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A Comprehensive Note On "Chapter Eight-Identifying Market Segmentation and Targets"
A Comprehensive Note On "Chapter Eight-Identifying Market Segmentation and Targets"
Prepared by:
MONIRA ALAM KANTA (G1536248)
International Islamic University Malaysia
INTRODUCTION
An organization cannot perform full customers in a wide market – consumers are too frequent
and various in their requirements. The company or organization needs to identify the market
Many corporation embrace target marketing where sellers differentiate the significant market
segments, target one or more of those segments, and develop products and marketing events
customized to each. Alternatively of scattering the marketing effort they focus on the customers
attacked in the similar process as they have same demand and preferences. Kotler and
Armstrong define market segmentation as “dividing a market into distinct groups of buyers
who have distinct needs, characteristics, or behaviour and who might require separate products
or marketing mixes” (Armstrong and Kotler, 2005: 54). In 1956 Smith defined, “Market
the desires of customers for more precise satisfactions of their varying wants." This being an
exact definition to date, one of its most seductive feature is that it presents segmentation as a
conceptual model as to how well it explains the environment for a specific product or service
one-to one marketing in one enormous and multitude marketing in the other.
Target marketing includes three activities: market segmentation, market targeting, and market
positioning. Market segments are large, identifiable groups within a market.
Segment Marketing:
A market segment consists of a large identifiable group within a market with similar wants,
purchasing power, geographical location, buying attitudes or buying habits. For example, for
an auto company might have four broad segments: customers seeking basic transportation or
high performance or luxury or safety.
Each segment buyers are assumed to be quite similar in needs and wants. Anderson and Narus
urge to present flexible market offering instead of a standard offering (“one size fits all”) to all
members within the segment. A flexible market offering consists of two parts:
Naked Solution: Product and service element that all segment members value
Options: That some segment member’s value, each option carries extra charge.
For example seat, food and drinks offered to the economy class passenger of an airline are
naked Solution while extra amount charged for an alcoholic beverage/Internet facility to those
who are ready to pay for it would be option.
There are quite a number of potential market segmentation bases which an organization could
effectively utilize to construct market segments. As a basic guide, segmentation bases can be
classified into four major categories:
Geographic segmentation:
First of all, what is a geography? Geography is the area which the amount of population can be
exists on the exact place.
Then the geographic segmentation, segmentation is the division of something. In this point the
geographic segmentation is explaining about the business and market divisions when a market
and business on the basis of geography divided into many various types for example based on
countries, people, distract and so on there are many examples of geographical segmentation
which are the largest country like China and the smallest one is like Singapore.
Geographic segmentation is focusing on the location of a company sale, into different
geographical units such as:
- Region: by continent, country, state, or even neighbourhood;
- Size of metropolitan area: segmented according to size of population;
- Population density: often classified as urban, suburban, or rural;
- And Climate: according to weather patterns common to certain geographic regions.
Therefore the international companies may divide its market basis on the neighbourhood
countries to provide their services easily, while national companies may star with rural areas
and move on to the cities.
Demographic segmentation:
Demographic segmentation is when a company divides the market into groups on the basis that
each group of the customers share similar demographic qualities. For instance, a company
selling feminine hygiene products might naturally identify its target market as female. The
number of demographic traits included in describing a particular segment can vary. A company
might identify a demographic segment based on common gender, age and income. Market
segmentation allows a company to target its products or services to a specific group of
consumers, thus avoiding the cost of advertising and distributing to a mass market. The
following are the different subsets of demographic segmentation. Demographic segmentation
divides the markets into groups based on variables such as age, gender, family size, income,
occupation, education, religion, race and nationality. As a matter of fact, demographic factors
are the most popular bases for segmenting the consumer group due to consumer needs, wants,
and usage rates which often vary closely with the demographic variables. Moreover,
demographic factors are easier to measure than most other type of variables.
- Age and life-cycle: In order to segment markets, age is one of the most common
demographic variables. As we all know, people desire and abilities change with the age;
that is a reason why some companies try to offer different products or use different
marketing approaches for different ages. For instance, Mc Donald’s target children,
teens, adults and seniors with different ads and media. Therefore, markets that are
commonly segmented by age include clothing, toys, music, automobiles, soaps,
shampoos and foods.
- Life stage: People differ in their life stage and it defines what will be the need of a
particular customer. Moreover, people may be in different situations such as going
through a divorce, deciding to buy a new car and deciding about the insurance and
investment plans. Therefore, it is a opportunity for the marketers to help people based
on these life stage.
- Gender: Men are from mars and women are from Venus. So naturally their preferences
differ; for example, where men might want the latest in technology, women might
desire the latest in Fashion. Hence, the differentiation in gender is applied on clothing,
cosmetics, hairstyling and magazines.
- Income: Markets are also segmented on the basis of income. Income is used to divide
the markets because it influences the people’s product purchase. It affects a consumer’s
buying power and style of living. Income includes housing, furniture, automobile,
clothing, alcoholic, beverages, food, sporting goods, luxury goods, financial services
and travel.
- Generation: Generation or cohort is a group of people who lived through similar times
in their youth, shaping their behaviour and values. Thus, they share the same cultural,
political and economical experiences. The marketers advertise to a group of cohort the
icons and images which are prominent in their experiences.
Psychographic segmentation:
Psychographics is when you record of someone in his personality like personality between
customers and consumers and such as: worth, ideas attitudes which is the way that of thinking,
lifestyles that people live in life. Because this place of looking for focuses on interests, values.
In psychographic segmentation customer are separate into parts various groups on the essential
of the way living or personality or the worth. People during an identical demographic group
can be show very dissimilar psychographic profile. Also the segmentation system is basically
replying to questions four demographics.
According to the VALS Framework, groups of people are arranged in a rectangle and
are based on two dimensions. The vertical dimension segments people based on the degree to
which they are innovative and have resources such as income, education, self-confidence,
intelligence, leadership skills, and energy. The horizontal dimension represents primary
motivations and includes three distinct types:
Consumers driven by knowledge and principles are motivated primary by ideals. These
consumers include groups called Thinkers and Believers. Consumers driven by demonstrating
success to their peers are motivated primarily by achievement. These consumers include groups
referred to as Achievers and Strivers. Consumers driven by a desire for social or physical
activity, variety, and risk taking are motivated primarily by self-expression. These consumers
include the groups known as Experiencers and Makers. At the top of the rectangle are the
Innovators, who have such high resources that they could have any of the three primary
motivations. At the bottom of the rectangle are the Survivors, who live complacently and within
their means without a strong primary motivation of the types listed above.
Behavioral segmentation:
Behavioural segmentation divides a population based on their behaviour, the way the
population respond to, use or know of a product. Actually consumer behaviour is a subject
studied in depth over time in marketing management. This is mainly because there are several
factors which a consumer takes into consideration before taking a decision. Thus consumer
decision making is affected by his behaviour and that is exactly how the behavioural segments
are targeted.
- Need and benefits: People have different needs and benefits from the same product.
Therefore several products are targeted towards the benefits sought by the customer.
Recently, there has been a war between Colgate and sensodyne to target the people who
have sensitive teeth. Similarly, there are other toothpastes which are targeted towards
whitening of teeth. Hair shampoos are targeted towards split ends, anti dandruff or
others.
- Decision Roles: It is easy to identify the buyer for many products. It is the behavioral
segmentation that helps in buyer identification. With regard to the decision making
buyers play roles of that of an initiator, influencer, decider, buyer and that of a user.
Even though different people are playing different roles, all are crucial in the decision
process and the ultimate consumer satisfaction.
- User and usage; Real user and Usage-Related variables: The behavioral variables
which are the best starting points for constructing market segments are :
Business market can be segmented on the bases consumer market variables such as geography,
benefit sought, and other usage rate because therefore business marketers also use other
variable segments.
The world is a huge market. A company cannot effectively serve the entire world with its
products or services -- it is not possible to be all things to all people. To compete more
effectively, many companies are now targeting specific markets. Instead of scattering their
marketing efforts everywhere, companies are focusing on market segments where they have
the greatest change of satisfying the most customers. The following are major segmentation
variables for business markets. Marketers can use these segments to plan and execute their
marketing plans.
Table 2: Major segmentation variables for business markets
Demographic
1. industry: which industries should we serve?
2. Company size: what size company should we serve?
3. Location: what geographical area should we serve?
Operating variables
4. Technology: what customer technology should be focused on?
5. User a nonuser status: should we serve heavy users, medium users, light users, or new users?
6. Customer capabilities: should we serve customers needing many or few services?
Purchasing approaches
7. purchasing function organization: should we serve companies with highly centralized or
decentralized purchasing organizations?
8. Power structure: should we serve companies that are engineering dominated, financially
dominant, and so on?
9. Nature of existing relationships: should we serve companies with which we have strong
relationships or simply go after the most desirable companies?
10. General purchase policies: should we serve companies that prefer leasing? Service contracts?
Systems purchases? Sealed bidding?
11. Purchasing criteria: should we serve companies that are seeking quality? Service? Price?
Situational factors
12. Urgency: should we serve companies that need quick and sudden delivery or service?
13. Specific application: should we focus on certain applications of our product rather than all
applications?
14. Size of order: should we focus on large or small orders?
Personal characteristics
15. Buyer seller similarity: should we serve companies whose people and values are similar to ours?
16. Attitudes toward risk: should we serve risk-taking or risk avoiding customers?
17. Loyalty: should we serve companies that show high loyalty to their suppliers?
C. Marketing Targeting
Target marketing means identifying specific market segments within a larger audience and
targeting them with ad campaigns. This process is commonplace in marketing and helps
companies get more value for their advertising investment. It goes against historical approaches
to marketing whereby companies would simply pay to deliver messages to mass markets
without considering the waste in paying to reach consumers who would never buy. Thus, when
a market is segmented, there must be at least a segment that is measurable, substantial,
accessible, differentiable, and actionable.
The many ways to segment the market, but all of them are not effective:
The useful market segmentation is:
1. Measurable: refers to the fact that the market size, purchasing power and profiles of the
segment needs to be measured.
2. Substantial: refers to the fact that the market segments are large or profitable enough to serve.
A segment should be the largest possible homogeneous group worth going after with a tailored
marketing program.
3. Accessible: refers to the fact that the market segments need to be effectively reached and
served.
4. Differentiable: refers to the fact that the market segments are conceptually distinguishable
and respond differently to different marketing mix elements and programs
5. Actionable: The firm needs to be able to implement a distinctive marketing mix for each
market segment.
Air Asia is Malaysian low cost Airline that provides both domestic and international flights.
Air Asia started opening on 18 November 1996, it pioneered low-cost traveling in Asia. In
2001, the airline which was heavily indebted was purchased by Tony Fernanda’s company
Tune Air Sdn Bhd. Under his charge, Air Asia has become one of the biggest low cost Airlines
operating in issue today. Its main hub is based in the low-cost Carrier Terminal (LCCT) at
Kuala Lumpur International Airport (KLIA). As such, ear issue consumers tend to be from the
lower to middle income population. Thai Air Asia and Indonesia Air Asia are subsidiaries of
Air Asia and are based in Suvarnabhumi Airport, Thailand and Soekarno-Hatta International
Airport, Indonesia, respectively. Company analysis.
1. Segmentation
Air Asia target market segment consists of three different but overlapping segments that were
segmented according to Geographic segmentation, Demographic segmentation, and
Psychographic segmentation. Air Asia targets mainly that Asian market, hence the name Air
Asia. As such, they do Geographic segmentation by focusing their services primarily in Asia.
Being a low-cost Airline, they are targeting the low to middle income group (demographic)
and the cost-conscious Travelers (psychographic).
CONSUMER DIVERSITY
Air Asia's main consumers are still those who could not previously afford to fly, but its
passenger profile is changing as it adds destinations and increases brand awareness.
“The economically disadvantaged are there, and the main Market is still the mass Market that
will never change, but we are reaching markets that we are never dreamt of," says Fernands.
Goldman Sachs executives in Singapore, for example, are very happy that we opened up
Singapore Bandung as it allows them to meet clients in the Indonesian City. Our corporate
business has gone 400% because companies want to save money and, once they fly us, they
don't want to change."
Fernands' Airline is transforming the perception of low cost travel, giving rise to a diverse
cross-section of passengers. The Air Asia chief shift executive says:" we show that low cost
does not mean low class. In the Jakarta Kuala Lumpur flight, you will find women with
diamonds sitting beside maids. You could not see that before. That shows we are reaching
everyone."
1. Geographic characteristics
The geographic characteristics of the target market of Air Asia are within the Australasian
region. Attract people from Australia who wish to visit the Asian region. Using Kathmandu as
a destination that the consumer is dreaming about. The ad implies to stop dreaming about doing
and just go, since the flights are very cheap it allows people to act on their dreams.
2. Demographic characteristics
Air Asia Target's people who want to travel in Asia for Leisure or business purposes. Their
main purchasing motivations are the price and the Simplicity for buying and check in.
Moreover, as the Chief Executive Officer of Air Asia explained, they target people who would
like to travel often to meet their families specially during special occasions, but due to how
expensive it was that time, their desire are not fulfilled. By introducing a low fare will give all
those people opportunity to travel if not more than once in a year. They mostly create a specific
target market. The corporation's brand positioning comparing with other similar organizations
in order to map and measure the Air Asia's brand positioning, I have first decided to compare
it with two similar organizations, Lion Air & EasyJet.
References:
Wedel, Michel and Kamakura, Wagner A., Introduction to the Special Issue on Market
Segmentation (2002). Intern. J. of Research in Marketing 19 (2002) 181–183. Available at
SSRN: https://ssrn.com/abstract=2395277
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