value to the chain.