Market Segmentation

What is MARKET?
A market is a place which allows the purchaser and the seller to invent and gather information’s and lets them carry out exchange of various products and services. In other words the Meaning of Market refers to a place where the trading of goods takes place. The place can be a market place or a street market. A market is thus by definition comprises people or business with potential interest, purchasing power and willingness to spend the money to buy a product or service that satisfies need. The following diagram illustrates this concept.

Total populatio n

Felt need

Intereste d

Money to Buy

Willingne ss to spend



Tata’s have started producing a Mercedes Benz car here in India. Many individuals have a need for car but they may not need a luxury car like Mercedes. They are happy with a santro or chevy spark or Maruti. Some might be interested in a luxury car, but may not be interested in Mercedes as it may attract the attention of tax authorities. They may prefer luxury cars like Honda city, Ford Fiesta, Octavia and so on. Some may be interested in Mercedes but they are not able to afford a price of Rs.32lakh. Thus, the market for Mercedes is a very small portion of luxury car markets, which is a small portion of the total car markets.

What is market segmentation?
Lets us first see what market segmentation means is:

Markets are Heterogeneous; Segmentation divides them into Homogeneous Sub-Units
The market for a product is nothing but the aggregate of the consumer of that product. We also know that consumer of a product vary in needs, motivates, characteristics, and buying behavior. It means that the market for a product is essentially a heterogeneous unit. Markets break up the heterogeneous market for product into several sub units, or sub markets, each relatively more homogeneous within itself, compared to market into a number of sub markets/ distinct sub units of buyer , each with relatively more homogeneous characteristics, is known as market segmentation.

not about the product that’s gets consumed. speaks of product segments and price segments and use these expressions as synonymous with market segments. nor Price It would be useful to provide one important clarification right at the beginning.It is the Consumer who are Segmented. the process of market segmentation as a whole. actually connote. it is not the passenger cars (product) that are segmented. Market is about people who consume the product. This can leads to a wrong understanding of what market segments. For example. Taking the passenger car instance again. nor price slots. We have to be clear that in market segmentation. It is the consumer. who invariably defines the segments. nor price. it is the consumers who are segmented.the Aurum and Royal lines. ‘Price slots’ and specific products offers thereof are just a derivative of segments of consumers. Markets. or for that matter. but it is the consumer/buyer of car that is segmented. not the product. in segmentation of the passenger car market. but it is the buyer of cars that are segmented. not product. it is not the cars that are segmented with price as the base. sometime. We do speak about ‘price slots’ in segmentation. But it does not mean that the price slots constitute the segments. Example: Titan Watches Arrives in three broad Segments • • • The Rich The Middle The Lower Titan Brings out a Wide Range of Offer to Serve the Different Value Segments • For the Gold lovers: Titan offered to this segment an all gold watch. Similar is the position about the price segments. Not Product. 2 . with their price preference for car as the base. What it signifies is that different offers are made available matching the differing price preference of the consumer segments involved.

• For the More than One Segments: Titan made those who wanted more than one watches into a separate segment ad tempted them by offering a wide range of models. the Euro collection. designed by European designers. • For the Children Titan adopted children – those between 6 to 14 years as o separate segment ( Dash for Kids) • For Women Seeking Fashion within the Middle-income Group: 3 . It offered them matched one’s dress and occasions. • For the youth /the outdoor lovers: Titan viewed them as a lifestyle segment and offered them the fast track. • For Designer Segment: Titan also adopted the designer segment and offered them all designer and hand assembled watches.

promotion and pricing for matching the particular customer group.the ones that match the firm’s resources and are most productive and profitable. and can develop marketing offers and appeal. which segments of the market match his situation and should. form his target market. the response from each segment will be more homogeneous. • Makes the Marketing Effort More Efficient and Economic Segmentation also makes the marketing more efficient and economic. achieves the specialization required in product. Why segment the market? Market segmentation benefits the market in several ways. that match the group. • Facilitates Right Choice of Target Market Segmentation helps the marketer to pick up his target market properly. They can adapt the offers to the target segments the. for most firms. will help the marketer develop marketing offers/programmers that are most suited to each segment’s. hence. This in turn. It ensures that the marketing effort is concentrated on selected and well-defined segments. It does this by enabling him to distinguish one customer group from another within market and by showing him. distribution. • Helps Identify Less Satisfied Segments and Concentrate on Them 4 . • Facilitates Effective Tapping of the Chosen Market Segmentation enables the markets to crystallize the needs of each of the chosen segments and make offer that match them. When buyers are handled after segmentation.Titan offered the Raga Range for this segment which was meant exclusively for women. the resources would benefits if its efforts were concentrated on selected segments. After all.

Market can be segmented using several bases A market/ consumer population for a product can be segmented using several relevant bases. The major ones include:  Geographic  Demographics  Socio-cultural  Psychographic  Buying Behavior Demographic s Geographic Socio-Cultural Market Segmentat ion Buying Behavior Psycho-graphics 5 .Segmentation also helps the marketer to asses to what extent existing offers in the market matches the needs of different customer segments and which are the less satisfied segments.

National markets within a country like India. region. state. Example: Geographic decides the product consumption pattern. and apply it even on face.Geographic Segmentation Segmentation of consumer based on factors like climate zone. When we sale our product to international market. and then go for segmentation on other bases. Products are made according to their need. state. in the first instance. and then go for segmentation on other bases. Marketer. People down south use talc excessively. Southern are found of coffee and north Indians like Tea. district and urban/rural area. continents/ country. perhaps aspiring to fairer like their counter part in the north. Rasna 6 . constitutes geographic segmentation. and urban/rural area. district. often segment the market segments the market by continents/country/region in the first instance. a staple grain there and fish abundantly available from sea. People in coastal areas of Konkan and Goa relish rice. who operate globally. often segment the market by region.

Complexion creams like fair and lovely sells only in India. Amul Shakti energy drink • Gender: Gender is another key variable/base under demographic segmentation. gender. age. • Age: It is essentially a case of age based segmentation of a market. family size. and does not contain a lot of sugar. Emami segmented its product in gender 7 . chocolate milk. Women tend to be slower to make decisions and exhibit greater uncertainty about their decisions. Example: Amul has segmented his product in different age group For kids: Amul kool. stage in family cycle. gives instant syrup when dissolves in glass of water. language. For women’s and older people: Amul calci+. There is substantial evidence that men and women differ in buying behavior and it their persuasive messages. For Youth: Amul cool kafe. community. Demographic segmentation Segmentation of consumer based on variables such as race. occupation. And. they are also more persuadable. Example: Adidas targets women in India German shoe maker Adidas is trying to develop the women segment in India for its products.of the consumer demographic segmentation. and social status . Nutramul energy drink. economic position/income/purchasing capacity level. marital status.

Women’s: Naturally fair Men: Fair and handsome • Purchasing capacity: In the segmentation context of several elements of demographic. Buyer’s preferred price range is often related to purchasing capacity. 500 Nokia N95 price Rs 22. 5300 Nokia N73 price Rs.12. purchasing capacity is perhaps the most significant one.2750 Nokia 5130 price Rs. Example: Nokia It deals with wild variety and wild range.750 8 . Nokia 2600 price Rs.

This segment is sometimes referred to as the small car segment. Matiz is some of the dominant players in this segment. Santro. Here the entry level starts from Rs 1. Maruti 800 (Budget Car Segment) Compact car segmentIt lies between budget car and family car. Maruti 800 and Omni are the dominant players in these segments. Preferred price range is between Rs 3 to 4. Maruti Zen (Compact car segment) Daewoo Matiz (Compact car segment 9 . Tata Indica. Maruti Zen. Fiat Uno. Competition in this segment is extreme in Indian market.5 lakh.Budget car segmentIt is the largest segment in Indian market. With the launch of Tata Nano with a price range of 1lakh the outlook of this segment has changed.5 to 3 lakh.

Audi 6. Price ranges between Rs 4. Honda City. Maruti Esteem.Cars of compact segment Family car segmentThe purchasing capacity of buyers of this segment is somewhat higher than that of the budget and compact car segment. and HM Contessa belongs to this segment. Honda City. BMW is the players in this segment. especially in term of space. 10 . that they turn to ‘the family car segment’. Obviously. Ford Escort. Daewoo Cielo (Family Car segment) Premium car segmentThis segment represents the buyer who require true world class luxury car. Audi 1800. Mercedes Benz E229. Daewoo Cielo. this is a tiny segment in the Indian context. In India cars that are sold in India as ‘Budget Car’ and ‘Compact Car’ do not meet their purpose. Rover Montego. Price ranges between Rs 6 to 8 lakh. Opel Astra (Premium car segment) Super luxury saloon segmentBuyer in this segment looks for a real super premium segment car.5 to 6 lakhs. E-250. Opel Astra etc are some of the major cars in this segment. Mitsubishi Lancer.

Example: 11 . deeply. traditional. movie channel. attitude. close colleges. form the base. Culture includes religious. A person usually acquires his cultural attributes right at his childhood. • Life style: Just as purchasing capacity forms a major base under demographic segmentation. language. peer group. pattern of social behavior etc. Social group include family. Example: Zee Televisions deals with variety of channels regional channel. The influences of cultural and social factor are on consumer behavior. self-concept and value system. So products are segmented on the basis of social and cultural factor. They adopt their common life style. The desire for status.Audi 6 (Super Luxury saloon) Socio-Cultural Factors Culture and social class are the two main bases of segmentation here. life style forms a major base under psychographics segmentation. Social Factor: Social group of varying types exert influenced on the consumer. enhanced appearance and more money are examples of psychographic variables. McDonald has veg burger for vegetarian and nonveg burger for non vegetarian. Many businesses offer products based on the attitudes. A given culture brings in its own unique pattern of social conduct. sports channel. They are the factors that influence your customers' purchasing decision. elements like life style. Culture: Culture influence consumer behavior. beliefs and emotions of their target market. caste. McDonald has both veg and non veg burger. Psychographic segmentation Psychographic Segmentation groups customers according to their life-style and buying psychology. In psychographic segmentation.

CCD has estimated that presently 60% of the footfalls in its 300 outlets belong to students between the ages of 15 to 24 years. and their buying behavior. It is therefore. useful in positioning/repositioning of product and in new product launch and brand extension. Variables of buyer behavior are:Benefit sought: . Buying Behavior Segmentation Markets can be segmented on the basis of buyer behavior as well. Example: Nestle has found a separate segment atta noodles as distinct from the maida noodles. they will be different in their motives in owing it and their behavior in buying it. The CCD are targeting students and trying to establish a space in their lives. demographics.Quality / economy / service / look etc of the product. • Psychographic segmentation helps in positioning/repositioning. Usage rate: .Café Coffee Day They choose lifestyle oriented. User status: . particularly. urban consumers as target with youth. It is because there is some distinction between buyer’s characteristics that are reflected by their geographic. Since all Segmentation is in a way related to buyer behavior. The primary idea in buyer behavior segmentation is that different customer groups expect different benefits from the same product and accordingly. one might be tempted to ask why buyer behavior-based segmentation should be a separate method. Marketers often find practical benefit in using buying behavior as a separate segmentation base in addition to bases like geographic. a psychographics. launch of new products and brand extension: Segmentation consumer based on psychographic rest on identifying consumer state of mind and hence helps in piecing together a more inclusive profile of target consumer.Heavy user / moderate user / light user of a product. They make coffee an ‘experience’ and provide a special experience to chosen segment.Regular / potential / first time user / irregular /occasional. demographic and psychographic profiles. 12 .

a market can be segmented using the demographic base in the first instance. and the market can be segmented at multi-levels. and continue its probe more deeply. Actually. that the firm first carries out volume segmentation of its market. Since customer characteristic are spread over several variables. using several bases in succession While discussing about bases of segmentation we must discuss about multi-level segmentation. the aim should always be to go as deep as possible in segmenting the market so that segments that are most attractive and most suited can be chosen 13 . but it cannot know the purpose for which they buy the product. the market can be segmented using volume as the base in the first instance. Example: Shampoos. They just have to be relevant for the concerned market. Occasion Attitude toward offering: . soap and all FMCG products buying behavior segmentation is used. The firm can then pick up the heavy users and carry out a multi-level segmentation. the different bases can be used in succession in a suitable order. Different bases can be used in combination in segmenting a given market. followed by the demographic/psychographic/buyer behavior/benefit base. the numbers of levels in which a market can be segmented are indeed numerous. followed by the psychographic base and the buyer behavior/benefit base. Actually. Since each of these bases has several sub-bases. as it is not as through segmentation bases discussed above are mutually exclusive and a market can be segmented only with one particular base.Hard core loyal / split loyal / shifting / switches. Or. on either / or basis. Occasion: . any market can be segmented through several bases.Holidays and occasion stimulate customer to purchase products.Loyalty to brand: . Multi-level Segmentation: A Market can be segmented. Assuming for example.Enthusiastic / positive attitude / negative attitude / indifferent / hostile. it can know who the heavy user of its product are. For example.

media vehicles. ADVANTAGES OF MARKET SEGMENTATION Various advantages of market segmentation are:• • • • • Helps distinguish one customer group from another within a given market. helps develop market offer that are most suited to each group. distribution method/channels. their needs. It also helps him to make the winning strategy and strike the right product offer and the right marketing mix. sports-oriented. advertising massages and sales appeal. helps develop marketing programmers on a more predictable base. Facilitates effective tapping of the market. which will be appropriate. Helps crystallize the needs of the target buyers and elicit more predictable responses from them . 40 different market segments in which it would present with its vehicles. He can understand in what way each of the different segments want the product to be. he can select the priced. more conservative couples. promotion. the Oldsmobile at affluent families. and the Buick at older. • • 14 . it has targeted the Pontiac at active. the Chevrolet at price-conscious young families. Example of General Motors:GM has identified about 40 different ‘customer needs’ and correspondingly. to fit the individual segment. With the information generated from multi-level segmentation. Makes the marketing effort more efficient and economic. Helps achieve the specialization required in product. he can then tailor his product.Multi-level segmentation enables better selection of target market and better choice of marketing mix Multi-level segmentation enables the marketers to choose his target market better. marketing offer and promotional appeal. For example. young couples. and pricing for matching the customer group and develop marketing offers and appeal that match the need of each group. he can obtain a deeper understanding of the customers in each segment. Helps divide the markets and conquer them. distribution. Facilitates proper choice of target market. buying motives and buying behavior.

In term of value. Brings benefits not only to the marketer but also to the customer as well. a much larger volume will be necessary for the business to be viable. instead of frittering them over irrelevant. the firms quickly sense that the premium segment is more profitable one. Helps spot the less satisfied segments and succeed by satisfying such segments. At the same time. customers and companies can choose each other and stay together. as it account for over 120. the popular segment account for 80 percent and the premium segment for the remaining 20 percent. 00.000 tones. the popular segment is a bigger compared to the premium segment. Is it profitable: .000 tones. the firm’s choice may tilt toward the premium segment. The market is very competitive. the premium segment has been growing at over 20 percent annum. in the popular segment. the segment cannot be ruled out as lacking in size. Clearly. of the total market of around 6. Analysis will readily indicate to the firm that in bath soaps. formerly nearly 30 percent of the total market. Is it growing: . 15 • • .• • • • Helps concentrate efforts on the most productive and profitable segment. business firms seek out the high growth segments. The tilt will be particularly pronounced if the firm’s natural disposition is to strive for a position in the high growth segment of the business. it has to note that the premium segment too is sizeable. When this fact is taken into consideration. the premium segment happens to be the high growth segment. If the firm wants a very large volume. the premium segment is even more sizeable. Even a relatively lower volume in the segment may bring in good returns. When segmentation attains high sophistication. or unprofitable segment. EVALUATION OF THE SEGMENTS Whether market segmentation is successful or not can be evaluated by the following questions• Is it sizeable: .Size-wise. In this background. On the contrary. it has to think of the popular segment. Whereas the popular segment has been growing at 10 percent per annum. In term of tonnage. aggressive promotional support through expensive media like TV becomes essential. the firm may come to the conclusion that it may be worthwhile to gamble in the premium segment rather than the popular segment.Another point is that costs of marketing.Next consideration will be the extend of profitability. since prices and margins in the segment are low. Costs of launching a new brand are particularly high.Growth rate and likely future position of the segment will be the next consideration in the evaluation process? Usually. or unproductive. distribution and promotion in the business are quite high and are constantly on the rise. In the present example.

Several other brands of different companies are competing in the segment. The popular segment will be accessible only to the firm with a cost advantage. The market realities will have to be taken into consideration.Having reached the conclusion that the premium segment is sizeable. The firm has to take due note of this reality. This may need further analysis. the premium segment. since price is a major determinant in this segment. and which are also marketing savvy. And. Premium segment will be accessible only to firms. HLL’s Pears and Dove are well entrenched.• Is it accessible: . Liril of Hindustan Lever has a commanding position in this segment. the firm has no reason to believe that the premium segment is not accessible to it. profitable and accessible. for some other choosing both. The firm therefore has to assess whether the particular segments are compatible with its resources and capabilities. growth oriented. PREPARED BY:Akanksha Goswami Student Of Bhilai Business School Bhilai Chattishgarh 16 . At the upper end of the segment. Is it compatible with the firm’s resources and capabilities: . Only firms endowed with strong resources and an aggressive marketing strategy/culture can fight and survive in the market. the popular segment may be the natural choice and for others. At the same time. unless it is convinced that it is very weak in marketing. and some of them do manage to stay. So. which enjoy a differentiation advantage. analysis also reveals that new brands do keep entering the segment every now and then.The firm has to now consider whether the segments are accessible to it. the firm has to now find out if the segment matches its resources? For some firms. The premium segment is a highly competitive segment.

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