You are on page 1of 10

Principles of Marketing | Richa Saxena

SESSION 10
SEGMENTATION
Study of consumer markets indicates there are different consumer need different products. Market
segmentation helps companies divide large, heterogeneous markets into smaller segments based on
similar needs. The objective is to reach them more efficiently and effectively with products and
services that match their unique needs. Two broad groups of variables to segment consumer markets:

Descriptive Characteristics—geographic, demographic, and psychographic—ask whether


these segments exhibit different needs or product responses

Behavioural Considerations – such as consumer responses to benefits, usage occasions, or


brands – see whether different characteristics are associated with each consumer-response segment
(Kotler & Keller, 2017, p. 266).

Need for Segmentation


• Mass marketing is not effective for all the products.
• At times for a company it is neither cost effective nor feasible to target consumers that are
too many in numbers.
• Markets are geographical scattered and difficult to reach.
• Consumers have different needs & wants.
• Consumer buying behaviour is different.

RUBIK'S CUBE METAPHOR


Consumer markets are like Rubik's cube. Each colour
represents different type of consumer. These consumers are
identified as different from each on the basis of homogeneous
need sets.

The process of segmentation is like solving the Rubik's puzzle.


To solve the puzzle, each face of the cube must have the same

colour. In segmentation, consumers with same needs and


motivations are brought together for effective understanding. Figure 10. 1 Rubic Cube

The consumers may be different from one another on several


parameters. These parameters form bases for segmentation. The major variables that might be used
in segmenting consumer markets are geographic, demographic, psychographic and behavioural.
(Saxena, 2015)

Geographic Segmentation
For some products, the consumers’ needs are different across geographic boundaries. For example,
different countries, regions, states, counties, cities, or even neighbourhoods have different needs. In

93
Principles of Marketing | Richa Saxena
India, woollens are sold more in northern region, PCs and
laptops are sold in urban markets whereas fertilizers and
seeds are sold in rural markets.

Geographic segmentation can be a very effective marketing


strategy. FMCG giants like HUL and ITC have gained a
strong market share because of their rural penetration.
Domino's pizza has gained a competitive edge by
positioning on quick delivery. They are able to do so by
branches in every neighbourhood.

Geographic segmentation is important because, consumers


from different region differs in

• consumption pattern
• taste and preferences
• climatic conditions
• infrastructure and power support

In a growing trend called Grassroots marketing, marketers


concentrate on making such activities as personally
Picture 10. 1 Spiderman in Hindi
relevant to individual customers as possible (Kotler &
Keller, 2017, p. 266) . Much of Nike’s and Red bull’s success came from engaging target consumers
through grassroot marketing efforts such as sponsorship of college events and local school teams and
provision of items to audiences and participants.

Demographic Segmentation
Demographic segmentation divides the market into groups
based on variables such as age, gender, family size, family life
cycle, income, occupation, education, religion, generation, and
nationality.

Demographic factors are the most popular bases for


segmenting customer groups. The demographic segmentation
can be useful in many product categories as consumer’s needs,
wants, usage rates, and product and brand preferences are
often associated with demographic variables.

Age and Life-Cycle Stage is offering different products or


using different marketing approaches for different age and
life-cycle groups. HDFC standard life pension plans are for the
retirement planning for middle aged people.

Gender segmentation can be bases for segmentation for many


products and services. Personal care companies like creams,
shampoos, deodorants, and soaps have different range of
products for men and women. Some two-wheeler companies
like Hero have Pleasure brand only for females. Clothing
Picture 10. 1 Life Stage Segmentation
brands like Louis Philip only target males. There are women
only beauty salons and spa and magazines separately for men
and women.
94
Principles of Marketing | Richa Saxena
Each Generation or cohort is profoundly influenced
by the times in which they grow up – the music,
movies, politics and defining events of that period.
Gen X refers to the people born between 1964 and
1978. This generation believes in technology as an
enabler and not barrier and has seen more difficult
times. Gen Y or millennial are the people born
between 1977 and 1994. Also known as digital
natives, millennial have been wired almost from
birth – playing computer games, navigating on
internet, downloading music, and connecting via
social networking sites. Gen Z is today’s generation
born after 1994 and before 2010. This generation is
more towards technology and mobile applications.

Income segmentation helps marketers clearly


Picture 10. 2 Marketing to Genders identify affordability factor for the given product. In
India, Society of Indian Automobile Manufacturers (SIAM) has identified automobiles segments like
A, B, C, D and SUV based on the prices. There are further sub segments in each of the segment.

Titan has different range of watches for different income groups; Timex for price sensitive markets
and Raga and Nebula for luxury markets. Tours and travel companies also design several range of
packages (standard, deluxe and premium) to suit different income groups.

Psychographic Segmentation
Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or
personality characteristics.

Lifestyle is a person’s pattern of living as expressed in his or her psychographics. Measures a


consumer’s AIOs (activities, interests, and opinions) to capture information about a person’s pattern
of acting and interacting in the environment.

One of the most popular commercially available classification systems is SRI Consulting Business
Intelligence’s VALS framework.

Figure 10. 2 VALS Framework

95
Principles of Marketing | Richa Saxena
The Value and Life Style framework (VALS) categories consumers into two broad categories: people
with high resources and people with low resources. There are three motivational functions across
these resources; ideals, achievers and self-expression. The major tendencies of the four groups with
high resources are: innovators, thinkers, achievers and experiencers. The major tendencies of the four
groups with lower resources are: believers, strivers, makers and survivors (Srategic Business
Insights, 2019).

Marketers also use personality variables like innovativeness, need for cognition and need for
uniqueness to segment markets.

Behavioural Segmentation
Behavioural segmentation divides buyers into groups based on their knowledge, attitudes, uses, or
responses to a product.

Needs-Based or Benefit-Based Segmentation


identifies distinct market segments with clear
marketing implications.

Decision Roles People play five roles in a


buying decision: Initiator, Influencer, Decider,
Buyer, and User. Different people are playing
different roles, but all are crucial in the decision
process and ultimate consumer satisfaction.

User and Usage-Related Variables include


occasions, user status, usage rate, buyer
readiness stage, and loyalty status.

Occasion Segmentation is grouping Picture 10. 4 The Role of Influencers

buyers according to occasions when they get the idea to buy, actually make their purchase, or
use the purchased item. Many companies give festival offers as many purchases are done
during that time.

Benefit Segmentation is grouping buyers according to


the different benefits that they seek from the product. For
automobile products consumers may seek different benefits
like mileage, style and power.

User Status is segmenting markets into nonusers, ex-


users, potential users, first-time users, and regular users of
a product.

Usage Rate is grouping markets into light, medium, and


heavy product users.

Loyalty Status is dividing buyers into groups according to


their degree of loyalty. Loyalty status can be of four types:

• Hard-core Loyals : Remain with one brand only.


• Split - Loyals: Loyal with two brands and buys
from those two only.
• Shifting Loyals: Their brand loyalty shifts from
one brand to other.
Picture 10. 5 Benefit Segmentation
• Switchers: No brand loyalty at all. (Kotler, 2017)
96
Principles of Marketing | Richa Saxena
Five Consumer Attitudes about products are enthusiastic, positive, indifferent, negative and hostile.

Q10.1 According to you what will be the appropriate basis for segmentation for
(a) Mobile Phones
(b) Soups
(c) Designer Sunglasses
(d) Coffee
(e) A toothpaste
(f) A daily moisturiser

Q10.2 Select a product and brand that you use frequently and list the benefits you
receive from using it. Without disclosing your list, ask a fellow student who uses a
different brand in this product category to make a similar list for his or her brand.
Compare the two lists and identify the implications for using benefit segmentation
to market the two brands.

Effective Segmentation Criteria


To be useful, market segments must rate favourably on five key criteria:

Measurable: The size, purchasing power, and characteristics of the segments can be measured

Substantial: The segments are large and profitable enough to serve. A segment should be the
largest possible homogeneous group worth going after with a tailored marketing program.

Accessible: The segments can be effectively reached and served.

Differentiable: The segments are conceptually distinguishable and respond differently to different
marketing-mix elements and programs.

Actionable: Effective programs can be formulated for attracting and serving the segments (Kotler,
2017, pp. 284-285)

Q10.3. Identify the bases for segmentation in the following examples. Justify your
answer.
(a) Consumer electronics maker Micromax announced its foray into the air cooler
category with products priced between Rs 5,990-16,990. Micromax will have a
full-fledged range of room air coolers including personal, tower, desert and
window. The company entered the consumer electronics category in 2012 with
the launch of LED televisions and is also present in the AC segment.
(b) Eveready Industries India (EIIL) has entered the Rs 9,000 crore plus
confectionery market through its brand 'Jollies'. According to a release issued
by the company, Jollies will be launched in the Rs 400 crore fruit chew segment
during the first phase. It will be priced at Re 1. Eveready will look to leverage
its deep distribution network across urban and rural India even as it follows an
asset light model and aims at quick profitability with entry into this segment.
(ET, 2018)
(c) Prestige Clean Home, a subsidiary of TTK Prestige, India’s largest kitchen
appliances brand, announced the launch of India’s first domestic electric mop

97
Principles of Marketing | Richa Saxena
and a new range of water purifiers. The electric mop, a completely new concept,
designed with Indian needs in particular, was conceptualized by Mr TT
Jagannathan, Chairman of TTK Group. (Watch: Prestige Launches electric
MOP, 2017).

Applied Marketing 10.1 Marico


Edible oil and personal care products maker entrepreneurial company to create and
Marico is launching new range of products in incubate new categories as it targets a 70%
the health and wellness food market. The increase in revenue to ₹10,000 crore by 2020.
company will roll out a range of food and Marico’s latest bet comes at a time when
beverages products including green tea and Hindustan Unilever made its most ambitious
coffee, high protein breakfast cereals, soups and foray into the health and wellness space by
protein shakes under Saffola Fittify brand, with acquiring GSK Consumer brands with plans to
their distribution entirely focused on modern extend Horlicks into similar nutritional product
trade and online channels. segments. Also, a host of consumer startups
have seen their pricier and gourmet products
According to Marico, the launch will give them
such as Greek yoghurt brand Epigamia and
an opportunity to try out new products even if
they don’t succeed in every category. These Raw Pressery juice fly off shelves as consumers
products are no longer niche and the market is switch to healthier food choices.
at an inflection point. Marico has internally
created a division which will continue to
experiment with such products without any
fear of failure. This is Marico’s second attempt
to enter the health and wellness food market.
Over the past decade, the maker of Saffola and
Parachute brands had entered segments such
as salt, snacks, rice and wheat flour for
diabetics, weight and cholesterol management,
which were either completely withdrawn or Picture 10. 7 Fittify from Marico
restricted to few markets. However, it Over the past few years, one of the
succeeded in the ₹400-crore oats segment where disappointments investors harboured for
Saffola Oats has more than 30% market share Marico was regarding the subdued performance
now. of its new launches. Except for Saffola Masala
oats, launched over six years ago, none of the
new launches have contributed significantly to
the sales growth. However, over the past 18
months, Marico has pulled up its socks and now
has a strong product pipeline with a few initial
successes. There has been an evident stepup in
the pace of new launches over the past 18
months with Marico launching one new product
every month on an average, mostly in value
Picture 10. 6 Marico's Saffola Oats added personal care space, in an effort to boost
margins. Marico quit the trader’s lane on
Marico’s business team for the new range of
Masjid Bunder in Mumbai more than 45 years
health and wellness food products, internally ago with an ambition to make two highly
called Engine 2, runs like a new
98
Principles of Marketing | Richa Saxena
commoditised products — edible and coconut oil Within personal care, too, Marico has been
— national brands. Today, Parachute and introducing premium products — from basic
Saffola are among the biggest oil brands in the coconut oil to value-added ones and now expects
country, although their contribution to Marico’s innovations such as serum and creambased
overall sales is below half now. Saffola is a hair products to drive the portfolio. A year ago,
₹1,000-crore brand, contributing nearly 16% of Marico bought a 45% stake in Zed Lifestyle,
our sales. But the company wishes to move which owned and sold a range of products under
away from being just an edible oil brand. Beardo brand (Malviya, No fear of failure:
Marico again sights health & wellness, 2018)

Q10. 4: Analyse the Segmentation strategy of Marico.

References
Bhatt, Shephali@ET Tech. (2019, November). Single people in their 50s open up to the idea of using
dating apps. Retrieved from ET Tech:
https://tech.economictimes.indiatimes.com/news/internet/single-people-in-their-50s-open-up-
to-the-idea-of-using-dating-apps/72212354

Kotler, P., & Keller, K. (2017). Marketing Management. Noida: Pearson.

Malviya, S. (2018). No fear of failure: Marico again sights health & wellness. Retrieved from
Economic Times: https://economictimes.indiatimes.com/industry/cons-products/no-fear-of-
failure-marico-again-sights-health-wellness/articleshow/67223668.cms

PTI@Financial Express. (2017). Delhi most ‘internet-ready’ state in India: Study. Retrieved from
https://www.financialexpress.com/india-news/delhi-most-internet-ready-state-in-india-
study/635519/

Roll, M. (2019). The Secret of Zara’s Success: A Culture of Customer Co-creation. Retrieved from
Martin Roll: https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-
culture-of-customer-co-creation/

Srategic Business Insights. (2019). US Framework and VALS™ Types. Retrieved from SBI:
http://www.strategicbusinessinsights.com/vals/ustypes.shtml

Trivia 10.1 Crossword

Across Down
2. According to the VALS segmentation 1. When Amy goes shopping for clothes, she
framework, consumers primarily motivated by goes into every store in the mall looking for the
ideals are guided by ________. best deal. She is very price conscious. On the
basis of loyalty status, Amy can be described as
a(n) ________.

5. Kim is a young professional who enjoys 3. If a marketing manager employs such


snowboarding and going to rock concerts with her marketing techniques as online buzz, student
friends. According to the VALS eight-part typology ambassadors, cool events, and street teams to

99
Principles of Marketing | Richa Saxena
segmentation system, Kim is best described as a(n) reach target markets, the manager is most
________. likely appealing to the ________ market.

8. If a marketing manager segments the market 4. If a marketer decides to segment a market


into culture-, sports-, or outdoor-oriented groups, based on neighbourhoods, the marketer will
he or she is segmenting the market on the basis of have chosen the ________ method of
________. segmentation.

11. Mothers-to-be are potential users who will turn 6. According to the VALS segmentation system,
into heavy users of infant products and services. ________ are successful, sophisticated, active,
By targeting mothers-to-be as future heavy users, "take-charge" people with high self-esteem.
producers of these products and services are Their purchases often reflect cultivated tastes
segmenting consumers on the basis of ________ for relatively upscale, niche-oriented products
status. and services.

12. When Nike attempts to get close to its 7. Newlyweds in the United States buy more in
customers at the local level by sponsoring local the first six months than an established
school teams and providing shoes, equipment, and household does in five years. Newlyweds are an
clothing to many of them, Nike is using example of a(n) ________ segment.
______________segmentation.

13. The horizontal dimension in the VALS 9. Pampers divides its market demographically
framework is consumer ________. on the basis of ________ into prenatal, new
baby, baby, toddler, and pre-schooler.

15. The sale of turkeys in the United States is 10. If a buyer is loyal to two or three different
highest in mid- to late November, as people buy brands of soap, this buyer's loyalty status can
turkeys to serve at Thanksgiving. Grocery stores be described as being among the
that specifically advertise turkeys at this time of ________loyals.
year are segmenting on the basis of ________.

17. A hardware store is interested in reaching 14. According to the VALS segmentation
people who are characterized by the VALS system system, ________ are conservative,
as being practical, down-to-earth, and self- conventional, and traditional people with
sufficient, who like to work with their hands, or the concrete beliefs. They prefer familiar, products
________ category. and are loyal to established brands.

19. Dennis requests his father to buy him a 16. According to the VALS segmentation
PlayStation® for his birthday. With respect to system, ________ are successful, goal-oriented
consumer decision roles, which role is Dennis people who focus on career and family. They
currently playing? favour premium products that demonstrate
success to their peers.

20. Linda was buying all her groceries from Home 18. According to the VALS segmentation
Needs supermarket for the past 5 years. She system, ________ are considered to be trendy
recently came across The Convenience Store, and fun-loving people who are resource-
another supermarket just a few miles away from constrained. They favour stylish products that
her place and started buying her groceries from emulate the purchases of those with greater
them. Linda can be best described as a(n) material wealth.
________loyal.

21. Robert is the owner of an automobile


manufacturing company. He calls for a board
meeting and tells his directors that he wants to
build a car that lets the users experience power
and exhilaration. He tells them that the car must

100
Principles of Marketing | Richa Saxena
allow his users to soar from 0-60 mph in about 4
seconds. He also adds in that the price of the car
must be affordable enough for anybody making a
good salary. In accordance with the given scenario,
Robert is trying to segment the market on the basis
of ________.

22. According to the VALS segmentation system,


________ are considered to be elderly, passive
people who are concerned about change and are
loyal to their favourite brands.

23. Mature and reflective people who seek


durability, functionality, and value in products are
most likely to be categorized as ________ in the
VALS system.
1

2 3
4
5 6
7
8

9 10 11
12
13
14 15 16

17 18
19

20
21

22
23

101
Principles of Marketing | Richa Saxena

Assignment 10.1 #ICA


Select one company from each of these four sets. Identify the Market segments for the selected
companies.

1. Apple, Samsung, LG
2. HUL, P&G, ITC
3. Reliance Jio, Vodafone, Airtel
4. Maruti, Mahindra & Mahindra, Tata Motors

Date of Submission_____________________

102

You might also like