Term paper on market segmentation

MARKET SEGMENTATION 1

A STUDY ON THE CONSUMPTION PATTERN OF THE
MARKET SEGMENT IN THE AGE GROUP OF 23 – 25
YEARS AND ITS IMPLICATIONS FOR A MARKETER
PURVA VERMA
INSTITUTE OF CHARTERED FINANCIAL ANALYSTS OF
INDIA


TABLE OF CONTENTS

S. NO. TOPIC
1. INTODUCTION
2. LITERATURE REVIEW
3. DATA GATHERING
4. DATA ANALYSIS
5. CONCLUSION


INTRODUCTION


Market segmentation is the process in which a marketer divides a large market into
smaller groups based on their common needs and buying behaviour(Cengage,
2002). Marketers must identify key groups or segments within the general market
based on their shared consumption pattern and needs. This approach works much
better than “one size fits all” mass marketing approach as it allows marketers to
identify their target segment and therefore, develop marketing strategies to capture
this segment.

Every individual is a member of an identifiable market segment based on various
segmentation variables. Every child when he/she is born becomes a consumer. Over
the years, an individual consumes many products depending upon his needs at that
time and point in his life. A child who consumes milk, baby food and diapers goes on
to consume toys, books and so on. These changing needs make it inescapable for
marketers to conduct segmentation studies. As soon as a slot is emptied by one
group of consumers, others are waiting to occupy that sub segment.

In order to conduct market segmentation, marketers first need to find out the factors
that influence consumer buying behaviour. Consumer behaviour is influenced by the
following factors(Kotler, Keller, Koshy, & Jha Mithileshwar, 1972):

1. CULTURAL FACTORS:

Culture is determined by how an individual is raised and what are his values and
perceptions. A child belonging to a middle class Indian family is exposed to values
such as loyalty, hard work, respect for elders and sacrifice. Recently launched
channel Life OK by Star World is targeting middle class Indians with it’s new set of
sitcoms in which every story highlights some or the other value held by middle class
India. Values such as sacrifice, adjustment and respect for elders are
portrayed(Chatterjee, 2011).

2. SOCIAL FACTORS:

These refer to a person’s reference groups, family and social status.

a) Reference group- These are the groups that have a direct or indirect impact
on an individual’s behaviour and attitude. These include family, friends,
religious groups, aspirational groups and dissociative groups.

b) Family- From the oriental family i.e. parents and siblings, a person acquire
orientation towards values, religious beliefs, political beliefs etc.


c) Social status- It is the honour attached to one’s position in society and it
depicts much of an individual’s behaviour.

3. PERSONAL FACTORS:

These refer to the age and stage in the life cycle, personality, lifestyle and
occupation of a person. For example, if a marketer wants to launch energy drink in
the market then on the basis of personal factors he will target the segment of people
belonging to the age group of 20 to 30 yrs, educated, fitness conscious with a fast
and busy lifestyle.

Upon understanding these factors, marketers should make sure that market
segments fall true in terms of the following five criterions(Roger, 2005):

1. MEASURABLE- Size and purchasing power of the segment can be
measured.
2. SUBSTANTIAL- Largest possible segment with a common need for the
offered product should be selected.
3. ACCESSIBLE- Ease of reach.
4. DIFFERENTIABLE- Should respond differently to different marketing mix
elements.
5. ACTIONABLE

One of the best recent success stories on market segmentation is that of Bharat
Matrimony. It is a matrimonial website in India. It has captured the pulse of Indian
families where most marriages are community based arranged marriages. It has
launched 15 regional websites in over 8 languages. They also provide horoscope
generation, elite services for the rich and affluent class and offline ventures to cater
to customers at grass root level.


LITERATURE
REVIEW


The concept of market segmentation attempts to reconcile differing customer needs
with limited company resources, and allows product and marketing offerings to be
adjusted to suit different customer groups (Wind, 1978). A firm cannot launch it’s
products or services randomly without conducting this process. The theoretical
grounding for market segmentation comes from economic pricing theory, which
indicates that profits can be maximized when prices that discriminates segments are
set (Frank et, al., 1972).

Market segmentation can be done on the basis of(Kotler, Keller, Koshy, & Jha
Mithileshwar, 1972):

1. GEOGRAPHIC SEGMENTATION:

It calls for division of market into different geographical units such as nations, states,
regions etc. It also divides markets on the basis of urban and rural areas; population
density and climate. The market potential value of towns in India can be calculated
on five parameters of(Swamy, 2004):

a) Number of consumers
b) The means these consumers have
c) Their consumption behaviour
d) Awareness levels
e) The availability of marketing support infrastructure

Geographical markets vary in their product requirement. For example, marketers
cannot offer air conditioners in the state of Kashmir. Also, tea as a beverage is
consumed much more in northern India as compared to the southern states like
Kerala.

2. DEMOGRAPHIC SEGMENTATION:

It calls for dividing the market into sub segments on the basis of:

a) Age- Clean and Clear products are targeted at teenage girls while Olay
products are targeted at women slipping in their prime.

b) Life cycle stage- In the advertisements for insurance cover, often people with
families are depicted as opposed to bachelors while products such as
deodorants are sold on the basis of its sex appeal for single unattached
consumers.


c) Gender- In recent ad campaigns launched by Emami, men were prompted to
buy their new fairness product designed especially for the tougher male skin
as compared to female skin. Washing powder brands such as Nirma always
target women in their promotion while automobile companies such as Pulsar
and Hyundai target men.

d) Income- The “value for money” proposition has long been adopted to target
middle income segment of the market while companies such as Mercedes do
not even advertise on television since they target only the elite class and
likewise advertise in magazines such as Forbes.

e) Generation- Youth today is a lot more brand conscious than it was a couple of
decades ago. Globalisation, access to internet and television has changed
attitude and perceptions of consumers completely.

f) Social class- It has a very strong influence on consumer buying behaviour and
influences buying decisions regarding the brand of clothing people wear, the
cars they drive etc.

g) Education level

3. PSYCHOGRAPHIC SEGMENTATION:

It uses psychology and demography to understand consumer buying behaviour.
Values and lifestyle effect product and brand choices of consumers(Kahle &
Chiagouris, 1997). It is a reflection of a consumers’ lifestyle and personality
characteristics formed due to their psychological traits, lifestyle and values.

Hindus do not partake of beef which led Mc Donald’s to change their menu
completely to suit Indian taste buds and lifestyle. Raymonds tagline of “The
Complete Man” target the psychology of ambitious achievers.

4. BEHAVIOURAL SEGMENTATION:

Various variables studied under this are:

a) Occasions- Cadbury Celebrations chocolates are promoted extensively during
the festival season in India (Diwali, rakshabandhan etc.)


b) Benefits- Sunsilk promotes 6 different shampoos to address different hair
needs for consumers. In African countries, Sunsilk even promotes shampoo
targeted at maintaining curly braided hair.

c) User Status- Potential customers for skin care products of Olay are women in
their 20’s currently. Thus, they have recently launched ads depicting
celebrities in their mid 20’s recommending Olay before the signs of ageing
appear.

In today’s environment, market segmentation has become a competitive necessity
as opposed to the competitive advantage it used to be. People are surrounded by
multitude companies offering the same products and services. It is now upto the
marketers how they differentiate their product from their competitors’ and create a
need for it.


DATA GATHERING


For this research, data has been collected about Indian population from the website
of Census of India (Ministry of Home Affairs, 2011). This data is divided into broad
sections and sub sections based on national population, state population, gender
wise division, sex ratio, income levels, literacy levels etc.

This data is verified and trustworthy. Also, data has been selected from the book
(Kotler, Keller, Koshy, & Jha Mithileshwar, 1972) which is projected data. This data
talks about populations’ growth, income levels and buying capacity.

A few projected data tables also predict customer preferences and how these
preferences change with age group and changing expendable income.

The following data has been referred:

TOTAL POPULATION IN INDIA 1,210,193,422
TOTAL POPULATION IN DELHI 1,67,53,235
NUMBER OF FEMALES IN DELHI 7,776,825
NUMBER OF LITERATE FEMALES 5,429,391
NUMBER OF LITERATE FEMALES IN 46,190
NEW DELHI REGION
Source of data: (Ministry of Home Affairs, 2011)

AGE GROUP 2001 2006 2011 2016
0-4 366 362 355 343
15-59 598 673 747 811
60+ 65 78 94 113
TOTAL 1027 1114 1194 1268
Note:Year wise population in million

Source:(Tata Services Ltd., 2004)


DATA ANALYSIS


The population of India as on 31st March 2011 as per the provisional population
totals of census is 1,210,193,422. The population of India has increased by more
than 181 million in the last decade leading to a decadal change of 17.64%. Data
shows that the poor tend to have larger families. In the developing countries, a youth
bulge ensures that the absolute number of births will rise even as couples are having
fewer children.At the other extreme, most developed Western countries are facing a
phenomenon called as a “youth dearth” after decades of low fertility. Stagnant
growth and declining population is challenging more countries as fewer workers must
support expanding pension social security systems for aging citizens. Governments
have crafted a range of policies to address these issues. In developing countries like
India, policies include support for family planning and reproductive health program’s
to control the extremely high rate of population growth.

These two different situations have a deep impact on marketing scenario of a
country. Many economists agree that people work and save when they are young
and live off the proceeds when they retire. Thus, wealth peaks at retirement age and
then begins to decline thereafter indicating that people will have different
consumption and saving patterns at different stages in their lives. With the change in
the age structure, consumption patterns of the population will also change. The
needs of older people are very different from the needs of middle aged and younger
people: older people buy different things than younger people and have less need for
borrowing money.

In India, population has been further segmented state wise. For the scope of this
project, I will talk about the population of NCT of Delhi. It’s population according to
2011 census is 1,67,53,235 and is the 18th most densely populated state in India. It
is the capital of the nation and a fast paced metropolitan city.

The market in Delhi has transformed both in terms of sophistication and variety,
resulting in a substantial change in the disposition of the customers towards quality,
price, delivery and service leading to new processes. It has a rapidly expanding
service sector including production, business, government and other service sectors
like education, healthcare, hotels, insurance, banking, consulting company, travel
and tourism etc. It has seen an emergence of production, business, government and
other service sectors like education, healthcare, hotels, insurance, banking,
consulting company, travel and tourism etc.(Ashok, 2007)

Awareness in terms of media expansion has exposed the population of this
metropolitan to global brand, alternative lifestyles and multiple buying options. From
single channel to cable network with multiple channels, larger coverage, multimedia
mix, greater spending and emphasis on market research and media planning, have
become the order of the day. It is a popular hub of the “Mall Culture”. Innovative
distribution channels like convenience shops, departmental stores, discount stores,
super markets, mail-order retailing, video shopping, internet shopping and multilevel


marketing, have begun to change the face of distribution format while e business and
e commerce are the talk of the day.

As a result of all these changes, the role and functions of marketing have undergone
a metamorphic change in recent years. Many new concepts and patterns of thought
have emerged. That apart, changes have also taken place in the consumer buying
habits and spending behaviour. Consumers have become more knowledgeable,
more adventurous and more demanding, compelling, in a way, redefinition of
marketing strategies and orientations of companies. Since present day consumers
are more concerned for value, brand image and performance than ever before,
consumer satisfaction is viewed as an integral part of total quality package in terms
of form utility, place utility, time utility and possession utility(K, 1999).

It is, therefore, essential that marketers keep a constant watch on the marketing
horizon to spot the new challenges thrown up by the staggering pace of
technological developments and various changes in the marketing environment and
to convert them into highly profitable marketing opportunities.

Further distinction has been made on basis of gender. Out of the total population of
Delhi, number of females at the 2011 census stood at 7,776,825. Out of these,
females residing in urban Delhi are 7,584,506 while literate females in New Delhi are
46,190 out of a total literate female population of 5,429,391.

Women are the world’s most powerful consumers. They are the big spenders
whether you talk about households, corporate purchasing or small businesses.
Educated women have a very different set of priorities, preferences and attitudes.
Thus, their decision process is radically different.

For years, women have been recognised as gatekeepers for family products and
they continue to be primary decision makers for most household goods. Now
marketers in industries like automobile, luxury travel, financial services etc. realize
that this segment is a potential market for their products as women not only hold the
keys to household purchases but also are increasingly driving big ticket expenditures
for themselves and their families(Barletta, 2003)

Out of the literate women in Delhi, those holding graduate-level degrees enjoy the
benefits of higher earning potential .Almost 40% of the MBA’s graduating today are
female. As this change in the workplace continues, one obvious result is that women
are building their current incomes. This in turn increases the household income
which fuels the demand for consumer goods as well as luxury goods. Working
women like men need cars, mobile phones, laptops, insurance and all other products
and services which were considered male dominated till a few years ago.

Two dimensions of the women’s buying process make them more profitable
customers than men in the long term: loyalty and referrals. Women are more likely to


try a product on the word of mouth basis as compared to men. Also, women are a lot
more brand loyal than men because they easily form relationships with the products
they like and use regularly.

This has deep implications for marketers as this segment has a lot of potential. Many
global brands such as Dior, Mac, Lancôme, LV have launched their stores in Delhi
looking at the buying capacity of women in this region. Not only luxury fashion
brands, but the recent years have seen a spurt in spa culture, nail salons, French
lingerie stores etc.

In a place like New Delhi where on one hand we see the liberation of women, at the
same time we see the increasing lack of their safety. Companies like Apple have
grabbed this point to launch a new application on their iPhones. This application
basically allows women to press one single button which updates their status on
social networking sites and also sends messages to their family that they are in
trouble in so and so location.

Lifestyle of young women in Delhi has gone through a drastic change in the last few
years. . Due to the education and increased level of literacy among people there is
increase in awareness of product availability, product features, technological
advancements etc.This in turn has led to a more complex nature of purchasing style.

The task of any marketing executive is becoming more complex because of our
cultural patterns – life style, social values and beliefs, which are changing more
quickly than they used to.A consumer’s behaviour also is influenced by social
factors, such as the consumer’s small groups, family and social roles and status. In
case of young women this is especially true as the last decade has seen
liberalisation of women not only in terms of education but also their lifestyle and
attitude.

Young women today have different social values in terms of the way they think about
their independence, their jobs and their families. Their social value orientation is
turning from altruistic (desire to maximize the welfare of the other) to competitive
(Desire to maximize own welfare relative to that of the other). This leads to a change
in their buying decision process as well.


CONCLUSION

The basic psychological processes play an important role in how consumers make
their buying decisions. It is also affected by where they live, their age, education


level, growth potential and real income. This can be reflected in the five stage model
of consumer buying process (Kotler, Keller, Koshy, & Jha Mithileshwar, 1972):

5. PROBLEM RECOGNITION:

The buying process starts when the buyer sees a problem or need triggered by an
external or internal stimulus. Internal stimulus could be hunger, thirst etc. while
external stimulus could be television ad, discount etc.

Marketers need to trigger this need in the identified segment of young, educated
women in New Delhi. They need to come up with products and marketing strategies
which would interest this group so a potential purchase gets serious consideration.
Reebok launched Easy tone shoes which was a hit as it suits the needs of a busy,
working girl who wants to stay fit without spending too much time on her fitness
regime. Pepper spray is another product which has huge potential in this urban
market due to growing insecurity for women.

6. INFORMATION SEARCH:

This habit is well developed in women. There are 2 levels of involvement:

a) Heightened attention- this is a milder search stage. At this level a person
simply becomes more attentive to information about a product.
b) Active information search- Looking for reading material, phoning friends,
going online and visiting stores to learn about the product.

Women often turn to 2 major sources of information:

i. Personal- family, friends, neighbours, word of mouth
ii. Commercial- advertisements, web sites, salespeople, dealers, discounts

For example, if a woman wants to buy a wrist watch then she will take the opinion of
her friends, family and then look for brands she has seen advertisements of. Final
decision will be made on personal choice and also the discount available on a
product, if any.

TOTAL SET: AWARENESS SET: CHOICE SET: DECISION:

Titan TitanTitanTitan

Timex Timex Tommy Hilfiger

Espirit Tommy Hilfiger

Tommy Hilfiger


1. EVALUATION OF ALTERNATIVES:

Consumer is trying to satisfy a need and looking for certain benefits from the product
solution. Also, consumer sees each product as a bundle of attributes with varying
abilities for delivering the benefits sought to satisfy the need (Dickson). The
attributes of different products vary according to the consumers’ interest. For
example:

i. Clothes- fabric, colour, brand, style
ii. Mouthwash- color, effectiveness, germ killing capacity, flavour

2. PURCHASE DECISION:

Consumer may decide on the basis of brand, dealer, quantity, timing and payment
method. There are different intervening factors that a consumer evaluates before
making a purchase decision. These are:

a) Functional risk- the product does not perform up to expectations. For
example, an anti-dandruff shampoo like Clinic Plus does not effectively
perform its task.

b) Physical risk- the product poses a threat to the physical well-being of the user
or others. For example, alcohol containing deodorants pose a threat to the
user and her environment.

c) Financial risk- the product is not worth the price paid. For example, fake sales.

d) Psychological risk- the product affects the mental well-being of the user. For
example, certain artificial salts and flavours present in eatables like Maggi
stimulate the brain to eat more and in general lead to unbalanced hormones.

e) Time risk- the failure of the product results in an opportunity cost of finding
another satisfactory product.

3. POST PURCHASE BEHAVIOUR:


This refers to service, replacement, guarantees and warranties. These determine a
consumers satisfaction with the product and if she would recommend it to other
people and repurchase when the chance arises.


BIBLIOGRAPHY:

Ashok, D. D. (2007, April 8). http://dspace.iimk.ac.in/bitstream/2259/322/1/627-639.pdf. Retrieved
February 15, 2012, from www.dspace.iimk.ac.in.

Barletta, M. (2003). Marketing to Women. USA: Dearborn Trade Publishing.

Cengage, G. (2002). Retrieved from www.enotes.com: http://www.enotes.com/market-
segmentation-reference/market-segmentation-178604

Chatterjee, P. (2011, December 20). Retrieved December 30, 2011, from
www.thehindustanbusinessline.com: http://www.thehindubusinessline.com/industry-and-
economy/marketing/article2732437.ece?homepage=true&ref=wl_info-tech_art

Dickson, P. R. (n.d.). Market Segmentation, Product Differentiation and Marketing Strategy. Journal
of Marketing.

Gabriel, A. (1998, 11 20). Single Message May Not Hit All Markets. Phoenix Business Journal.

K, A. (1999). Business Environment. Himalaya Publishing House.

Kahle, L. R., & Chiagouris, L. (1997). Values, Lifestyle and Psychographics. Mahwah, NJ: Lawrence
Erlbaum Associates.

Kotler, P., Keller, K. L., Koshy, A., & Jha Mithileshwar. (1972). Marketing Management- A South Asian
Perspective (13th ed.). Pearson Education India.

Ministry of Home Affairs, G. o. (2011). http://censusindia.gov.in/2011-prov-
results/indiaatglance.html.

Roger, B. J. (2005). Market based management. PRENTICE hall.

Shariff, A. (1999). India Human Development Report, National Council of Applied Economic Research.

(2004). In R. Swamy, BBDO Guide to Urban Markets.

Tata Services Ltd. (2004). Year Wise Population. Statistical Outline of India, 34.

Term paper on market segmentation

More Related Content

What's hot

Viewers also liked

Similar to Term paper on market segmentation

Recently uploaded

Term paper on market segmentation