1. FROM www.businessplans.

org
Market Segmentation
The purpose for segmenting a market is to allow your marketing/sales program to focus on the
subset of prospects that are "most likely" to purchase your offering. If done properly this will
help to insure the highest return for your marketing/sales expenditures. Depending on whether
you are selling your offering to individual consumers or a business, there are definite differences
in what you will consider when defining market segments.

Category of Need
The first thing you can establish is a category of need that your offering satisfies. The following
classifications may help.

For businesses:

 Strategic - your offering is in some way important to the enterprise mission, objectives
and operational oversight. For example, a service that helped evaluate capital investment
opportunities would fall into this domain of influence. The purchase decision for this
category of offering will be made by the prospect's top level executive management.
 Operations - your offering affects the general operating policies and procedures.
Examples might be, an employee insurance plan or a corporate wide communications
system. This purchase decision will be made by the prospect's top level operations
management.
 Functional - your offering deals with a specific function within the enterprise such as data
processing, accounting, human resources, plant maintenance, engineering design,
manufacturing, inventory control, etc. This is the most likely domain for a product or
service, but you must recognize that the other domains may also get involved if the
purchase of the product or service becomes a high profile decision. This purchase
decision will be made by the prospect's functional management.

For the individual consumer:

 Social Esteem or Pleasure - your offering satisfies a purely emotional need in the
consumer. Examples are a mink coat or a diamond ring. There are some products that are
on the boundary between this category and the Functional category such as a Rolex watch
(a Timex would satisfy the functional requirement and probably keep time just as well).
 Functional - your offering meets a functional requirement of the consumer such as a
broom, breakfast cereal or lawnmower.

Segmentation of Needs
Then you should establish what the need is and who is most likely to experience that need. Your
segmentation will be determined by a match between the benefits offered by your offering and
the need of the prospect. Some "need" categories for segmentation include:
Reduction in expenses
Prospects might be businesses that are downsizing (right sizing), businesses that have
products in the mature stage of their life cycle or individuals with credit rating problems.
Improved cash flow
 Prospects might be businesses that have traditionally low profit margins, businesses that
have traditionally high inventory costs or individuals that live in expensive urban areas.
Improved productivity
Prospects might be businesses that have traditionally low profit margins, businesses that
have recently experienced depressed earnings or individuals with large families.
Improved manufacturing quality
Prospects might be businesses with complex, multi-discipline manufacturing processes.
Improved service delivery
Prospects might be service businesses in highly competitive markets, product businesses
requiring considerable post-sale support or individuals in remote or rural areas.
Improved employee working conditions/benefits
Prospects might be businesses where potential employees are in short supply.
Improvement in market share/competitive position
Prospects might be new entrants to a competitive market.
Need for education
Prospects might be businesses or individuals looking for books on business planning, or
seminars on Total Quality Management.
Involvement with social trends
Prospects might be businesses concerned with environmental protection, employee
security, etc. or individuals who believe in say 'no' to drugs, anti-crime, etc.
Specific - relating to product/service characteristics
Prospects might be businesses or individuals interested in safety, security, economy,
comfort, speed, quality, durability, etc.
Factors that segment prospects
Having determined the more general segmentation characteristics you can proceed to a more
detailed analysis of the market. There are literally thousands of ways to segment a market, but
the following are some of the more typical segmentation categories.

For businesses:
Industry by SIC code
This is especially beneficial for vertical market offerings.
Size - revenues, # employees, # locations
In general if your offering is highly sophisticated, requires significant resources or
provides greater value based on volume, then the target should be the larger enterprises.
Job position/responsibility
Examples of offerings might be planning software for managers or cleaning agents for
maintenance managers.
Climate
Examples of offerings might be dehumidifiers in areas near the ocean or snow plows in
northern areas.
Time related factors
Some services in this category are vacation related industries in summer and tax planners
in the spring.
Language
An example of a language specific service is a Spanish TV channel.
Status in the industry
You might want to target businesses that are the technology leader or revenue leader or
employee satisfaction leader, etc.
Accessibility
 To minimize promotion and sales expense you may want to target urban rather than rural
or local rather than national prospects.
Future potential
A good example is how Apple Computer supplied products to schools at all levels to
condition students graduating into the marketplace.
Ability to make a quick purchase decision
Targeting individual purchasers versus business committees can significantly reduce
marketing expense and increase the probability of a quick close.
Access (or lack of access) to competitive offerings
Cable TV business's significant investment in their service delivery system has allowed a
near monopoly for some time. IBM's service reputation insured minimal competition
during the mainframe days.
Need for customization
Offerings such as police cars, busses for municipalities and specialized computer systems
fall into this category.
Product or service application to a business function
Examples are data processing, accounting, human resources and plant maintenance.
For Individual Consumers:
Physical Size
Offerings might be big men's clothing, golf clubs for shorter players, etc.
Creation of or response to a fad
Examples are hula hoops, Jurassic Park T-shirts, pet rock, physical fitness, etc.
Geographic location
Marketers take advantage of location by selling suntan lotion in Hawaii, fur coats in
Alaska, etc.
Time related factors
You may be able to target vacationers in summer, impulse buyers during the holidays or
commuters at 7AM.
Demographics/culture/religion
Ethnic products would fall into this category.
Gender
Product examples are scarves for women, ties for men, etc.
Age
Product examples are toys for children, jewelry for women, etc.
Social status
This could include country club memberships, philanthropic contributions, etc.
Education
Product and service examples are encyclopedias, scientific calculators, learning to read
tools and financial counseling.
Avocation
This could include products for hunting, fishing, golf, art work, knitting, etc.
Special Interests
You could target cat lovers, science fiction readers, jazz music collectors, etc.
Accessibility
Because the individual is more difficult to reach you may want to segment by urban
versus rural, train commuters, people who read Wall Street Journal, etc.
Access (or lack of access) to competitive offerings
 Due to high investment capital requirements or timing of market entry you may be able to
capture a significant market share in a specific geographical area. Examples might be a
trash service, emergency medical support, etc.
Need for specific information
Based on features or content of your offering you can target a market segment. A product
might be books on how to start a business or a service might be seminars on how to quit
smoking.
Need for customization
Product/service examples are home decoration, fashion wear, personal portraits, etc.
Need for quality, durability, etc.
Product examples are mountain climbing gear, carpenter's tools, etc.
Degree of a product/service ingredient
Segmentation based on prospect preferences is common. An example is dark chocolate
for some tastes, light chocolate for others.
Purchase decision influencers
Once you have isolated a specific segment of the market on which to focus, then you can
consider more subtle influences on the purchase decision. Some of these are:
Preference for channel of distribution
Many prospects prefer to buy through a specific distributor or wholesaler. For individuals
this may be due to subtle, as well as, economic reasons. For example, an individual
prospect may immediately think of Wal-Mart or Home Depot when considering an
offering like yours. A business often has a preference so they can have a single
communication point for all purchases. This also often results in lower purchase prices.
Number of decision makers
When selling to consumers or businesses, the more individuals or groups involved in the
purchase decision, the more difficult the sale. Marketing costs for selling bread can stay
low because one person normally makes the purchase decision. Car purchases are more
complex because the purchase decision normally involves a husband and wife. Business
sales to committees often require months to achieve a decision.
Financial strength of the prospect
Less affluent prospects may desire time payments versus a cash purchase and Chevrolets
instead of Cadillacs.
Quantity/volume requirements
Restaurants will want large jars of pickles while individuals want small jars. Businesses
use large amounts of electricity at predictable times.
Ability to use the offering
Trying to sell to a prospect who lacks either the knowledge or resources to properly
benefit from your offering will result in a 'no sale' situation or an unhappy customer. The
prospect should have knowledge and resources such as time, equipment, facilities,
personnel and complementary products/services.
Commitment required
If the offering requires a high commitment in terms of time, resources or money by the
customer then the target should be prospects who 'really need' the offering rather than
prospects who get some, but not a lot, of benefits.
Brand awareness/users
Examples are prospects who ask for IBM compatible PC's or Pitney Bowes mailing
machines or Winnebago R.V.s
Attitude toward a personality or enterprise
 Reputation helps sell AT&T long distance service, IBM computers, Michael Jordan
tennis shoes, etc.
Attitude toward price versus value
For example, purchasers of collectors items aren't price sensitive while purchasers of
commodity items are price sensitive.
Experience with other products/services your enterprise has offered
You are looking for a reaction like "I liked your first product so I'll try your second."
Prospect bias
Examples are, 'Buy USA', I want a car with a 'solid' feel, fast cars, sweet wines, large
print playing cards, etc.
Affiliation with other organizations
Such as the U.S. Chamber of Commerce, AMA, IEEE, doctors, attorneys, pastors,
franchisors, entrepreneurs, etc.
After sale support expectations
It is often beneficial to target prospects who have enough expertise that they will require
a minimum of after sale support.
Seller Characteristics that can influence purchase decision:
Another form of influence is how the prospect perceives your offering and/or enterprise. If you
can determine the characteristics your prospects most value in an enterprise they purchase from,
you can identify those your organization possesses and promote them to the prospect.
Unique employee skills, knowledge
Extensive experience with a specific market segment or field of scientific inquiry can be
a powerful promotional tool. For example if an enterprise could sat, "Our scientists
knows more about corn silk genetic structures than anyone in the world" they would have
a strong sales statement.
Special relationships with distribution channels
Product or service accessibility is a critical factor in sales success. If an enterprise could
say, "Due to a unique relationship, the XYZ video stores give us more shelf space than
any competitor" prospects will likely respond positively.
Customer service capabilities
Prospects like to know that they can depend on post sale support from the product or
service provider. A statement like, "We have more service outlets in New Hampshire
than any competitor" will help secure sales.
Unique product forms
Credible uniqueness such as, "Our product is the only one that offers dynamic digi-
whirling" is appealing to the market.
Manufacturing expertise
The market is always interested in purchasing from the "best". If an enterprise can
confidently state, "We are the only enterprise that can manufacture molecular engineered
widgets", they have created an image of being the "best".
Longevity
Reliability is important. A statement like, "We have been in business for 50 years, so you
can count on us to be there when you need us" is usually a strong selling point.
Purchase Decision Makers
Finally, a point to consider is, given the characteristics of your offering, what type of decision
maker will most likely be interested in purchasing from you. It may be beneficial to rank your
prospects based on the following classifications. While you may not be able to make this
classification of the prospect prior to the first contact, if your sales personnel are sensitive to
these characteristics it can strongly influence your sales strategy.
Ultra Conservative - don't rock the boat, whatever they purchase must be consistent with their
current way of doing things.

 They are most likely interested in products/services that are improvements to existing
offerings rather than something new.
 Once established as a customer they are seldom inclined to review alternatives.
 Very negative to technically complex offerings or offerings requiring extensive user
education.
 Cost effective offerings are only of interest if they don't disturb the status quo.
 They are likely to react positively to any volume purchasing opportunities.

Conservatives - are willing to change, but only in small increments and only in a very cost
effective manner.

 Will consider new products/services but only if related concept has been proven to be
effective. More likely to purchase improvements to existing offerings.
 Will probably want to review competitive offerings, but will gravitate to best known
offering with lowest risk decision.
 Negative to neutral when considering technically complex offerings or offerings
requiring extensive user education.
 Strongly influenced by cost effective offerings and/or 'best price' opportunities

Liberals - regularly looking for new solutions, willing to make change (even major change) if
the benefit can be shown.

 Will usually consider new products/services even if the related concept has not yet been
proven to be effective, but only if the potential benefits can be specified and understood.
 Wants offerings that make effective use of technology, but is not interested in offerings
just because they use a certain technology.
 Will always want to review competitive offerings, but will usually choose the one
offering the greatest benefit, even if there is some risk involved.
 Neutral to positive when considering technically complex offerings or offerings requiring
extensive user education.
 Usually concerned with keeping employees informed and educated, so will often consider
educational offerings.
 Strongly influenced by offerings that most closely deliver the 'end results' desired, even if
they are not the most cost effective.
 Often are on social trend bandwagons so react positively to offerings that address these
needs.

Technical Liberals - enamored with the benefits provided by high tech solutions and any
purchase decision will be biased by the technical content of the offering.

 Usually consider new products/services even if the related concept has not yet been
proven to be effective.
 Often consider just because they use a certain technology.
  Will always want to review competitive offerings, but will usually choose the one
offering the most hi-tech features, even if there is some risk involved.
 Consider themselves technically competent and will expect leading edge use of
technology.
 Positive to fanatic when considering technically complex offerings even when requiring
extensive user education.
 Conversion costs usually not a major concern if technical benefits are there.
 Not particularly concerned with keeping employees informed and educated, so
educational offerings are not of great interest.
 Strongly influenced by offerings that most closely deliver the 'end results' desired, even if
they are not the most cost effective.

Self Helpers - consistently defines/designs solutions to their problems, likes to acquire tools that
help in the innovation process.

 Will usually consider new products/services, but the related concept must have been
proven to be effective.
 Often consider just because they use a certain technology that is relevant to the
development program they have underway.
 Will always want to review competitive offerings, but will usually choose the one
offering the most effective 'do it yourself' features.
 Usually consider themselves technically competent and will expect very effective use of
proven technology.
 Not especially inclined toward technically complex offerings, would rather have user
friendly, but thought provoking, offerings.
 Conversion costs usually not a major concern if offering promises potential for
innovation.
 Usually concerned with keeping employees informed and educated, so educational
offerings are of interest.

MARKET SEGMENTATION IN INDIA

1. Segmentation by income
We all know that India is a very poor country, but as in every country , India also has a “rich
group of people”. You for sure need to divide the India market in those two groups, since the rich
part can be very big buyer becouse of lots and lots of cash they have.

2. Segmentation by religion
The second very important segmentation by my opinion is segmentation by religion. India has
many religions and with those religions many different cultures come. So you will need to adjust
your marketing campaign to those cultures.

3. Segmentation by location
India also has a very different terrain, since it’s a big country. We all know that people in flat
places and people in mountains want different products so market segmentation by location is in
place in India.
2. www.wisegeek.com
Market segmentation is a strategy that involves dividing a larger market into subsets of
consumers who have common needs and applications for the goods and services offered in the
market. These subgroups of consumers can be identified by a number of different demographics,
depending on the purposes behind identifying the groups. Marketing campaigns are often
designed and implemented based on this type of customer segmentation.

One of the main reasons for engaging in market segmentation is to help the company understand
the needs of the customer base. Often the task of segregating consumers by specific criteria will
help the company identify other applications for their products that may or may not have been
self evident before. Uncovering these other ideas for use of goods and services may help the
company target a larger audience in that same demographic classification and thus increase
market share among a specific sub market base.

Market segmentation strategies can be developed over a wide range of characteristics found
among consumers. One group within the market may be identified by gender, while another
group may be composed of consumers within a given age group. Location is another common
component in market segmentation, as is income level and education level. Generally, there will
be at least a few established customers who fall into more than one category, but marketing
strategists normally allow for this phenomenon.

2. INVESTOPEDIA
What Does Market Segmentation Mean?

A marketing term referring to the aggregating of prospective buyers into groups (segments) that
have common needs and will respond similarly to a marketing action. Market segmentation
enables companies to target different categories of consumers who perceive the full value of
certain products and services differently from one another. Generally three criteria can be used to
identify different market segments:

1) Homogeneity (common needs within segment)

2) Distinction (unique from other groups)
3) Reaction (similar response to market)

Investopedia explains Market Segmentation

For example, an athletic footwear company might have market segments for basketball players
and long-distance runners. As distinct groups, basketball players and long-distance runners will
respond to very different advertisements.

Investopedia explains Market Segmentation Theory

Also called the "Segmented Markets Theory", this idea states that most investors have set
preferences regarding the length of maturities that they will invest in. Market segmentation
theory maintains that the buyers and sellers in each of the different maturity lengths cannot be
easily substituted for each other.  An offshoot to this theory is that if an investor chooses to
invest outside their term of preference, they must be compensated for taking on that additional
risk. This is known as the Preferred Habitat Theory.

3.
1.0 Purpose
Public and academic libraries face a plethora of information age challenges. In a world of
customized service, where Amazon knows what books you might like to read and Netflix suggests
films you’d like to watch, libraries have an opportunity to reinvent their customer relationship and to
strategize how to create meaningful relationships with potential customers. Libraries that become
customer-centric – those that start from understanding their customers’ needs and develop
products, services, and programs to meet those needs – will ultimately find success as a 21st
century community leader.
We believe that market segmentation is instrumental to understanding customer needs and
reinventing the customer relationship. Within this context, the purpose of this white paper is to:
1. Provide a general introduction to the concept, methodology, and use of market
segmentation
2. Inform public and academic librarians, including administrators and reference librarians,
about the importance of market segmentation
3. Provide information about the Tapestry market segmentation system (Tapestry), one of the
nation's leading off-the-shelf (OTS) market segmentation systems
2.0 Introduction
According to www.bplans.com, a free resource to help entrepreneurs plan better businesses,
market segmentation is “the categorization of potential buyers into groups based on common
characteristics such as age, gender, income, and geography or other attributes relating to purchase
or consumption behavior.”
Medium and large companies have been using market segmentation for years.
> See Appendix for Case Study: Customer Prospecting, DS Waters, Atlanta, Georgia
Small businesses, non-profit organizations, entry-level entrepreneurs, and public and academic
libraries, however, know virtually nothing about market segmentation.
Until recently, the cost of segmentation systems and the level of expertise needed to employ them
have been beyond the reach of these organizations. With the entry of the BusinessDecision
database (www.businessdecision.info) into the public and academic library market, the Tapestry
segmentation system brings professional level segmentation to all public and academic library
patrons. This opportunity provides organizations, including libraries themselves, with a powerful new
tool to obtain the same benefits as large companies using market segmentation.

Organizations use market segmentation to 1) gain insight into their customers and use that
knowledge to enhance their profitability, revenue growth, and growth in the number of customers;
and 2) to become a customer-centric organization; that is, to make the customer an integral part of
their organization's strategy and decision-making.
Public and academic libraries can use market segmentation to achieve growth in the number of
customers; realize a higher return on investment (ROI) in materials and services; and increase the
utilization of their resources (e.g., books, DVDs, etc.) across a higher number of people (in business
terms to amortize or leverage their “sunk” investment in assets). Public and academic libraries can
specifically use market segmentation in two use cases:
• Customer service use case:
• To offer their small businesses, entry-level entrepreneurs, and non-profits a tool to find new
customers, retain existing customers, improve profitability, find the best location for their
business, and develop new products and services appropriate to their market.
> See Appendix for Case Study: Start-Up Yoga Studio, Los Angeles, California
• For use by students to support research and class projects and to prepare students to use
market segmentation in their chosen profession.
> See Appendix for Case Study: Student Advertising Campaign Project, Pellissippi State
Community College, Knoxville, Tennessee
• Strategic planning use case:
• For use by the public library itself to improve services by better engaging library users and
those who don't yet use the library.
> See Appendix for Case Study: Strategic Plan: Topeka and Shawnee County Public Library
(TSCPL), Kansas
For public and academic libraries, market segmentation is applicable both as a customer service (to
businesses, entrepreneurs, non-profits, students, and faculty) and as an indispensable tool for the
library’s own strategic planning process. Recognizing these different use cases, this white paper will
use business terminology and library terminology interchangeably. We encourage the reader to
think broadly about the applications for market segmentation in his or her library environment.

"Today, segmentation is no longer a simple, or static, marketing

technique; it is core to the way successful companies run their business."
- IBM Institute for Business Value

Market segmentation is best known for its use in marketing: customer acquisition, retention, and
migration to higher value; and choosing the right location for a given facility, be it a retail store,
library, or other type of outlet. Over the last decade, however, the success of market segmentation
has expanded its application across other business functions. Market segmentation can be applied
to a range of business or organizational functions (see Figure 1: Business Applications of Market
Segmentation) including:
• Strategic and tactical functions ranging from strategy development to customer acquisition and
retention
• Core business practices and initiative-based activities including planning and forecasting and
development of new products and services
• Customer management at the portfolio level and in one-to-one sales and services, including
media and distribution choices

Figure 1: Business Applications of Market Segmentation (Source: IBM Institute for Business Value)
4. NetMBA.com
Market Segmentation

Market segmentation is the identification of portions of the market that are different from one
another. Segmentation allows the firm to better satisfy the needs of its potential customers.

The Need for Market Segmentation

The marketing concept calls for understanding customers and satisfying their needs better than
the competition. But different customers have different needs, and it rarely is possible to satisfy
all customers by treating them alike.

Mass marketing refers to treatment of the market as a homogenous group and offering the same
marketing mix to all customers. Mass marketing allows economies of scale to be realized
through mass production, mass distribution, and mass communication. The drawback of mass
marketing is that customer needs and preferences differ and the same offering is unlikely to be
viewed as optimal by all customers. If firms ignored the differing customer needs, another firm
likely would enter the market with a product that serves a specific group, and the incumbant
firms would lose those customers.

Target marketing on the other hand recognizes the diversity of customers and does not try to
please all of them with the same offering. The first step in target marketing is to identify different
market segments and their needs.

Requirements of Market Segments

In addition to having different needs, for segments to be practical they should be evaluated
against the following criteria:

 Identifiable: the differentiating attributes of the segments must be measurable so that they
can be identified.
 Accessible: the segments must be reachable through communication and distribution
channels.
 Substantial: the segments should be sufficiently large to justify the resources required to
target them.
 Unique needs: to justify separate offerings, the segments must respond differently to the
different marketing mixes.
 Durable: the segments should be relatively stable to minimize the cost of frequent
changes.
A good market segmentation will result in segment members that are internally homogenous and
externally heterogeneous; that is, as similar as possible within the segment, and as different as
possible between segments.

Bases for Segmentation in Consumer Markets

Consumer markets can be segmented on the following customer characteristics.

 Geographic
 Demographic
 Psychographic
 Behavioralistic

Geographic Segmentation

The following are some examples of geographic variables often used in segmentation.

 Region: by continent, country, state, or even neighborhood

 Size of metropolitan area: segmented according to size of population
 Population density: often classified as urban, suburban, or rural
 Climate: according to weather patterns common to certain geographic regions

Demographic Segmentation

Some demographic segmentation variables include:

 Age
 Gender
 Family size
 Family lifecycle
 Generation: baby-boomers, Generation X, etc.
 Income
 Occupation
 Education
 Ethnicity
 Nationality
 Religion
 Social class

Many of these variables have standard categories for their values. For example, family lifecycle
often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids),
full-nest, empty-nest, or solitary survivor. Some of these categories have several stages, for
example, full-nest I, II, or III depending on the age of the children.
Psychographic Segmentation

Psychographic segmentation groups customers according to their lifestyle. Activities, interests,

and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables
include:

 Activities
 Interests
 Opinions
 Attitudes
 Values

Behavioralistic Segmentation

Behavioral segmentation is based on actual customer behavior toward products. Some

behavioralistic variables include:

 Benefits sought
 Usage rate
 Brand loyalty
 User status: potential, first-time, regular, etc.
 Readiness to buy
 Occasions: holidays and events that stimulate purchases

Behavioral segmentation has the advantage of using variables that are closely related to the
product itself. It is a fairly direct starting point for market segmentation.

Bases for Segmentation in Industrial Markets

In contrast to consumers, industrial customers tend to be fewer in number and purchase larger
quantities. They evaluate offerings in more detail, and the decision process usually involves
more than one person. These characteristics apply to organizations such as manufacturers and
service providers, as well as resellers, governments, and institutions.

Many of the consumer market segmentation variables can be applied to industrial markets.
Industrial markets might be segmented on characteristics such as:

 Location
 Company type
 Behavioral characteristics

Location

In industrial markets, customer location may be important in some cases. Shipping costs may be
a purchase factor for vendor selection for products having a high bulk to value ratio, so distance
from the vendor may be critical. In some industries firms tend to cluster together geographically
and therefore may have similar needs within a region.
Company Type

Business customers can be classified according to type as follows:

 Company size
 Industry
 Decision making unit
 Purchase Criteria

Behavioral Characteristics

In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such
behavioral characteristics may include:

 Usage rate
 Buying status: potential, first-time, regular, etc.
 Purchase procedure: sealed bids, negotiations, etc.