The document discusses market segmentation, which involves dividing a market into subgroups with distinct needs, characteristics, or behaviors that would benefit from targeted marketing efforts. It provides definitions and principles of segmentation, including aggregating buyers into groups that have common needs and will respond similarly to marketing actions. The document also outlines various ways to segment markets, such as by geography, demographics, psychographics, purchase behaviors, and category networks. It emphasizes that effective segmentation requires groups that are measurable, accessible, substantial, and actionable. Examples of market segmentation for air travel and cosmetics are also provided.

1. Market Segmentation
A fundamental principle of marketing
•In the past, segmentation has been largely used as a guiding
conceptual principle for developing marketing plans and
strategies rather than a call for empirical data analysis.
•Today, some form of quantitative measurement is typically
required if you want to segment.
•Segmentation is facilitated by the computer and other
information technology.
•However, raw data are not segments, only the building blocks
of segmentation.

2. Definition
Segmentation:
“Aggregating
prospective buyers into
groups that (1) have
common needs and (2)
will respond similarly to
a marketing action.”
Although not all these consumers
are completely alike, they share
relatively similar needs and wants
Marketing action: involves efforts,
resources, and decisions--product,
distribution, promotion,
and price

4. The Principle of Segmentation
“It is more important to reach the people
who count than to count the people you
reach.”
•Based on the believe that individuals and
businesses have differences.
•Defining and targeting segments is a way to
leverage knowledge about individuals’ or
companies’ differential responses.

5.  Markets consist of buyers, andMarkets consist of buyers, and
buyers differ in one or morebuyers differ in one or more
respects, including...respects, including...
• WantsWants
• ResourcesResources
• Buying attitudesBuying attitudes
• Buying practicesBuying practices
• Geographical locationsGeographical locations
MARKET SEGMENTATION LOGIC

6. Segmentation Variables
There is no single way to segment a market. A
marketer has to try different segmentation
variables, singly and in combination.
• Geographics
• Demographics
• Psychographics
• Purchase Behavior
• Category Networking

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No market
Segmentation
Complete
Segmentation
Market Segmentation
by Income Classes
1, 2, and 3
Market Segmentation
by age classes A & B
Multi-dimensional
Market Segmentation
By income-age class
2
2
1 1
1
3
a
a
a b b
b
1b
1a 2b
3a 3b
Different Segmentations of a Market

8. Creaminess
Creaminess
Creaminess
Sweetness Sweetness Sweetness
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Homogeneous Diffused Cluster
Preferences Preferences Preferences
Basic Market-Preference Patterns
Ice Cream Preference Example

9. Bases for SegmentingBases for Segmenting
Consumer MarketsConsumer Markets

10. Geography
– Region of the world
– Country
– Region of the country
– State
– City

11. Demography
– age
– gender
– family size
– family life cycle
– income
– occupation
– education
– ethnicity
– nationality

12. Psychographics
– social class
– lifestyle
– personality

13. Behavior
– purchase occasions
– benefits sought
– user status
– usage rate
– loyalty status
– readiness stage

14. Purchase Behavior
Buyers are divided into groups on the basis of their
knowledge, attitude, use or response to a product.
• Use occasion
– Regular occasion, special occasion
• Benefits sought
– Quality, service, economy
• User status
– Nonuser, ex-user, potential user, first-time, regular user
• Loyalty status
– None, medium, strong, absolute
• Readiness stage
– Unaware, aware, informed, interested, desirous, buyer
• Attitude toward product
– Enthusiastic, positive, indifferent, negative, hostile

15. Network Category
(A way to explain purchase behavior)
• Hierarchical Hypothetical Beverage Network Category
– Superordinate Level
• Beverage
– Basic Level
• Soft Drink
– Subordinate Level
• All natural soft drink
• Diet Cola
• Orange juice
• High preservative fruit juice

16. BEVERAGE
Liquid Thirst quenching Good with Food
SUPERORDINATE
LEVEL
carbonated
cola
cold
slightly sweet
Preservatives
SOFT DRINK SOFT DRINK
fruit
slightly sweet
nutritious
cold
all natural
B
A
S
I
C
Artificial
Sweetener
All Natural
Soft Drink
diet
cola
diet
unusual
healthy
Orange Juice
breakfast
Fruit Juice w/
Preservatives
artificial taste
unhealthy
stores well
SUBORDINATE LEVEL
Network Category

17. Benefit Segmentation of the Toothpaste Market
Benefit Demographics Behaviorists Psychographics Brand
Segments Network
Economy Men Heavy users High autonomy Sale
(low value oriented Brands
price)
Medicinal Large Heavy users Hypochondriac, Crest
(prevent families conservatives
decay)
Cosmetic Teens, Smokers High Macleans,
(bright young adults, sociability, Ultra
teeth) active Bright
Taste Children Spearmint High self- Colgate,
(good lovers involvement, Aim
Tasting) hedonistic

18. SEGMENTING BUSINESS MARKETS
Basis…..

19. • Demography
– industry
– company size
– location

20. • Operating variables
– customer technologies
– usage rate
– user status
– customer service requirements

21. • Purchasing approaches
– centralized vs. decentralized purchasing
– current vs. potential customers
– purchasing criteria

22. • Situational factors
– urgency of need
– application of product
– size of order

23. Requirements for EffectiveRequirements for Effective
SegmentationSegmentation

24. • Measurability
– The degree to which the size and purchasing power of the
segments can be measured. Some segments are hard to
measure. (Teen smokers who are rebelling)
• Accessibility
– The degree to which the segments can be effectively reached
and served. (Perfume and single women who frequent bars late
at night.)
• Substantiality
– The degree to which the segments are large, homogenous,
and/or profitable enough. (Cars for people who are 4 feet tall)
• Actionability
– The degree to which effective programs can be formulated for
attracting and serving the segments. (Airlines with small staff
serving seven segments.)

25. Segments--Examples (1)
• Air Travel
– Business/Executive: Inflexible; relatively price
insensitive (Small number of people, but travel
often)
– Leisure Traveler/Student: Relatively flexible; very
price sensitive (other methods of travel--e.g., bus,
car, train--are feasible; travel may not be
essential) (Very large segment)
– Comfort Travelers: Comfort (e.g., space, food)
important; willing to pay (Small segment)

26. Examples (2)
SEGMENTATION FOR COSMETICS
Over the last decade, women have become
more confident and the negatives attached to
a well-dressed woman are on the wane.
People have accepted color cosmetics as an
essential part of daily grooming.

27. The color cosmetics market can be broadly
divided into two segments:
* Organized sector dominating 36%of the
market.
* Unorganized sector catering to 64% of the
market

28. The segments that are targeted are as follows:
* Age
Youth segment (15 - 24yrs): Elle 18
Core target (24+): Lakme Radiance
* Purchasing power
Affluent segment: Aviance, Orchids
Middle segment: Lakme Radiance
Lower segment: Lakme does not exactly cater to the lower
segment but the Elle-18 range it offers is low-priced and
hence can satisfy this end of the market also.