What is Market Segmentation?

Market segmentation is a marketing term referring to the aggregating of prospective buyers into
groups or segments with common needs and who 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.

Companies can generally use three criteria to identify different market segments: homogeneity,
or common needs within a segment; distinction, or being unique from other groups; and
reaction, or a similar response to the market. 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 respond to very different advertisements.

Market segmentation is an extension of market research that seeks to identify targeted groups of
consumers to tailor products and branding in a way that is attractive to the group. The objective
of market segmentation is to minimize risk by determining which products have the best
chances for gaining a share of a target market and determining the best way to deliver the
products to the market. This allows the company to increase its overall efficiency by focusing
its limited resources on efforts that produce the best return on investment.

Companies can segment markets several ways: geographically by region or area;

demographically by age, gender, family size, income or life cycle; psychographically by social
class, lifestyle or personality; or behaviorally by benefit, uses or response. The objective is to
enable the company to differentiate its products or message according to the common
dimensions of the market segment.

Examples of Market Segmentation

You can see examples of market segmentation in the products, marketing and advertising that
people use every day. Auto manufacturers thrive on their ability to identify market segments
correctly, and create products and advertising campaigns that appeal to those segments. Cereal
producers market actively to three or four market segments at a time, pushing their traditional
brands that appeal to older consumers and their healthy brands to health-conscious consumers
while building brand loyalty among the youngest consumers by tying their products to popular
movie themes.

A sports-shoe manufacturer might define several market segments that include elite athletes,
frequent gym-goers, fashion-conscious women and middle-aged men who want quality and
comfort in their shoes. In all cases, the manufacturer's marketing intelligence about each
segment enables it to develop and advertise products with high appeal more efficiently than
trying to appeal to the broader masses.
Types of Market for agricultural produce may broadly be divided into three categories:

- Wholesale market
- Retail market
- Fairs

1. Wholesale Markets

These markets are subdivided into

I. Primary wholesale markets: These markets are periodically held, either ones or twice a
week. Agricultural produce comes from neighboring villages. These markets deal in the sale of
fruits, vegetables, foodgrains, all household requisites etc. for e.g. Village market

II. Secondary wholesale market: These are also known as mandis. These are situated generally
at district or taluka headquaters. Small merchants purchase from primary wholesale market and
sale in this markets. Some cultivators directly sell their produce in these markets. Each market
comprises area with a 10-20 miles radius. For e.g. District and taluka market.

III. Terminal markets: These are the markets in which the produce is either finally dispose
off , direct to consumer or processors or assemble for shipment to foreign countries. These
markets are the parts where warehouses and storages are available/ cover a wide area, may be
state.

Example Bombay terminal market.

2. Retail markets: These markets are spread all over the city or town subject to municipal
control. They generally deal in all types of produce and serve the needs of the city people as
well as of the surrounding villages. Particular type of market is located in particular locality.
Cloth market is one locality and grain, vegetable are in different localities. There is direct
selling to consumer.

3. Fairs: These are held on religious occasions, at pilgrim centre. These markets deal in
livestock, agricultural produce etc. for e.g. Magh Mela at Allahabad. There are various
dimensions of markets.

Indian economy is basically an agricultural economy. A substantial portion of India’s national

income comes from the agricultural sector.

A vast majority of India’s population is dependent on agriculture for its livelihood. Agriculture
also provides employment opportunities to many, both directly and indirectly.The production
and marketing of agricultural goods poses certain peculiar problems for the producers. This is
mainly because the agricultural goods possess certain peculiar characteristics. These are as
follows:

Characteristics of Agricultural Goods

1. Agricultural goods are quickly perishable.

2. These are bulky in nature.

3. It is difficult to control both quality and quantity of output.

4. Product differentiation is not possible.

5. Nature plays a crucial role in production.

6. Agricultural goods have inelastic demand.

Problems faced in the production of Agricultural goods

1. Seasonal production

Unlike consumer goods and industrial goods, which are produced throughout the year,
agricultural goods can be produced only during a specific period in a year. There are summer
crops and winter crops. Certain crops need lot of water. Others require only minimum water. In
view of all these differences, not all the crops can be grown in all the months in a year.

2. Difficult to control production

In the case of consumer and industrial goods it is possible for the producer to exercise direct
control over production. But in the case of agricultural goods nature plays a vital role in
production. If the cultivator has sown the seeds and is awaiting rains, failure of rains will
hamper production. Agricultural production is much dependent on the availability of abundant
water. Availability of water depends on rainfall.

3. Difficult to control quality and quantity of output

The producers of consumer and industrial goods can control both quality and quantity of output.
It is not that easy in the case of agricultural production. Even if the producer (the farmer) uses
good quality seeds, fertilizers and manures, the quality and quantity of output are determined
mainly by natural factors.

4. Long waiting period

Production of consumer and industrial goods takes place almost continuously on a daily basis.
But in the case of agricultural goods, the gestation period is too long. Thus, continuous
production cannot be thought of.
5. Loss of crops due to pests and animals

The crops need to be protected from pests and animals. Every year, farmers suffer heavy loss of
revenue due to crop loss caused by the activities of pests, insects and animals. To protect their
crops, farmers, therefore, use pesticides, insecticides and so on. They also use electrical fences
to safeguard their crops from cows, elephants and other animals.

6. Loss of production due to litigation

Another peculiar problem in agricultural production is that there is always litigation between
the farmers over the land territory and other such issues. As a result, they may have to spend lot
of time, money and efforts to win legal battles. This affects the time available for production
and thereby affects output.

7. Small-scale production

In India, the number of small and marginal farmers is larger than the number of big landlords.
The small and marginal farmers hardly own a few acres of land. The quantity of output they
turn out is hardly sufficient for their family needs. In fact, most of these people produce for
their families rather than for the market.

8. Use of primitive techniques of production

In developed countries, agriculture gets the same importance that the industry gets. But in India,
although industrial development has reached a significant level, agriculture still remains a
neglected sector.

The farmers follow the conventional methods of production which affect the yield. They do not
have access to the latest machines and equipment because they cannot afford to have these.

9. Ignorance of the producers

Producers of consumer and industrial goods have greater awareness than the producers of
agricultural goods. As a result, the former can adapt to any kind of situation and come out of the
problem.

For example, the producers of consumer and industrial goods can modify or update their
products in tune with the demand and market trend. But the farmers are conservatives. They
cannot adapt themselves to changes. They prefer to grow the same crop they grow every year.

10. Lack of collective bargaining

Industrialists have their own associations through which they represent all their grievances to
the Government and are able to find a solution to any problem. But in the case of agriculture,
the farmers do not have any such prominent association. As a result, although they have
grievances, they are not in a position to represent the same in a proper manner.