FUNDAMENTALS OF MARKETING IN NEPAL

CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

MEANING OF MARKET........................................................................................................................................................... 2
Concepts of Market ............................................................................................................................................................. 2
PLACE CONCEPT ............................................................................................................................................................. 2
SPACE CONCEPT ............................................................................................................................................................. 2
CUSTOMER CONCEPT ................................................................................................................................................... 2
Types of Market .................................................................................................................................................................... 3
1. CONSUMER MARKET........................................................................................................................................... 3
2. INDUSTRIAL MARKET / BUSINESS MARKET ........................................................................................... 3
3. INSTITUTIONAL MARKET ................................................................................................................................. 3
4. GLOBAL MARKET / INT’L MARKET .............................................................................................................. 3
MEANING OF MARKET SEGMENTATION ....................................................................................................................... 4
Types of Segmentation (Levels) .................................................................................................................................... 4
REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION ............................................................................. 5
BENEFITS OF SEGMENTATION .......................................................................................................................................... 5
PROCESS OF MARKET SEGMENTATION ........................................................................................................................ 6
SEGMENTATION VARIABLES FOR CONSUMER MARKETS..................................................................................... 8
1. GEOGRAPHIC VARIABLES ...................................................................................................................................... 8
2. DEMOGRAPHIC VARIABLES .................................................................................................................................. 8
3. PSYCHOGRAPHIC VARIABLES .............................................................................................................................. 9
4. BEHAVIORAL VARIABLES ................................................................................................................................... 10
SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS ............................................................................... 12
1. GEOGRAPHIC VARIABLES ................................................................................................................................... 12
2. DEMOGRAPHIC VARIABLES ............................................................................................................................... 12
3. OPERATING VARIABLES ...................................................................................................................................... 13
4. PURCHASE - RELATED VARIABLES ................................................................................................................ 13
SEGMENT SELECTION STRATEGIES ............................................................................................................................. 14

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 FUNDAMENTALS OF MARKETING IN NEPAL
CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

CHAPTER TWO: MARKET SEGMENTATION AND TARGETING

MEANING OF MARKET
It is very important to know the meaning of Market closely. A market is a place which allows
the purchaser and the seller to invent and gather information 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. The market for a
particular item is made up of existing and potential customers who need it and have the ability and
willingness to pay for it.
Markets can be defined in different ways. Originally a market was a physical place where
buyers and sellers gathered. Economists describe a market as a collection of buyers and sellers
who transact (in person, over the phone, by mail, whatever) over a particular product or product
class. However, marketers define marketing as the set of actual and potential buyers of a product.
These buyers share a particular need or want that can be satisfied through exchange. Thus, the size
of a market depends on the number of people who exhibit the need, have resources to engage in
exchange, and are willing to offer these resources in exchange for what they want.
Markets are dependent on two major participants – buyers and sellers, who enter into
voluntary agreements that will leave both parties better off. Buyers and sellers typically trade
goods, services and/ or information.
In brief, a market is a group of customers, who have unsatisfied needs and wants along with
ability and willingness to spend, that enter into exchange relationship with sellers for obtaining
products for money.

Concepts of Market
PLACE CONCEPT
It is traditional concept which refers to physical place as market where buyers and sellers meet for
exchanging something of value. Its features are:
- A geographical location
- Buyers and sellers come together face to face
- Freely exchange information and
- Exchange something of value (products, money etc )

SPACE CONCEPT
It is emerging concept which refers to digital space where buyers and sellers meet on internet for
exchanging something of value. Its features are:
- Based on internet
- Uses various means of communication like telephone, computers and others
- Buyers and sellers does not come face to face
- Exchange something of value (products, money etc)

CUSTOMER CONCEPT
It is concept specially uses by businesspeople to cover various groupings of customers. Here,
markets refer to set of all actual and potential buyers of a product or service. Its features are:
- Collection of buyers
- Customers have unsatisfied needs and wants
- Customers have ability to pay
- Customers have willingness to pay
- Exchange something of value (products, money etc)

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 FUNDAMENTALS OF MARKETING IN NEPAL
CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

Types of Market
1. CONSUMER MARKET
Consumer markets consist of individuals and households that buy goods and services for
personal consumption.
BUYING
FOCUS OBJECTIVE DEMAND CHANNEL
DECISIONS
•Individuals •Final •Elastic •Emotional •Retailers
•Households consumption •Small Volume •After sales
•Geographically service
dispersed

2. INDUSTRIAL MARKET / BUSINESS MARKET

Business market consists of all the organizations that buy goods and services to use in the
production of other products and services that are sold, rented or supplied to others. It also
includes retailing and wholesaling firms that acquire goods for the purpose of reselling or
renting them to others at a profit.
BUYING
FOCUS OBJECTIVE DEMAND CHANNEL
DECISIONS
•Organizations •Business use •Inelastic •Rational •Manufacturers
•Geographically •Reselling •Large Volume •Done by •Authorized
concentrated •Making other professionals Dealers
products

3. INSTITUTIONAL MARKET
Institutional market consists of schools, hospitals, nursing homes, prisons and other institutions
that provide goods and services to people in their care. It also includes governmental units –
national and local – that purchase or rent goods and services for carrying out the main functions
of government.
BUYING
FOCUS OBJECTIVE DEMAND CHANNEL
DECISIONS
•Non profit •Provide service •Quality product •Red tapism •Manufacturers
organizations in different areas at low price •Transparent •Specialized
•Government suppliers
institutions

4. GLOBAL MARKET / INT’L MARKET

International markets consist of buyers in other countries, including consumers, producers,
resellers and governments. Global market consists of global firms that operates in more than
one country, gains research and development, production, marketing and financial advantages
in its costs and reputation that are not available to purely domestic competitors. It plans,
operates, and coordinates their activities on a worldwide basis.
BUYING
FOCUS OBJECTIVE DEMAND CHANNEL
DECISIONS
•Global Firms •Consumption •Branded •Professionals •Direct
•Foreigners •Business use products Marketing
•Service •Authorized
Dealers

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 FUNDAMENTALS OF MARKETING IN NEPAL
CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

MEANING OF MARKET SEGMENTATION

Organizations that sell to consumer and business markets recognize that they cannot appeal to
all buyers in those markets or at least not to all buyers in the same way. Buyers are too
numerous, too widely scattered and too varied in their needs and buying practices. Companies
vary widely in their abilities to serve different segments of the market. Rather than trying to
compete in an entire market, sometimes against superior competitors, each company must
identify the parts of the market that it can serve best. Segmentation is thus a compromise
between mass marketing which assumes everyone can be treated the same and the assumption
that each person needs a dedicated marketing effort.

Markets consist of buyers, and buyers differ in one or more ways. They may differ in their
wants, resources, locations, buying attitudes and buying practices. Through market
segmentation, companies divide large, heterogeneous markets into smaller segments that can
be reached more efficiently with products and services that match their unique needs.

PHILIP KOTLER
Market segmentation means dividing a market into distinct groups of buyers with different
needs, characteristics or behaviors, who might require separate products or marketing mixes.

Types of Segmentation (Levels)

1. TARGET MARKETING
Target Marketing is identifying market segments, selecting one or more of them, and developing
products and marketing mixes tailored to each. In this way, sellers can develop the right product
for each target market and adjust their prices, distribution channels and advertising to reach the
target market efficiently. Instead of scattering their marketing efforts, they can focus on the
buyers who have greater purchase interest.

2. NICHE MARKETING
A niche is a more narrowly defined group, usually identified by dividing a segment into sub
segments or by defining a group with a distinctive set of traits who may seek a special
combination of benefits.
Whereas segments are fairly large and normally attract several competitors, niches are smaller
and normally attract only one or a few competitors. Niche marketers presumably understand
their niches' needs so well that their customers willingly pay price premium.
It follows the philosophy: There will be no market for products that everybody likes a little, only
for products that somebody likes a lot.

3. LOCAL MARKETING
Local marketing involves tailoring brands and promotions to the needs and wants of local
customer groups - cities, neighborhoods and even specific stores. Local marketing helps a
company to market more effectively in the face of pronounced regional and local differences in
community demography and lifestyles.

4. CUSTOMIZED MARKETING
Today customers are taking more individual initiative in determining what and how to buy.
They log onto the internet; look up information and evaluations of product or service offers;
dialogue with suppliers, user ad critics and sometimes design the product they want.
Customers will want to express their individuality with the products they buy. Therefore,
customized marketing is tailoring products and marketing programs to the needs and
preferences of individual customers. Consumer marketers are now providing custom-made
products in areas ranging from hotel stays and furniture to clothing and bicycles. Business-to-
business marketers are also finding new ways to customize their offerings. It is also known as
‘one-to-one marketing’, ‘individual customer marketing’ and ‘segments to one’.

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CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION

Clearly there are many ways to segment a market, but not all segmentations are effective. Indeed,
there is quite a gap between the sophisticated approaches to segmentation that are sometimes
suggested and what is actually used by practitioners.

1. Measurable: The size, purchasing power and characteristics of the segments should be
measurable.

2. Accessible: The segments should be effectively reached and served.

3. Differentiable: The segments are conceptually distinguishable and respond differently to

different marketing mix elements and programs. If married and unmarried women respond
similarly to a sale on perfume, they do not constitute separate segments.

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

5. Actionable: Effective programs need to be formulated for attracting and serving the segments.

BENEFITS OF SEGMENTATION
A company cannot serve all customers in a broad market. The customers are too numerous and
diverse in their buying requirements. A company, hence, needs to identify the market segments it
can serve effectively. Rather than offering the same marketing mix to vastly different customers,
market segmentation makes it possible for firms to tailor the marketing mix for specific target
markets, thus better satisfying customer needs. Not all elements of the marketing mix are
necessarily changed from one segment to the next. For example, in some cases only the promotional
campaigns would differ.

The followings are the benefits of segmentation:

1. Identification of market opportunities: Through segmentation, marketers can effectively

identify the most profitable segments and focus all its effort on that segment.
2. Effective use of marketing resources: Segmentation helps to find out the needs and wants of
the market such that all marketing offers can be customized and effectively utilize. It helps to
make coordinated use of all resources and efforts.
3. Competitive response: Through segmentation, the marketers focus on part of the whole
market which helps to have close monitoring on competitors actions and reactions as well. This
will help organization to exist in this competitive environment as well by making quick
decisions to any changes.
4. Market specialization: Since no organization can fulfill all the needs and wants of the market,
market segmentation helps to achieve specialization on what that segment wants and needs so
that they can have close tuning to the customers and changes in that segment.
5. Environmental adaptation: Since focus will be on small segment of the market, it becomes
easier to identify any changes in the environment and have quick adaptation as well.
6. Objective Achievement: Through segmentation, the marketers can effectively and efficiently
satisfy all customers under the segment which will eventually helps achieve organizational
goals i.e. profit, service, survival or growth.

“Building the right relationships with right customers”

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CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

PROCESS OF MARKET SEGMENTATION

Market Segment
Survey Profiling Positioning

Segment Segment
Identification Evalutaion /
Selection

Figure 1: Process of Market Segmentation

1. Market Survey: First of all, the market research to be conducted to know about customer needs
and preferences, brand awareness, product uses patterns and uses rate, product attributes,
customer attitudes etc. Here, marketers may use internet to collect information of customers or
may conduct sample research.

2. Segment Identification: Based on the information collected, for each needs based segment the
marketer determines which demographic, lifestyles and usage behaviors make the segment
distinct and identifiable (actionable). The task should be to group customers into segments
based on similar needs and benefits sought by customers in solving a particular consumption
problem.

3. Segment Profiling: Each cluster is profiled to show its distinguishing attitudes, behavior,
demographics and so forth. Usually the clusters get a descriptive name like toddlers, kids,
teenager, adult market etc.

4. Segment Evaluation / Selection: After profiling segment, the markets should evaluate and
select one or more segments based on its attractiveness and profitability. The factors such as
size and growth, profitability, competition, technology, customer loyalty and risk may be
considered for segment evaluation. Further, organization objectives and resources, ethical
considerations and government policies and laws should also be considered while evaluating
segment. And the segment which attracts the most should be selected.

5. Positioning: Consumers typically choose products and services that give them the greatest
value. Thus the key to winning and keeping customers is to understand their needs and buying
processes better than competitors do, and to deliver more value. To the extent that a company
can position itself as providing superior value to selected target markets, either by offering
lower prices than competitors do or by providing more benefits to justify higher prices. Solid
positions are not built upon empty promises. If a company positions its product as offering the
best quality and service, it must then deliver the promised quality and service. Positioning
therefore begins with differentiating the company's marketing offer, so that it will give
consumers more value than competitors' offers do.

Positioning starts with a product, a piece of merchandise, a service, a company, an institution or

even a person. But positioning is not about what you do to a product. Positioning is what you do
to the mind of the prospect.

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CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

Steps in Product Positioning Implementation

1. Identify potential competitive advantages: Companies can build a competitive advantage

from many sources, such as superiority in quality, speed, safety, service, design, and
reliability, together with lower cost, lower price, and so on. It is more often some unique
combination of these, rather than a single silver bullet, that delivers the advantage.
Successful product positioning strategies should differentiate your product, address
important customer buying criteria, and articulate key product attributes. To achieve all
three objectives, you must have an in-depth understanding of:
• How your target market makes purchasing decisions
• How your competitor positions their products
• What your product has to offer

Target Market

Your Product Competitive Positioning

These three interrelated elements of the Positioning Triangle must be in balance for
attaining competitive advantage. If you only understand two of the three, you still don’t
know enough. The key to competitive advantage is product differentiation.

1. Establish the products’ key distinctive competitive advantage: A company must decide
how many ideas to convey in its positioning to its target customers. A company should
develop Unique Selling Propositions (USP) for each brand and stick to it. If company
consistently hammers away at one positioning [best quality, fastest, safest, lowest price,
most reliable, most prestigious, most affordable etc] and delivers on it, it will probably be
best known and recalled for this benefit. Sometime company can also develop several
benefits and market it.

2. Communicate the competitive advantage: After establishing distinctive competitive

advantage, it should communicate its value propositions. The value propositions shall be
communicated as:
a. More for more b. More for less
c. More for same d. Same for less
e. Less for much less
To communicate a company or brand positioning, a marketing plan should include a
positioning statement. These statements summarize the company or brand positioning.
Example: to (target market or needs) our (brand) is (concept) that (point of difference).
After developing a clear positioning statement, it must communicate that positioning
effectively through all the elements of the marketing mix and company must be certain to
deliver their value propositions.

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CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

SEGMENTATION VARIABLES FOR CONSUMER MARKETS

There is no single way to segment a market. A marketer has to try different segmentation variables,
alone and in combination, to find the best way to view the market structure.

Geographic

Behavrioral
Variables Demographic

Psychographic

1. GEOGRAPHIC VARIABLES
a. Area: Geographic segmentation calls for dividing the market into different geographical
units, such as nations, states, regions, counties, cities or neighborhoods. A company may
decide to operate in one or a few geographical areas, or to operate in all areas but pay
attention to geographical differences in needs and wants.
b. Topography and Climate: Climatic differences lead to different lifestyles and eating
habits. For example; in countries with warm climates, social life takes place outdoors
and furniture is less important. Examples of product-markets that are segmented based
on climatic differences include markets for sporting goods, heating and cooling
equipment, and clothing.
c. Population: Segmentation can also be done by measuring the population and its
density. Population determines the demand size. This information can come from
national census data. As per recent population census of 2011;
o Nepal’s population is 26,621,000. Of which, males are 12,927,431 and female NPR
13,693,378 i.e. out of every 100females there are 94.41males.
o Out of total Population, 17 percent (4.5 millions) reside in urban areas.
o National average household size has decreased from 5.44 in 2001 to 4.70 in 2011.
o Terai constitutes 50.15 percent of Population while hill constitutes 43.1 percent and
mountain 6.75 percent.
o Population density of Nepal is estimated 181 per sq.kms. Kathmandu district has the
highest density (4408) and Manang (3) has the least.

2. DEMOGRAPHIC VARIABLES
Demographic segmentation variables are amongst the most popular bases for segmenting
customer groups. This is partly because customer wants are closely linked to variables such
as income and age. Also, for practical reasons, there is often much more data available to
help with the demographic segmentation process.

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Demographic segmentation consists of dividing the market into groups based on variables
such as;

a. Age: Consumer needs and wants change with age. The marketing mix may therefore
need to be adapted depending on which age segment or segments are being targeted.
Therefore, some organizations develop specific products aimed at particular age groups
for example nappies for babies, toys for children, clothes for teenagers and so on.
b. Gender: It is commonly used segmentation variables. Generally, cosmetics, clothing and
magazine industry segment market through these variables.
c. Family size: The family size i.e. no. of members in a family can also be one of the
segment variables.
d. Education: As people get educated, their needs changes. Even needs may differ as per
the level study and faculty they are studying. Simple calculator may work for
management students where as scientific calculator is required for science student.
e. Occupation: The needs and wants of the customers vary as per customer’s occupation
as well. For example, IT professional requires high end laptops, Doctor requires
stereoscopes, Farmers requires tractor, fertilizers etc.
f. Income: Income segmentation is employed for products such as automobiles, boats,
clothing, cosmetics and travel. For such products, marketers are primarily interested in
identifying and targeting higher income customer groups because these consumers
often have the greatest purchasing power. Moreover, consumers in these groups are
most likely to be attracted to innovations in these product categories.
g. Social Class: Living standard of the customer varies as per their social class and needs
and wants also vary as per living standard.
h. Ethnicity & Religion: People of different caste, race, nationalities demands different
goods and services. For example: Muslim community purchase Halal meat only. Hindu
women like to wear Mangal-sutra after marriage.

3. PSYCHOGRAPHIC VARIABLES
Psychographics is the science of using psychology and demographics to better understand
consumers. It is also known as IAO variables - Interests, Activities and Opinions. The seller
needs to analyze these 3 factors primarily in order to understand the psyche of the
customers.

As per psychographic segmentation, consumer is divided according to their lifestyle,

personality, values. People within the same demographic group can exhibit very different
psychographic profiles. Hence, following variables shall be studied:

a. Buying Motives: Customers are directed by their motives to utilize goods and services.
The customers’ buying motives can be rational, emotional or egoist. Big tycoons and
high income professionals purchase vehicles such as Land Rovers, Range Rovers to
match up with their status quo. Housewife prefers to purchase economical and durable
products whether it is furniture or foods. Similarly, parents prefer to purchase toys and
chocolate to their children to show love and affections.
b. Life Style: A way of living of individuals, families (households), and societies, which they
manifest in coping with their physical, psychological, social, and economic environments
on a day-to-day basis is life style. It is expressed in both work and leisure behavior
patterns and (on an individual basis) in activities, attitudes, interests, opinions, values,
and allocation of income. It also reflects people's self image or self concept; the way they
see themselves and believe they are seen by the others. The analysis of consumer life styles
is an important factor in determining how consumers make their purchase decisions.
For example, People with "Green lifestyle" holds beliefs and engages in activities that
consume fewer resources and produce less harmful waste (i.e. a smaller carbon

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footprint). In the magazine and television industries, "lifestyle" is used to describe a

category of publications or programs.
c. Personality: Personality is the summation of traits, habits, and behaviors that are
exhibited by a human being or person. This clearly influences behavioral responses.
Marketers have also used personality variables to segment markets, giving their
products personalities that correspond to consumer personalities. Successful market
segmentation strategies based on personality work for products such as cosmetics,
cigarettes, insurance and alcohol.
The factors of the Big Five personality traits and their constituent traits can be
summarized as (OCEAN):
Openness to experience –is a general appreciation for art, emotion, adventure,
unusual ideas, imagination, curiosity, and variety of experience. People who are
open to experience are intellectually curious, appreciative of art, and sensitive to
beauty. People with low scores on openness tend to have more conventional,
traditional interests. They prefer the plain, straightforward, and obvious over the
complex, ambiguous, and subtle.
Conscientiousness – is a tendency to show self-discipline, act dutifully, and aim for
achievement against measures or outside expectations. The trait shows a preference
for planned rather than spontaneous behavior.
Extraversion – is characterized by positive emotions, surgency, and the tendency to
seek out stimulation and the company of others. The trait is marked by pronounced
engagement with the external world. Extraverts enjoy being with people, and are
often perceived as full of energy. They tend to be enthusiastic, action-oriented
individuals who are likely to say "Yes!" or "Let's go!" to opportunities for excitement.
However, Introverts lack the social exuberance and activity levels of extraverts. They
tend to seem quiet, low-key, deliberate, and less involved in the social world.
Agreeableness – is a tendency to be compassionate and cooperative rather than
suspicious and antagonistic towards others. The trait reflects individual differences
in general concern for social harmony. Agreeable individuals’ value getting along
with others. They are generally considerate, friendly, generous, helpful, and willing
to compromise their interests with others. Disagreeable individuals place self-
interest above getting along with others. They are generally unconcerned with
others’ well-being, and are less likely to extend themselves for other people.
Neuroticism – is the tendency to experience negative emotions, such as anger,
anxiety, or depression. It is sometimes called emotional instability, or is reversed
and referred to as emotional stability. Those who score high in neuroticism are
emotionally reactive and vulnerable to stress. They are more likely to interpret
ordinary situations as threatening, and minor frustrations as hopelessly difficult.
Their negative emotional reactions tend to persist for unusually long periods of
time, which means they are often in a bad mood.

4. BEHAVIORAL VARIABLES
In behavioral segmentation, consumers are divided into groups according to their
knowledge of, attitude towards, use of or response to a product. It is actually based on the
behavior of a particular consumer.

a. Occasions: Buyers can be grouped according to occasions when they get the idea to buy,
make their purchase or use the purchased item. Occasion segmentation can help firms
build up product usage. For example: Mothers’ Day, Father's Day, Valentine Day etc are
promoted to increase the sale of confectionery, flowers, cards and other gifts.
b. Benefits: A powerful form of segmentation is to group buyers according to the different
benefits that they seek from the product. Benefits segmentation requires finding the

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main benefits people look for in the product class, the kinds of people who look for each
benefit and the major brands that deliver each benefit. Companies can use benefit
segmentation to clarify why people should buy their product, define the brand's chief
attributes and clarify how it contrasts with competing brands. They can also search for
new benefits and launch brands that deliver them. For example: toothpaste company
like Colgate, Close-up segments its market as per its benefits which can broadly divided
into four: economic, medicinal, cosmetic and taste.
c. User Status: Some markets segment into non-users, ex-users, potential users, first-time
users and regular users of a product. Potential users and regular users may require
different kinds of marketing appeal. Market share leaders will aim to attract potential
users, whereas smaller firms will focus on attracting current users away from the
market leader.
d. Usage Rate: Some markets also segment into light, medium and heavy-user groups.
Heavy users are often a small percentage of the market, but account for a high
percentage of total buying. For example: Buddha Air has provision of providing mileage
card for frequent travelers which will help to retain heavy users.
e. Loyalty Status: Many firms are now trying to segment their markets by loyalty, and are
using loyalty schemes to do it. They assume that some consumers are completely loyal -
they buy one brand all the time. Others are somewhat loyal - they are loyal to two or
three brands of a given product, or favor one brand while sometimes buying others. Still
other buyers show no loyalty to any brand. They either want something different each
time they buy or always buy a brand on sale. In most cases, marketers split buyers into
groups according to their loyalty to their product or service, and then focus on the
profitable loyal customers. The effectiveness of loyalty schemes and segmentation by
loyalty is limited by how people buy. Loyal customers are few and very hard to find in
most markets. In recent period, Bhat-bhateni Supermarket is distributing loyalty card to
its regular customers.
f. Attitude towards products: People in a market can be enthusiastic, positive,
indifferent, negative or hostile about a product. Door-to-door workers in a political
campaign use a given voter's attitude to determine how much time to spend with that
voter. They thank enthusiastic voters and remind them to vote; they spend little or no
time trying to change the attitudes of negative and hostile voters. They reinforce those
who are positive and try to win the votes of those who are indifferent. In such marketing
situations, attitudes can be effective segmentation variables.
g. Buyer readiness stages: A market consists of people in different buyer readiness -
stages of readiness to buy a product. Some people are unaware of the product; some are
aware; some arc informed; some are interested; some want the product; and some
intend to buy. The relative numbers at each stage make a big difference in designing the
marketing program. For example: Car dealers use their databases to increase customer
care and to estimate when customers are ready to buy. Guarantees lock customers into
having the first few services from a dealer, but after that, the dealer can estimate when
services are needed. Close to the due date the customer is sent a reminder or rung to
arrange for a service. Sometime later the dealer can estimate that the customer is getting
ready to buy a new car and can then send out details of new models or deals.

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SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS

While similar to consumer market segmentation, segmenting industrial markets is different and
more challenging because of greater complexity in buying processes, buying criteria, and the
complexity of industrial products and services themselves. Further complications include role of
financing, contracting, and complementary products/services. Industrial market segmentation is a
scheme for categorizing industrial and business customers to guide strategic and tactical decision-
making, especially in sales and marketing.

As the industrial customer is not an individual but a number of interacting individuals in a decision
making unit (DMU) of a formal organization, the bases of segmentation are different.

Geographic

Purchase
related Variables Demographic

Operating

1. GEOGRAPHIC VARIABLES
Industry of various locations, climate area, and topography demands various kinds of goods
and services. These variables affect the movement of products and packaging requirement.
For example: in Terai area, demand of fans may be higher as compared to Himalayan
regions. Ice cream can be sold more on the places whose climate is moderately high. Hence,
segmentation can be based on geographical areas.

2. DEMOGRAPHIC VARIABLES
The type of industry, size of company and location play vital role in segmentation.
a. Type of Industry: Segmentation can be done as per type of industry as well because they
demands different type of products. Hence, segmentation can be done by answering the
question “Which industries those buy this product should we focus on?” For example,
banking industry requires high end security systems and information technology to secure
data and money of the customers as compared to others. Similarly, agriculture industry
requires fertilizers and plough machine.
b. Size of Customers: Size of the industry sets the quantity demand of particulars products
and services. So, segmentation can be done by answering to the question “What size
companies should we focus on?” Hence, market can also be segmented as cottage and small
units, medium size units, large size units and global units.

BINAYA RATNA SHAKYA

CASPIAN VALLEY COLLEGE
 FUNDAMENTALS OF MARKETING IN NEPAL
CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

3. OPERATING VARIABLES
` Segmentation can be based on operation module of the customers as well.
a. Technology: Sometime, customer may demand handmade handicraft or sometime machine
made. Hence, segmentation can be done as per technology requirement of the customers as
well.
b. User/non-user status: Customer can be either heavy, medium or light users, or non-users.
Hence, segmentation can be done as per usage rate as well.
c. Customer capabilities: Industry may demands various services after selling the products
as well. Hence, segmentation can also be based on customers needing many services or few
services. The focus should be on before sale service, after sale service, warranties,
guarantee, installation, repairs, credit needs etc.

4. PURCHASE - RELATED VARIABLES

a. Purchasing function organizations: Some of the organization makes highly centralized

decisions and some make decentralized purchasing decisions. Hence, segmentation can be
done by identifying who operates them – individual, purchase committee or purchase
department.
b. Power Structure: Should we focus on companies that are engineering dominated,
financially dominated or marketing dominated is another question that can be answered for
segmentation.
c. Nature of existing relationships: Segmentation can also be done as per relationship with
organizations like companies having strong relationships and most desirable companies.
d. General purchase policies: The purchase policy of the organizations also differs. Hence,
segmentation based on companies that prefer leasing, Service contracts, Systems purchases,
and sealed bidding can be done.
e. Purchasing criteria: Companies may focus on various things like quality, Service or Price.
Hence, segmentation based on these variables can also be done.
f. Urgency: Segmentation can be based on companies that need quick delivery or service.
g. Specific application: Segmentation can also be done by focusing on certain applications of
our product rather than all applications.
h. Size of order: Segmentation based on order size like large or small orders can also be done.

BINAYA RATNA SHAKYA

CASPIAN VALLEY COLLEGE
 FUNDAMENTALS OF MARKETING IN NEPAL
CHAPTER THREE: MARKET SEGMENTATION AND TARGETING

SEGMENT SELECTION STRATEGIES

There are several different target-market strategies that may be followed. Targeting strategies
usually can be categorized as one of the following:

Single-segment strategy - also known as a concentrated strategy. One market segment

(not the entire market) is served with one marketing mix. A single-segment approach often
is the strategy of choice for smaller companies with limited resources.
Selective specialization- this is a multiple-segment strategy, also known as a differentiated
strategy. Different marketing mixes are offered to different segments. The product itself may
or may not be different - in many cases only the promotional message or distribution
channels vary.
Product specialization- the firm specializes in a particular product and tailors it to
different market segments.
Market specialization- the firm specializes in serving a particular market segment and
offers that segment an array of different products.
Full market coverage - the firm attempts to serve the entire market. This coverage can be
achieved by means of either a mass market strategy in which a single undifferentiated
marketing mix is offered to the entire market, or by a differentiated strategy in which a
separate marketing mix is offered to each segment.

A firm that is seeking to enter a market and grow should first target the most attractive segment
that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product
specialization strategy, tailoring the product for different segments, or by pursuing a market
specialization strategy and offering new products to its existing market segment.

BINAYA RATNA SHAKYA

CASPIAN VALLEY COLLEGE