MARKET SEGMENTATION

CONCEPT AND DEFINITION

The concept of market segment is based on the

fact that the market of commodities are not
homogeneous but they are heterogeneous. Market
represent a group of customer having common
characteristics but two customer are never
common in their nature, habits, hobbies income
and purchasing techniques.

DEFINITION

According to Philip kotler ,

Market segmentation is sub-dividing a market

into distinct and homogeneous subgroups of
customers, where any group can conceivably be
selected as a target market to be met with
distinct marketing mix.

Market Segmentation is a method of dividing a

market (Large) into smaller groupings of
consumers or organizations in which each
segment has a common characteristic such as
needs or behavior.

LEVELS OF MARKET SEGMENTATION

1. SEGMENT MARKETING
Consists of a group of customers who
share a similar set of needs and wants.

Identifiable Group with in a Market with

Similar

Wants
Purchasing Power
Geographical Location
Buying Attitudes

2. NICHE MARKETING
Group of customers seeking a distinctive mix of benefits

who are ready to pay extra premium.

Niche = segment

sub segments

Eg. Washing detergents

hard & gentle washes .
Surf excel for tough stains ( hard on clothes) & Ezee from
Godrej for delicate clothes.
--- Astha , Sanskar , Q TV focus on religion & spiritualism.

DISTINCT NEEDS

PAY PREMIUM

SPECIALIZATION

LESS COMPETITION

POTENTIAL

ROLLS ROYCE

3. LOCAL MARKETING

Marketing programs tailored to the needs & wants of local

customer groups in trading areas, neighborhoods , etc.
This trend is called grass roots marketing.

Ex. Spiderman 3 was released in 5 different language in

India including bhojpuri.

Pune
sarees

Kashmiri silk

4. INDIVIDUAL MARKETING

Ultimate segmentation segments of 1 or customized

marketing or one to one marketing.
Customerization empower the consumers to design the
product or service offering of their choice.
Individuals can directly talk with the suppliers or the
manufacturers for fulfilling their wants for the required
product.
Ex. Paint companies have started doing this- Asian Paint ,
Nerolac , Berger Paints

5. GEOGRAPHIC SEGMENTATION
Divide the market into different group based on :
Region South India , North , Western Region, East

City metro cities, cities with population more than 1

million
World
Density
Climate
States
Ex.- Mcdonalds globally, sell burgers aimed at local markets,
for example, burgers are made from lamb in India rather
then beef because of religious issues.

6. DEMOGRAPHIC SEGMENTATION

As people agetheir needs and wants change, some organizations develop specific
products aimed at particular age groups forexamplenappiesforbabies,toysfor
children,clothesforteenagersandsoon.
Gendersegmentation is commonly used within the cosmetics, clothing and magazine
industry.
In the UK we have also seen the introduction of Maxim, (www.maximmagazine.co.uk) a male lifestyle magazine covering male fashion, films, cars, sports
and technology. \

Incomesegmentation is another strategy used by many

organisations. Stores like Harrods, Harvey Nicohals are
predominantly aimed at the affluent market. Daewoo aim
their vehicles at price sensitive buyers who require a
bundle of benefits for the price. In today's globally
competitive environment brands are specifically developed
and positioned within particular income segments inorder
to maximise turnover.
Products and services are also aimed at differentlifecycle
segments. Holidays are developed for families, the 18-30's
singles, and for those in their 50's.

7. BEHAVIOURAL SEGMENTATION

OCCASIONS - Archies and Hallmark

cards, Monaco at tea time.
BENEFITS Shampoo for hair conditioning,
cleaning , hair fall defence dandruff control
USER STATUS- light medium heavy user

CRITERIA FOR EFFECTIVE MARKET

SEGMENTATION
In order for segmentation to be viable there are
some criteria that the selected groups must
comply with. A segment needs to be identifiable
and measurable. Marketers should be able to
distinguish those who fit in the segment and
those who don't.

1. Substantiality
The choice of market size alone does not differentiate segmentation from
other activities; size is a factor when defining any market. It is more
critical to segmentation, though, owing to its focus on parts or fragments
of a market. If segments are small in relation to a companys current
operation their contribution to overall corporate results may be meagre,
but large segments may tax company resources and strain cash flows.
As with any marketing strategy, the optimum ratio between resources
and market size must be found.
2. Differential Response
An absolute requirement for segmentation is that each defined segment
must have unique market response characteristics. The fact that a
market segment or a mailing list represents households with selective
traits is of no use if the response from it is not substantially different
from that of other segments or lists.

3. Identification
Any segment used in a marketing program must be capable of
being identified quantitatively. If a segment cannot be reduced
to statistics there is no way of knowing if the marketing program
targeted to it is successful.
4. Stability
segments must be relatively stable over time. Segments that
change radically in a short time are precarious investments.
Shortening the payback period reduces risk, but long-term
returns are still unreliable. Unstable segments are often
attractive to marketers wishing to cash in quickly on a trend, but
they generally hold little attraction for prudent, long-term
investors. Some marketing segments are more volatile than
others.

5. Accessibility
Accessibility dictates that direct marketers must be
capable of reaching their chosen segments efficiently
through one or more media. Each firm determines
its own level of efficiency by correlating its resources
and objectives with certain factors common to all
marketing programs.

PROCESS OF SEGMENTATION
Four step market segmentation process
To develop a successful marketing strategy, it is
important to identify the appropriate consumer
segments. There are four steps you should perform to
conduct the market segmentation process effectively.
Step 1: Identify segmented markets
The first step of the market segmentation process is
to identify the segmented markets. It is important to
select the segmenting strategy that most accurately
categorizes consumers according to your product or
service.

Step 2: Analyze each segment

Step two of the market segmentation process is to
analyze each segment. After identifying potential
market segments, it is important to research and
analyze the consumers that comprise each segment.
You must determine the similarities that connect
the members of each segment, and identify the
differences that separate one segment from another.
During the analyzing step, you should outline the
buying habits, product usage rates, attitudes, and
lifestyle choices that represent a typical customer in
each segment. Demographic and geographic
information will provide a clear customer profile to
help you determine the market segment best suited
for your product or service .

Step 3: Evaluate market opportunities

The third step of the process is to evaluate your market
opportunities. The customer profiles you create help you
identify the market segments that offer the sufficient benefits
you need to achieve company goals and objectives.
When evaluating each segment, you should consider your ability
to reach the targeted consumer, the number of potential
customers within the segment, your ability to measure the
segment's progress, and the segment's compatibility with your
company's
mission.
During this step, you must also forecast your company's market
share possibility in each segment. By defining the sales
potential, you can justify the need to secure the necessary
resources to implement your marketing strategy

Step 4: Select target segments

The fourth step of the market segmentation
process is to select the appropriate target
segments. The research, examination, and
evaluation of the market segments allow you to
evaluate the profit potential of each segment.
Once you select one or more target segments, you
can develop products and marketing strategies to
satisfy your customers' needs.

MARKETING TARGETING

Definition

A target market is a group of customers that

the business has decided to aim its marketing
efforts and ultimately its merchandise towards.
A well-defined target market is the first element to
a marketing strategy. The marketing mix
variables of product, place (distribution),
promotion and price are the four elements of a
marketing mix strategy that determine the
success of a product in the marketplace.

Target markets are groups of individuals that are

separated by distinguishable and noticeable
aspects. Target markets can be separated by the
following aspects:
Geographic segmentations, addresses (their
location climate region)
demographic/socioeconomic segmentation
(gender, age, income, occupation, education,
household size, and stage in the family life cycle)
psychographic segmentation (similar attitudes,
values, and lifestyles)
behavioral segmentation (occasions, degree of
loyalty)
product-related segmentation (relationship to
a product)

In addition to the above segmentations, market

researchers have advocated a needs-based
market segmentation approach to identify
smaller and better defined target groups.
A seven step approach proposed by Roger Best is
as follows:
Select the target audience the customers are
grouped based on similar needs and benefits
sought by them on purchase of a product.

Identify clusters of similar needsdemographics, lifestyle, usage behaviour and

pattern used to differentiate between segments.

Apply a valuation approach- market growth,

barriers to entry, market access, switching, etc. are
used.
Test the segments- A segment storyboard is to be
created to test the attractiveness of each segments
positioning strategy.
Modify marketing mix- expanding segment
positioning strategy to include all aspects of
marketing mix.