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Submitted To: Submitted By: MRS.Ritu sehgal Nishant Jain ( 2130) Lec. in MBA Himani (2120)
Introduction Reasons Requirement Steps Bases Benefits Limitations Critique Conclusion
These can broadly be viewed as 'positive' and 'negative' applications of the same idea. markets can be divided according to a number of general criteria. Market segmenting is the process that a company divides the market into distinct groups who have distinct needs. it is homogeneous within the segment (exhibits common needs). it responds similarly to a market stimulus. All of these methods of segmentation are . DEFINITION BY PHILIP KOTLER Market segmentation is subdividing into homogeneous sub set of customer. where any subset may conceivably be selected as market target to be reached with distinct marketing mix. and it can be reached by a market intervention. wants. splitting up the market into smaller groups. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs). such as by industry or public versus private although industrial market segmentation is quite different from consumer market segmentation. both have similar objectives. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts.INTRODUCTION Market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs. behavior or who might want different products & services Broadly.
the right lists can be purchased. Improved segmentation can lead to significantly improved marketing effectiveness. The overall intent is to identify groups of similar customers and potential customers. which don't always fit into convenient demographic boundaries.merely proxies for true segments. Successful segmentation requires the following • • • • • Homogeneity within the segment heterogeneity between segments Segments are measurable and substantial Segments are differentiable Segments are accessible and actionable . advertising results can be improved and customer satisfaction can be increased leading to better reputation. Consumer-based market segmentation can be performed on a product specific basis. to understand their behavior. Revenues are thus improved. to prioritize the groups to address. With the right segmentation. and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Distinct segments can have different industry structures and thus have higher or lower attractiveness. to provide a close match between specific products and individuals The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment).
notebooks.• Target segment is large enough to be profitable Effective market segmentation • • • Improves understanding of the customer base Provides a clear classification of the customers Enables the generation of a targeted product portfolio that responds to the needs of market place Helps gauge a company's market position relative to the competition Leads to the effective fine tuning of marketing strategies • • • Reasons for Market Segmentation As already stated. Better serving customers needs and wants It is possible to satisfy a variety of customer needs with a limited product range by using different forms. it would be . for instance. As an example. but by customer groups (privates. A segment-orientated marketing approach generally offers a range of advantages for both. they suggest product bundles and supporting services that are individually tailored for the needs of each particular group. small businesses. However. bundles. This service provides a huge potential for savings for corporate customers. public/state organizations). The computer manufacturer Dell. segmentation is the basis for developing targeted and effective marketing plans. large businesses. printers etc). Furthermore. does not organize its website by product groups (desktops. servers. Dell offers to take on all IT-administration for companies. They offer the same products to all customer groups. analysis of market segments enables decisions about intensity of marketing activities in particular segments. businesses and customers. Nevertheless. incentives and promotional activities.
product variations and the like. A typical segment-based price variation is by region. REQUIREMENTS OF MARKET SEGMENTATION Philip Kotler mentioned five criteria for an effective segmentation which states that Segmentation should be: • 1. Feasible: . exclusive points of sale. 4.it should be possible to determine the values of the variable used for the segmentation. Higher Profits It is often difficult to increase prices for the whole market. The generally higher price level in big cities is evidence for this.the firm must have an ability to draw an effective marketing program for its customers. Relevant: .absolutely useless for private customers.the target audiences must be diverse and able to show different reactions to different marketing mix. organizations have to take care that there is no chance for cannibalization between high-priced products with high margins and budget offers in different segments. 2. segment-specific product bundles increase chances for cross selling. Such segments could be distinguished from the mass market by features like additional services. Measurable: . When differentiating prices by segments. 3. Thus. Distinguishable: . Nevertheless.the target customers must be reachable and servable for the organization. 5. • • • • The market which is segmented must meet the following criteria: . it is possible to develop premium segments in which customers accept a higher price level.it should justify the expected profits and the growth potential. This risk is the higher. the less distinguished the segments are. Accessible: .
Measurability of segment: Can you measure the size and growth of the segment. Suitability of segment: Is there enough spending power within the segment for the company to sustain itself.? Will spending within the DVD marketing continue? Actionability of segment: If you were a car manufacturer the organisation would not concentrate on the affluent and price sensitive market if they did not have the resources to do so. Accessibility of segment: Is it easy for you to target and reach your segment? Can they be reached with basic communication tools such as radio and TV advertising? If you cannot target your segment effectively with marketing communication then it is not viable. From January 2002 – June 2002 900. Is the segment growing? In the UK the DVD market is growing at an extremely fast pace. The fast growth rate is attracting many players within the market. STEPS INVOLVED IN MARKET SEGMENTATION .000 DVD’s were sold.
knowledge and common sense to estimate if the market you have just identified earlier is not too narrow or too broad for you.The biggest challenge is to find the right balance for your business: use your experience. each of them designed to encourage the marketer to come with a creative approach. more options are available for a new business but resources would normally be a little limited. STEP 1: Identify and name the broad market You have to have figured out by this moment what broad market your business aims at. this can be a starting point.The most widely employed model of market segmentation comprises 7 steps. If your company is already on a market. .
You should have by now a list of need dimensions for each market segment: try to identify those that carry a determining power.There is no exact formula on how to form narrow markets: use your best judgement and experience. Also create a list of people-related features. since it can be compared to a brainstorming session. then aggregate similar people into this segment. on the condition to be able to satisfy their needs using the same Marketing mix.STEP 2: Identify and make an inventory of potential customers' needs This step pushes the creativity challenge even farther. for each narrow market you form – a further step will ask you to name them. The more possible needs you can come up with. STEP 4: Identify the determining dimensions Carefully review the list resulted form the previous step. as different people can have different opinions and you can usually count on at least those items most people agree on. Do not avoid asking opinions even from non-Marketing professionals. STEP 3: Formulate narrower markets McCarthy and Perreault suggest forming sub-markets around what you would call your "typical customer".Got yourself stuck in this stage of segmentation? Try to put yourself into the shoes of your potential customers: why would they buy your product. the better. demographics included. What you have to figure out is what needs the consumers from the broad market identified earlier might have. .Reviewing the needs and attitudes of those you included within each market segment can help you figure out the determining dimensions. Start building a column with dimensions of the major need you try to cover: this will make it easier for you to decide if a given person should be included in the first segment or you should form a new segment. what could possibly trigger a buying decision? Answering these questions can help you list most needs of potential customers on a given product market.
These were the steps to segment a market. This 7 steps approach to market segmentation is very simple and practical and works for most marketers. It is important for a marketer to understand market behavior and what triggers it. STEP 7: Estimate the size of each market segment Each segment identified. now review them one by one and give them an appropriate name. However. Estimates of market segments will come in handy later.STEP 5: Name possible segment markets You have identified the determining dimensions of your market segments. even if. if you are curious about other methods and want to experiment. while most segments have similar needs. named and studied during the previous stages should finally be given an estimate size.A good way of naming these markets is to rely on the most important determining dimension. You might notice that. you should take a look at computer-aided techniques. STEP 6: Evaluate the behavior of market segments Once you are done naming each market segment. you should now be able to have a glimpse of how to build Marketing mixes for each market segment. by offering a support for sales forecasts and help plan the Marketing mix: the more data we can gather at this moment. it is only a rough estimate. briefly presented. such as clustering and positioning . the easier further planning and strategy will be. for lack of data. If performed correctly and thoroughly. allow time to consider what other aspects you know about them. they're still different needs: understanding the difference and acting upon it is the key to achieve success using competitive offerings.
gender. product and services usage rates and wants. D mga h e o r p ic Go r e ga . and family lifecycle amongst other variables. income. The population can be divided into age.BASES OF MARKET SEGMENTATION Demographic Segmentation Demographics originates from the word ‘demography’ which means a ‘study of population’. Understanding who consumers are will enable you to more closely identify and understand their needs. A very popular form of dividing the market is through demographic variables.
g. race or family lifecycle [insert diagram g]. 12-19. 35-49. 50-64.Understanding who consumers are requires companies to divide consumers into groups based on variables such as gender. income. under 6.3 Demographic segmentation Age Life-cycle Stage Ae g Income Social Class E. A clear advantage of this strategy over others is that there are vast amounts of secondary data available that will enable you to divide a market according to demographic variables Figure 7. 6-11. 29-34. age. social class. 65+ Gn e . religion.
000 etc E. clothing and magazine industry. some organisations develop specific products aimed at particular age groups for example nappies for babies. Stores like Harrods. lower As people age their needs and wants change.000-250. Gender segmentation is commonly used within the cosmetics. a male lifestyle magazine covering male fashion. Bachelor State. 20.00. Harvey Nicohals are predominantly aimed at the affluent market. upper B = Upper lower C1= middle class C2= Working class (skilled workers) D= upper lowers E= Lower. 50. taking opportunity of the rise in the number of women who now enjoy ‘social drinking’.000. Daewoo aim their vehicles at . 5. toys for children.000. Newly Wed: No kids Full Nest 1: w/child under 6 Full nest 2: Youngest child over 6 Full nest 3: Older married couples with dependent children Empty nest 1: Older couples no children at home Empty nest 2: Retired Solitary survivor: Still in the labor force Solitary survivor: Retired E.000-100. clothes for teenagers and so on. 100. cars. All Bar One within the UK have developed their bars to attract the female audience. sports and technology. Under 5.000-20. films.g.. A = Upper. We have also seen the introduction of unisex cosmetic products like CK1 which works on the similarities between the two genders.g.000-50.E.g. Income segmentation is another strategy used by many organisations.000.
for example. the region or the country.price sensitive buyers who require a bundle of benefits for the price. Mcdonalds globally. In today's globally competitive environment brands are specifically developed and positioned within particular income segments inorder to maximise turnover. 6. in London UK certain parts of the West End of London are more affluent then the East End and you will find particular products sold in these regions based on their affluence. 4. 3. Geographic Segmentation 1. Geographic segmentation is the division of the market according to different geographical units like continents. This form of segmentation provides the marketer with a quick snapshot of consumers within a delimited area. the 18-30's singles. North America. sell burgers aimed at local markets. burgers are made from lamb in India rather then beef because of religious issues. An area can be divided by the town. countries. regions. South America. Products and services are also aimed at different lifecycle segments. If you are an organisation working on a global scale you may divide by global regions such as Europe. for example. counties or neighbourhoods. Nation State Region City Climate Density (urban/rural) Geographical segmentation divides markets into different geographical areas. Asia and Africa. Marketers use geographic segmentation because consumers in different areas may display certain characteristics and behaviours in that particular region. 5. Geographic segmentation can be a useful strategy to segment markets because it: • provides a quick overview of differences and similarities between consumers according to geographical unit. Holidays are developed for families. In Mexico more chilli sauce is added and so on. 2. . and for those in their 50's.
you would find a very international clientele. .• • • can identify cultural differences between geographical units. age and consumer lifestyles. Pyschrographics segmentation can be broken down into lifestyle. If you were to do a quick check of people's nationalities in a 18s-30s club in Mexico. recognises language differences between geographical units. takes into consideration climatic differences between geographical units. Failing to recognise this could hinder a company's potential for success. marketers can use alternative segmentation variables which aim to develop more accurate profiles of their target segments. Youth groups will tend to listen to similar music and follow similar fashion trends. and personality characteristics. You might have found that you can befriend foreign people of your same age easily because you Pyschographics Segmentation Although demographic segmentation is useful. For example some youth groups across the world appear to be somewhat similar. social class. But this strategy fails to take into consideration other important variables such as personality.
associated with mobile phones. and prestigious city jobs.Life styles segmentation The Oxford English dictionary defines a lifestyle 'as a way of life' and lifestyle segmentation aims to examine the way people live. . our interest. money. Interest and Opinions). This lifestyle segment is labeled because individual within it display similar characteristics. The media termed this group as YUPPIES. our every days activities. they were young upwardly mobile professionals. opinions and beliefs on certain issues dictates who we are. and our AIO’s dictate our everyday behaviour from where we shop to what we buy. A lifestyle group is a particular segment defined by the organisation that is marketing a product or service. For example in the early 1980s within the UK as the economy was booming the City of London were increasingly employing young independent staff on very high salaries. Marketers develop and aim products/services at particular lifestyle groups and develop lifestyle profiles on their target market. Marketers refer to these as AIO’s (Activities. expensive cars. If we understand the lifestyle of a particular group we can sell them a product/services on the basis that it will enhance their lifestyle. Our lifestyle.
A B Professional staff Middle management C1 Junior management C2 Skilled manual D E Semi-skilled and unskilled workers. what type of person would they be? Social Class Segmentation Divides society into 6 distinct groups based solely on occupation. Those dependent on the state. Pigaio motorcycles are aimed at young 18-25 outgoing. and have a high disposable income with time on the hand. . Thus the more affluent lifestyle you will lead. Many of these third-agers are adventurous and experimenters. spending more time on the internet then their younger counterpart. Ask yourself if Nike or Levi’s was a person. Marketers use this type of information to sell products and services based on lifestyle behaviour. In the United States there are 70 million third-agers who are the fastest growing users of the internet. Social class segmentation works on the assumption that the higher your profession the more you will earn. independent persons. Personality Characteristics Products and brands can also be aimed at particular personalities.Third agers are another group termed and identified by the marketing industry. and your profession does have an impact on the way you behave. Often marketers try to develop personalities for their brands and products that mimic that of their target market. as they have spent their past lives working hard and they seek enjoyment from their remaining years and have the income to spend on luxury items. They are people in their 50’s retired from a profession.
Research has found four main benefit segments: economic. For example. knowledge and attitudes towards products and services. There are six main techniques through which marketers can divide the market according to behavioural variables. 6. others will opt to . 3. medical. How will the product enhance their overall lifestyle. While some consumers will dine in an exclusive restaurant for its taste. Benefits sought: Grouping consumers based on the benefits they seek from a product or service provides unique opportunities to define and position a brand's main attributes and highlight its superiority over competitors. regular Usage rate – light. 4. Occasions: Segmenting a market according to the occasions when consumers use a product or service can provide rich insight to expand market possibilities. aware Attitude toward product – positive. Expedia offers holiday packages according to the different types of experiences people want to have. 2. responses. Behavioural Segmentation 1. 7. indifferent Refers to why people purchase a product or service. 5. Behavioural segmentation can be broken down into the benefit a consumer seeks from purchasing a product. special Benefits User status – non user. heavy Loyalty status – medium. For example. strong Readiness stage – unaware. 'early bird' dinners offered in some restaurants have tapped into the market of consumers who want to have an early meal but without the pomp and formality of a regular dinner. Occasions – regular. When purchasing a computer the benefit sought maybe of ‘ease of use’ to the ‘need for speed’ This segmentation strategy divides markets into consumer groups based on their uses. cosmetic and taste.
and an ex-user of a chocolate you used to like. they are also responsible for a high percentage of the total buying. The following are the advantages of Market Segmentation o Helps in better understanding of the customers’ needs and wants. . Hence. It is not surprising then to find that hotel chains like Holiday Inn offer special prizes to reward their frequent visitors. This allows marketers to guide consumers through the many stages leading to a final purchase. your friend might be very well informed of its details. indifferent. Consumers are typecast according to their readiness state. your father might be interested in this product.go to the trendy bistro (cosmetic). Usage rate: Consumers can be light. positive. You might have found that you are a regular user of a particular service provider. For instance you can be enthusiastic. For example you might be aware that a tour operator provides excellent travel packages to India. while your sister is not. a consumer can be a non-user. but not any more. negative or hostile about a product or service. o Better targeting and position of the product. ex-user. User readiness: Segments can be divided based on how ready consumers are to make a purchase. User status: Consumers can be divided based on whether or not they are patronising a product. Although heavy users account for a very small percentage of a market. some will go for the value for money deals (economic) and others will prefer the organic food served in an all-vegetarian deli (medical). potential user. medium or heavy users. like your bank. first-time user or a regular user of a given product or service. Attitudes towards the product or service: Consumers can be segmented according to their attitudes towards products and services.
o Maintaining effective relationship with the customers. resulting in higher profits.o Encourages two-way communication among the potential buyer and the organization. o Retaining the existing customers and attracting new ones. o Reducing cost / expenses on various marketing activities and increases market share. o Enables marketers to better understand the reasons behind consumers' purchases. o Improving service delivery standards. Segmentation can lead to proliferation of products. o Provides rich data concerning the psychological make-up of consumers. o Provides marketers with an effective way to match a variety of marketing communication tools from packaging to taste with consumers psychodemographic characteristics. Narrowly segmenting a market can hamper the development of broad-brand equity. o Can be used to develop customer profiles that will guide promotional efforts and ultimately strengthen a brand. Market segmentation: a critique . LIMITATION OF THE SEGMENTATION: • • • Targeting multiple segments increases marketing costs.
a citizen or a rebel. Market Segmentation generally responds in a predictable manner to a marketing or promotional offer. Market segmentation assumes that consumers are static and stable. There is also an underlying supposition that human behaviour is always rational. families. a sister or a brother. sharing one or more characteristics or needs in an otherwise homogenous market. failing to take into consideration spontaneous and playful behaviour. firms. it becomes the perfect cleaning companion. . Most people find it difficult to describe their own personality. The different roles an individual plays everyday also conflict with the somewhat limited categories used to segment markets. a friend. Furthermore it places very complex behaviours into neat and exclusive categories that fail to account for all the complexities of human behaviour.Products and services are constantly reinvented by consumers. Market Segmentation is rightly referred as a marketing term referring to the buyers into groups (segments) that have common needs and will respond similarly to a marketing action. While you recognise all these different facets. removing rust spots from chrome car bumpers or cleaning corrosion from car battery terminals [see more creative product usages Consumer’s wacky uses of product and services hint at some of the shortcomings associated with market segmentation. You are a student. Finally. Consequently market segmentation strategies provide marketers with the illusion of a certain and effective tool to operate. What a marketer intended to be a children’s toy becomes a cult object among college students [to find out why UK students love Teletubbies A fizzy drink is not only drunk but is also used in imaginative ways. but the question remains as to whether or not this strategy allows marketers to know and talk to consumers. or organizations. advertising appeals treat you mostly as an educated middle class student. it is an identifiable group of individuals.
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