CONTENT

 
 DECLARATION

I, Chinmayee Tripathy, a student of M.Com Semester-III, Panchayat

college Bargarh do hereby declare that the project report entitled,
“Market segmentation” submitted by me under the guidance of Mr
Harman Singh, Department of Commerce, Panchayat college,
Bargarh, Odisha for the degree of Master of Commerce is my original
work and any other’s ideas, contents and materials used in the study
have been duly cited and acknowledged. This project report has not
been published or submitted to any other University/ Institution for
award of any other degree. I have taken utmost care and diligence to
make it error free and I will be extremely sorry if any erroneous
information being found out in my work. I will be completely
responsible of such act. However, if any errors identified the same
may kindly be intimated.
 CERTIFICATE

This is to certify that Chinmayee Tripathy , a student of MFC

Semester-III, Panchayat college Bargarh has completed her project
report on “Market segmentation” ,under my guidance and
supervision ; and this is complete and fit for fulfilment of her
MCom Semester-III ,2021 Examination in Master in commerce

Mr. Bhanu Prakash das

HOD PG Dept.

Panchayat College, Bargarh

 ACKNOWLEDGEMENT

From the inner core of my heart, I convey my hearty thanks to the

Department of M.com for providing me the scope of projecting
on “ Market segmentation” It is really an unimaginable
experience by me . This project report have completed successfully
with the help of my teacher Mr Harnam Singh and
Miss Priyadarshini Mahapatra

Mere words can’t translate that I convey to my esteemed guide

Mr Harnam Singh , who set me on the path of project work and
never disheartened me. In spite of his intensely busy schedule he
went through my writing and provided me excellent insight ,
advice and offered me valuable suggestions without which have
been lost somewhere.

To all of them who are included in my work , I wish to make

public acknowledgement.

Chinmayee Tripathy
M.com 2nd year
Roll No- PG20COM019
Univ. Roll No- 24S20CO03
Introduction

Target marketing involves the identification of the most profitable market segments.
Therefore, businesses may decide to focus on just one or a few of these segments. They may
develop products or services to satisfy each selected segment. Such a target marketing
strategy differs from mass marketing (where a company may decide to produce and distribute
one product to all consumers) or from product differentiation (where a company offers a
variety of products to a large market). Marketers have been moving away from mass
marketing endeavours, as they are increasingly targeting smaller segments with customised
marketing programmes. In this light, this chapter sheds light on the process of market
segmentation. It clarifies how businesses could select the most profitable segments as they
employ market coverage and positioning strategies to attract them.

In traditional marketing approach, the marketer develops a product and then goes in search of
customers who can buy it. Anyone who has the buying power and willing to pay transacts
and the marketer closes the deal. In the advanced stage of marketing, the marketer identifies
the demand of products with profitability so that he goes in search of the markets and set of
customers who intend to buy it and share the feedback for improvisation of their needs to the
marketers and willingness to pay premium for meeting the extra needs.

The marketers follow the sequence of identifying the potential customers, profiling them,
targeting them and finally positioning them in the minds of the customers. This is typically
known as STP.

Segmentation talks about how the marketers classifies or groups the heterogenous market into
homogenous markets in which a set of customers have a similar need or demand pattern.
While segmentation explains whom to target, targeting explains how to target these markets.
Positioning talks about marketers’ efforts in placing the brand or offering taking into
consideration the customer perceptions.

The Market Segment

A market segment is a group of individuals, groups or organisations who may share the same
interests, traits and characteristics. The consumer segments may have similar needs, wants
and expectations. Therefore, businesses should ask themselves which segments should they
serve? To answer this question, the businesses must determine the most appropriate ways to
distinguish and to differentiate their segments. Once the segments have been identified they
must customise their offerings to satisfy each and every one of themerage and positioning
strategies to attract them.

Market Segmentation

Market segmentation is the

actual process of identifying segments of the market and the process of dividing a broad
customer base into sub-groups of consumers consisting of existing and prospective
customers. Market segmentation is a consumer-oriented process and can be applied to almost
any type of market. In dividing or segmenting markets, researchers typically look for shared
characteristics such as common needs, common interests, similar lifestyles or even similar
demographic profiles. So, market segmentation assumes that different segments require
different marketing programmes, as diverse customers are usually targeted through different
offers, prices, promotions, distributions or some combination of marketing variables. For
example, Southwest Airlines’ single-minded focus on the short-haul, point-to-point, major-
city routes, allowed them to prosper as their competitors floundered.

The airline’s focus on specific segments allowed them to do a better job of deciding what
their target segment really valued (for example, convenience, low price, on-time departures
and arrivals, among other things).
Once the customer segments have been identified and profiled, the marketer must decide
which segment to target. Diverse customers will have different expectations. For instance,
there may be customers who will value a differentiated, high quality service, whilst others
may be more price-sensitive. Notwithstanding, not all firms have the resources to serve all
customers in an adequate manner. Trying to serve the entire market could be a recipe for
disaster. The overall aim of segmentation is to identify high-yield segments. These are likely
to be the most profitable groups of customers, or may hold potential for growth. Hence, the
most lucrative segments will usually become target markets. In the tourism industry, the
business traveler is usually considered as an attractive segment. However, there are different
types of business travelers:

 The Hard Money Travelers (or the independent business travelers), these include the
business individuals travelling at their own expense;
 The Soft Money Travelers (or corporate business travelers), these include business
individuals travelling on an expense account;
 The Medium Money Travelers (or the conference or incentive business travelers),
these include business individuals travelling within a group;
 The Interim Travelers, these include business travelers who are combining personal
travel with a business trip;
 The Frequent Short Travelers, these include business travelers who consistently fly a
short-haul route;
 The Periodic Travelers, these include sales persons who make a round of stops on a
steady itinerary.

However, these six groups are said to be only part of some other travel groupings which have
often been identified as principal sources of revenue for the tourism industry. Travel and
tourism marketers must analyze these various segments. They must then select at least one
segment and decide how to service them, in terms of fare prices, facilities, frequencies and
special features.

Different types of Market Segmentations

Having defined segmentation and discussed about its benefits, the next question to address is;
how could businesses segment their markets? The traditional variables that may be used for
market segmentation can be grouped into five main categories: (I) Demographic; (ii)
Geographic (iii) Psychographic; (iv) Behavioral and / or (v) Product-Related Factors.

1.Demographic Segmentation

Demographic segmentation
involves dividing the market into
groups that are identifiable in
terms of physical and factual data.
The demographic variables may
include; age, gender, income,
occupation, marital status, family
size, race, religion and nationality.
These segmentation methods are a
popular way of segmenting the customer markets, as the demographic variables are relatively
easy to measure.

For example, the age range for business travellers may usually span from their late twenties
to their mid-fifties. According to Skift (2017), younger employees are travelling for business
purposes and their buying habits are completely different than their older counterparts. On
average, millennials took 7.4 business trips in the last year, compared to 6.4 for Generation
Xers and 6.3 for baby boomers. Younger travellers are less likely to book air travel based on
loyalty programme perks. They are more likely to book their flight according to the airline
service and the customer experience they offer. Moreover, young travellers are more likely to
use room share services like Airbnb, than other segments (Skift, 2017). However, for the time
being, major hotel brands are not under any serious threat.

At the same time, Uber and other ridesharing services are becoming mainstream across all
age groups, as they may be cheaper than taxis (Pew Research, 2016). The age range in the
leisure market is a very broad one and quite different to that in the business market. Children
particularly can play an important role in leisure travel, as they travel abroad on holidays with
their families. Young people in their early to mid-twenties too are prepared to spend their
disposable income on travel before they take on the responsibilities of family life. At the
other end of the scale, we have those who are retired from work, are in a relatively good
health and in good financial position which allows them to travel.

In the past, middle-aged males dominated the business travel market. However, recently, the
advertising and promotion of airline services have increasingly targeted female business
travellers. This market controls 60% of U.S. wealth and influences 85% of purchasing
decisions (Skift, 2014). The female gender is high-tech, connected, and social. They represent
58% of online sales (Skift, 2014). To get maintain their competitive edge, travel brands must
start focusing their campaigns to better target women. The leisure travel market is far more
balanced in terms of gender. In fact, in older categories of leisure travellers, that is over the
age of sixty, women outnumber men due to their longer life expectancy (Boston Globe,
2016).

The ability to travel for leisure purposes greatly depends on an individual’s income. Leisure
travel is a luxury which may be foregone when times are financially difficult. Generally, as
personal income rises, the demand for air travel increases. However, should there be a
recession, money belts are tightened, and less leisure trips may be taken. This is an example
of a concept known as income elasticity (this topic will be discussed in Chapter 8). Income
elasticity can be defined as the relationship between changes in consumers’ income level and
the demand for a particular item.

2. Geographic Segmentation

In total, there are six factors that pertain to geographic segmentation and can be used to
create customer segments:

1. Location (country, state, city, ZIP code)

2. Timezone
3. Climate and season
4. Cultural preferences
5. Language
6. Population type and density (urban, suburban, exurban or rural)

Geographic segmentation involves selecting potential markets according to where they are
located. This segmentation approach may consider variables such as climate, terrain, natural
resources and population density, among other geographic variables. Markets can be divided
into regions because one or more of these variables could differentiate customers from one
region to the next. For example, those individuals who are living in wet and cold climates
will favour warm, sunny destinations for their holidays. This issue could greatly affect
competition among airlines for certain destinations, particularly during the peak holiday
seasons.

The culture or country of origin of all travellers is also an important factor which must be
taken into consideration, particularly when targeting corporate segments. Not all business
travellers belong to the same stereotypical image of the sophisticated, affluent middle-aged
business man hailing from specific regions such as the north-west of Europe, North America
or Japan. Today, business travellers may include traders who are travelling to different
locations in the world, including developing countries, where there are growth prospects. In
this case, convenient schedules and inflight frills are relatively unimportant when compared
to excess baggage policies and low fares.

3. Psychographic Segmentation

This type of market segmentation can be traced to the VALS framework developed by

Arnold Mitchell in 1980. The VALS model understudies the values, attitudes, and lifestyles
of consumers, and leverages this data for market research. It is commonly referred to as the
background of psychographic segmentation. 

The dynamics informing psychographic segmentation are easy and relatable. As with
everything else, you're more likely to make the right business decisions when you not only
know who your customers are; but also have a fair idea of how they think.Psychographic
segmentation could be used to segment markets according to personality traits, values,
motives, interests and lifestyles. A psychographic dimension can be used by itself to segment
a market, or it can be combined with other segmentation variables. The psychographic
variables are used when purchasing behaviours correlate with the personality or lifestyles of
consumers. Diverse consumers may respond differently to the businesses’ marketing efforts.
For example, affluent business travellers who are used to high standards of living will expect
an airline’s service to complement such a lifestyle (Swarbrooke, & Horner, 2001). The
lifestyle one leads and expects to lead greatly depends on an individual’s social status which
is generally influenced by occupation. Social grades (grades in status) may be broken down
as follows:

A: Higher managerial, administrative or professional;

B: Intermediate managerial, administrative or professional;
C1: Supervisory, clerical and junior managerial, administrative or professional;
C2: Skilled manual workers;
D: Semi or unskilled manual workers;
E: State pensioners or widows, casual or lowest grade workers.

Most business class passengers come from the A, B and C1 social grades. These people have
high occupational status. They may earn high incomes and are usually accustomed to a good
lifestyle. Therefore, they may demand a very high standard of service. Marketing managers
must carefully consider additional facilities for these passengers, as they should ensure their
comfort, at all times. Examples of additional facilities that could be provided to these
individuals (particularly those who are in Class A) could include; separate cabin for business
class, separate check-in desks, the use of private lounge, and so on. Air travel is no longer an
elitist luxury. Although members of the A and B social grades form a substantial number of
leisure travellers, many airlines, particularly low-cost carriers are increasingly targeting lower
social grades, namely, C2, D and E, as a means of exploiting the market.

4.Behavioural Segmentation
Behavioural segmentation is
defined as the segmentation of the
market according to individual
purchase behaviours. Behaviour-
based segmentation is conspicuous with the benefits sought from the product, with the
identification of specific buying behaviours, in terms of shopping frequency and volumes of
purchase, et cetera. For example, a customer relationship management system could include
customer profiles of frequent-flyer travellers, and could reveal valuable information on their
past transactions. The frequency with which individuals travel often depends on their
occupation. The higher the standard of living of individuals will enable them to travel more
frequently. These issues ought to be considered by the airlines’ marketers. A poorly run
airline could lose the return custom of its business travellers. Moreover, it may lose
credibility among potential prospects who may have come in contact with disappointed
travellers.

5. Product-related Segmentation
These variables depend on the product or service to be marketed. In the airline industry such
variables include, journey purpose, the length of the journey, the passengers’ country of
origin, and the like. For instance, passengers could be travelling for business reasons,
therefore they may need to book for their short itinerary in the last minute. When discussing
about business travellers it is necessary to break them into segments, namely, corporate,
independent, incentive or conference travellers. As mentioned earlier, there are quite a large
number of market segments which provide good sources of revenue for the airline industry.
However, the business passengers (as mentioned above), may differ from each other, in terms
of their spending power.

The independent travellers are usually travelling on their own expense, so they would expect
value for money. The corporate travellers are subsidised by their company, so they may be
more interested in the standard of service, as well as on other frills being made available to
them. The conference and incentive segments have other requirements. This latter segment
consists of individuals who travel in groups. Their arrangements are usually made well in
advance by either corporate businesses or by specialised travel agencies. As a means of
offering cheap group rates, airlines could possibly organise group travel at unsociable hours.

The length of the travel journeys may also dictate the customers’ needs, wants and
expectations. For example, the needs of the customers who are travelling on a long-haul flight
from London to Singapore, would be different from those of other travellers on a short-haul
flight from London to Paris. Long-haul travellers will need very comfortable seats, inflight
entertainment, inflight meals and so on. On the other hand, the short-haul travellers may only
require a drink and some literature (inflight magazine) to peruse. Then, there are other
journeys which may be categorised as medium-haul flights. An example would be a flight
from London to Rome. These passengers will have different requirements to those mentioned
above. In this case, they may expect comfortable seating and a light snack. Other services
such as priority boarding and a welcome drink may also be expected by business travellers.

History
The business historian, Richard S. Tedlow, identifies four stages in the evolution of market
segmentation:[4]

 Fragmentation (pre-1880s): The economy was characterized by small regional suppliers

who sold goods on a local or regional basis
 Unification or mass marketing (1880s–1920s): As transportation systems improved, the
economy became unified. Standardized, branded goods were distributed at a national
level. Manufacturers tended to insist on strict standardization in order to achieve scale
economies to penetrate markets in the early stages of a product's lifecycle. e.g. the Model
T Ford
 Segmentation (1920s–1980s): As market size increased, manufacturers were able to
produce different models pitched at different quality points to meet the needs of various
demographic and psychographic market segments. This is the era of market
differentiation based on demographic, socio-economic, and lifestyle factors.
 Hyper-segmentation (post-1980s): a shift towards the definition of ever more narrow
market segments. Technological advancements, especially in the area of digital
communications, allow marketers to communicate with individual consumers or very
small groups. This is sometimes known as one-to-one marketing.

The practice of market segmentation emerged well before marketers thought about it at a
theoretical level. Archaeological evidence suggests that Bronze Age traders segmented trade
routes according to geographical circuits.  Other evidence suggests that the practice of
modern market segmentation was developed incrementally from the 16th century onwards.
Retailers, operating outside the major metropolitan cities, could not afford to serve one type
of clientele exclusively, yet retailers needed to find ways to separate the wealthier clientele
from the "riff raff". One simple technique was to have a window opening out onto the street
from which customers could be served. This allowed the sale of goods to the common people,
without encouraging them to come inside. Another solution, that came into vogue from the
late sixteenth century, was to invite favored customers into a back-room of the store, where
goods were permanently on display. Yet another technique that emerged around the same
time was to hold a showcase of goods in the shopkeeper's private home for the benefit of
wealthier clients. Samuel Pepys, for example, writing in 1660, describes being invited to the
home of a retailer to view a wooden jack. The eighteenth-century English
entrepreneurs, Josiah Wedgewood and Matthew Boulton, both staged expansive showcases of
their wares in their private residences or in rented halls to which only the upper classes were
invited while Wedgewood used a team of itinerant salesmen to sell wares to the masses.

Evidence of early marketing segmentation has also been noted elsewhere in Europe. A study
of the German book trade found examples of both product differentiation and market
segmentation in the 1820s. From the 1880s, German toy manufacturers were producing
models of tin toys for specific geographic markets; London omnibuses and ambulances
destined for the British market; French postal delivery vans for Continental Europe and
American locomotives intended for sale in America. Such activities suggest that basic forms
of market segmentation have been practiced since the 17th century and possibly earlier.

Contemporary market segmentation emerged in the first decades of the twentieth century as
marketers responded to two pressing issues. Demographic and purchasing data were available
for groups but rarely for individuals and secondly, advertising and distribution channels were
available for groups, but rarely for single consumers. Between 1902 and 1910, George B
Waldron, working at Mahin's Advertising Agency in the United States used tax registers, city
directories, and census data to show advertisers the proportion of educated vs illiterate
consumers and the earning capacity of different occupations, etc. in a very early example of
simple market segmentation. In 1924 Paul Cherington developed the 'ABCD' household
typology; the first socio-demographic segmentation tool. By the 1930s, market researchers
such as Ernest Dichter recognized that demographics alone were insufficient to explain
different marketing behaviours and began exploring the use of lifestyles, attitudes, values,
beliefs and culture to segment markets. With access to group-level data only, brand marketers
approached the task from a tactical viewpoint. Thus, segmentation was essentially a brand-
driven process.

Wendell R. Smith is generally credited with being the first to introduce the concept of market
segmentation into the marketing literature in 1956 with the publication of his article, "Product
Differentiation and Market Segmentation as Alternative Marketing Strategies. Smith's article
makes it clear that he had observed "many examples of segmentation" emerging and to a
certain extent saw this as a "natural force" in the market that would "not be denied. As
Schwarzkopf points out, Smith was codifying implicit knowledge that had been used in
advertising and brand management since at least the 1920s.

Until relatively recently, most segmentation approaches have retained a tactical perspective in
that they address immediate short-term decisions; such as describing the current “market
served” and are concerned with informing marketing mix decisions. However, with the
advent of digital communications and mass data storage, it has been possible for marketers to
conceive of segmenting at the level of the individual consumer. Extensive data is now
available to support segmentation at very narrow groups or even for the single customer,
allowing marketers to devise a customised offer with an individual price which can be
disseminated via real-time communications. Some scholars have argued that the
fragmentation of markets has rendered traditional approaches to market segmentation less
useful.

Advantages of Market Segmentation

Market segmentation consists of identifying a sufficient number of common buyers. It

enables subdivision of the total aggregate demand for a product into economically viable
segments. Segments fall between the two extremes of total homogeneity and total
heterogeneity. Segments benefit the marketer in several ways which may be discussed under
four heads:

1. Proper choice of target market

2. Tapping a particular market
3. Efficient and economic marketing efforts; and
4. Benefits to the customers.

1. Proper choice of target market: The market for any product is made up of several
segments. A market is the aggregate of consumers of a given product. Consumers are not a
homogeneous lot. They differ a lot in their characters and buying behavior. Thus, many
differing segments exist in a market. Market segmentation helps the marketer divide the
heterogeneous market. It is possible to distinguish one customer group from another.
2. Tapping a particular market: Segmentation enables the marketer to understand the
needs of the customers and serve them well. Prediction of the likely response from each
segment is possible. With homogeneous responses from each segment, marketer finds it easy
to develop an appropriate marketing programme. By tailoring the marketing programmes to
individual market segments, marketers perform their tasks effectively.

Specialization can be achieved in product distribution, promotion and pricing for catering to a
particular segment.

3. Efficient and economic marketing efforts: Segmentation makes marketing efforts

both efficient and economic. Marketers segment the market and try to fulfill the needs of that
segment. It helps in designing the kinds of promotional devices that are effective from the
view point of customers.

Marketing efforts are focused on the well defined needs of the segment. Thus, marketing
efforts undertaken by the marketer become more productive. They help the marketer to
evaluate the results of his marketing programme. Best time to introduce new products,
advertising etc., could be easily determined.

4. Benefits to the customer: Segmentation benefits not only the marketer but the
customer as well. It distinguishes one customer group from another within a given market. It
helps the marketer concentrate on the fulfillment of the well defined needs of the specific
segment. Now-a-days, segmentation has attained a high degree of sophistication.

Disadvantages or Limitations of Market Segmentation

1. Sometimes, market segmentation becomes an expensive proposition. A marketer

experiences considerable difficulties, as he has to develop different marketing mixes for
different segments. Moreover, mass production is much cheaper than making a variety of
products.

Even major players like Bata have erred in market segmentation. In the early 1990s, Bata
introduced a few brands with high price tags in the high end segment of the Indian footwear
market. This segment was not a sizable one for Bata. This segment accounted for a mere 5 —
10 percent of the Indian footwear market. The sales trend could not facilitate mass
production. Having incurred a loss in the high end segment, Bata had returned to the mass
segment.

2. Promotional expenses, costs of keeping adequate inventory of each variety of goods etc.,
also go up, eroding profitability.

3. Since the marketer has to implement varying marketing programmes suiting to the
different segments, administrative expenses increase.

LITERATURE REVIEW

American Marketing Association defines marketing as “Marketing is the activity, set of

institutions, and processes for creating, communicating, delivering, and exchanging offerings
that have value for customers, clients, partners and society at large (approved July 203) [2)
Philip Kotler defines marketing as a societal process by which individuals and groups obtain
what they need and want through creating, offering and freely exchanging products and
services of value to each other. (3) The Marketing concept proposes the reason for success
lies in the company’s ability to create, deliver and communicate a better value proposition
through its marketing in comparison to its competitors for its chosen target segment. The
market segmentation is a process to divide customers into homogeneous groups which have
similar characteristics such as buying habits, life style, food preferences etc.[4]. Brewer and
Speh (2000) have developed a model for evaluating supply chain performance using balance
scorecard. (5) Betchel and Jayaram (1997) claim that integrated measures, which are cross
functional have to be used as they avoid optimization at one point in the chain without
considering the potential consequences at other points on the chain.(6) Many companies have
not succeeded in maximizing their supply chain’s potential because they have often failed to
develop the performance measures and metrics needed to fully integrate their supply chain to
maximize effectiveness and efficiency. Gunasekaran et al. (2004) developed a framework to
promote a better understanding of the importance of SCM performance measurement and
metrics (7) Maltz et al. (2003) developed a performance evaluation frame work named
dynamic multidimensional performance (DMP) (8). There are two distinct orientations to
product policy, i.e., market segmentation and product differentiation (Smith 1956) (9) Market
segmentation refers to making product decisions after studying and characterizing the
diversity of wants in a market place, while product differentiation refers to product decisions
taken relative only to a firm's competitors. This revolves around a search for groups of
consumers from the general population, and sometimes even customers, with similar within-
group and different across-group response (see Frank, Massy and Wind, 1972, Wedel and
Kamakura2000(10).Thus market and customer segmentation always is a continuous process
of bringing out Heterogenous sets with in a group of Homogenous markets/segments. The
effectiveness of the segmentation keeps improving with the narrowing down of this process
of bringing down heterogeneity within the homogenous set with the number of iterations.
Comprehensive models of consumer behaviour have appeared in the marketing literature for
more than thirty years and describe a complex, multi-event behavioural process (Nicosia
1966 (11). A recent literature on statistical techniques for market segmentation that uses sales
scanner data to make inferences about brand preference and attribute importance (Kamakura
and Russell 1989 (12). "segmenting" consumers by their shopping behaviour or
responsiveness to marketing mix elements may seem out of touch with the potential for
mining today's data bases. Understanding where and how prospects shop is one facet of the
task of market definition, but not market segmentation. Peacock (1998) identifies several
potential uses that data mining has in the area of marketing including customer acquisition,
customer retention and customer abandonment and market-basket analysis.

OBJECTIVES OF THE STUDY

The objectives of the study are as follow: To find out the significance of Market
Segmentation/Customer segmentation and its relevance and association with various other
components of Marketing. 3.1 Hypothesis H(0): Segmentation has no relevance to other
components of Marketing -no impact on them. H(a): Segmentation has a greater relevance to
other components of Marketing and it impacts them significantly. 3.2. Research Design We
went for a thorough study of the literature available on Segmentation and the various
components of marketing which have a great relevance to segmentation. We even collected
the primary data for a cross-check of the relevance of some of the components viz. customer
satisfaction levels and used statistical tools using Mintab for evaluating certain hypotheses,
but not able to share them for reasons of confidentiality as well as confining the scope of the
research to the objectives cited. 3.3 Data Collection 3.3.1. Primary Source The data was
collected directly from respondents with the help of structured questionnaires. 3.3.2.
Secondary Source The secondary data was collected from internet and references such as
magazines, Journals etc. A Study of Market Segmentaton – Relevance And Association of
Segmentation… www.ijbmi.org 40 | Page Figure 3: Model indicating Segmentation and its
relevance to certain marketing concepts Data Mining And Segmentation Data mining is the
process of extracting previously unidentified and actionable information from large, complex
sets of data. Segmentation is a key data mining technique. A set of customers reacting in a
similar way to a marketing approach is known as a Segment. We can predefine the
characteristics of the segments in advance and allocate customers to these segments. This is
called priori segmentation. On the other hand, if we use tools and software to analyse the data
to extract the naturally occurring clusters of behaviours, these clusters form the segments and
this process is called Clustering in data mining. Clustering is a type of exploratory data
mining used in application oriented areas like machine learning, classification and pattern
recognition. In this way, Data mining is the first component which has high relevance to
segmentation of the customers -which forms the basis for targeting the customer base to be
serviced. By segmenting the markets and customers, marketers can target their customers in
an effective and efficient way. Prof Archana Raje and Dr.R.K.Srivastava have , in their
research study, unfolded the relationships and linkage between data mining and customer
segmentation(14) Properly built datamining tools enrich the segmentation studies effectively.
Supply Chain Management And Segmentation Manufacturing at peak capacity is only
profitable when goods can be distributed rapidly from manufacturer to consumer through an
efficient distribution system. Supply chain efficiencies shall be geared to service based on the
segmentation of customers. supply-chain logistics that cater to the size and location of the
receiving stores. Planning and setting up a distribution network for a variety of different
manufacturers whose end-users range from major high-frequency stores to small stores
catering to cosmetics, fragrances and personal skin care products. With the right partner for
supply chain management and distribution, in line with the segment, organizations will
certainly strengthen their bottom line. Marketing Communication And Segmentation -4ps,
Product Development And Campaign Organizations need to have their marketing
communications centered and focus around the essential 4Ps of marketing (product, price,
promotion and physical distribution/place). In this way, segmentation is an essential pre-
requisite of their marketing communications. Without STP (segmenting, targeting and
positioning), marketing communications can not be effective. Segmenting helps to focus on
the right product and service attribute for the right market/customer segments from the total
universe. This also saves undesirable promotion expenses in the form of advertisements since
the communications reach on dot to the specific customer/markets targeted and the
campaigns of new product developed can be centered around the segmented and positioned
set of customer-market segments. Marketing communications also have a bearing on place-
and it needs to have the local tastes and preferences of the products since the preferences will
change from one place of distribution to other (more so in FMCG Category). Segmentation is
the conceptual tool used to focus and achieve the needs of the manufacturer, the retailer and
finally the end-use, the consumer. Marketing strategy/Service and Segmentation: Our
exploratory study reveals that it is not just enough to have the market and customers
segmented properly. Segmentation has a higher bearing only when the organization adopts
the right strategy to service the right segment. For example, an organization has customer
segments with Just-in-time deliveries, Loyal customers and value for money adopting a
uniformstrategy will render the organization lose the customers as well as incur losses. On
the other hand, the successful organizations strategize to keep adequate inventory for the Just
in time customers near to the customer place, (seek a higher price), support the loyal
customers in all A Study of Market Segmentaton – Relevance And Association of
Segmentation… www.ijbmi.org 41 | Page aspects including technical support required and
right campaigns depicting high value added for the customers seeking value for money.
Customer relationship management (e-CRM/CEM) and Segmentation: Customer relationship
management and customer experience management are the emerging areas of marketing
which focus on nurturing selective segments. Segmentation helps in identifying the Loyal
customers and highly profitable customers from the rest of the customer base. Organizations
shall be customer centric for such segments in every aspect of touch points. Research reveals
that the cost of acquiring new customers is ten times more than the cost of retaining the
existing profitable customers. The service levels of such set of customer segments shall excel
in customer experience management. According to Prof.M.L.SaiKumar, Dr.V.Venkata
Ramana and Dr.G.Somayajulu, a number of research studies show that “a small segment of
customers can tilt the whole business and that the companies have discovered that they need
to shift the focus from branch to customers” (segmented and targeted customers).(15) A
360degree understanding of the customer requirements will render the organisations to
service the customer needs based on the depth of relationship and this results in customers
having a better experience in all tough points. Customer satisfaction /customer delight and
Segmentation: Customer satisfaction strategy of organizations often fail because of ignorance
of implementation problems. An internal market perspective helps to identify the barriers
arising inside the organizations which directly mirror the external market. Workshop and
survey information confirm the existence of powerful but hidden implementation obstacles in
the internal market. -Nigel F.Piercy (1995) (16) Customer satisfaction provides a lead
indicator of customer purchase intentions and Loyalty (Farris et al 2010) (17). Organizations
should be keen to note that customer dissatisfaction results in customer defection and long-
term losses. To be customer centric, organizations shall constantly monitor the customer
satisfaction levels and need to find the barriers of implementation strategies, let it be external
market oriented or internal market oriented and try to overcome the barriers.

Data Collection and Methods

This research compares and contrasts market segmentation practices between two groups:
independently owned crop input retail businesses, and diversified agricultural cooperatives.
Individuals from these firms with primary responsibility for marketing crop inputs and
agronomic services were chosen to participate in this study. Participants‟ experiences with
market segmentation strategy were examined through a two-part process: first with a survey
administered through Zoomerang Survey (http://info.zoomerang.com) online; and second
with a succeeding telephone interview. The sample design was structured around CropLife’s
Top 100 ranking of crop input retailers (Sfiligoj, 2003; Sfiligoj, 2006). The 20 participants
were selected 5 first based upon a previous working relationship with Purdue‟s Center for
Food and Agricultural Business (CAB), and secondly on their status as a current Top 100
rank holder. The web-based survey was designed to gather demographics, general market
information and address preliminary issues in the market segmentation process to set the tone
for the followup telephone interview. The web-based survey instrument is presented in
Appendix A. The telephone interview was designed to examine in a detailed manner the
specific elements, methods, effects and outcomes (both challenging and beneficial) of
adopting a market segmentation strategy. The phone interview survey instrument is presented
in Appendix B. Questions were structured upon an adapted version of Best‟s steps for a
needs-based market segmentation process. By structuring the questionnaire so that at least
one question addressed each of the steps, gaps or breakdowns in the market segmentation
process could be assessed, and then related back to a difference in organizational type, size,
market environment descriptor, implementation challenge, or participant‟s survey responses.
Statistical analysis included simple descriptive characteristics including the mean, minimum,
maximum, frequency and cross tabulations. Cross tabulations and associated chisquared
statistics were completed to evaluate differences in firm type. Statistical significance of mean
responses between the categories of firm type for each variable were calculated using an
Ftest. Digitally recorded telephone interviews were transcribed in Microsoft Word,
highlighting key points and statements from individuals‟ responses. Once all interviews had
been transcribed, responses were sorted by question and a synopsis of each set of qualitative
responses was compiled. This procedure was previously used successfully by Stolp to collect
data on market planning practices of retail crop input firms. These data were collected in
March and early April 2007.

Primary Themes of Telephone Interviews

Step 1: Market Segmentation Identification

Overall, 17 (85%) retailers identified market segments within their respective market areas.
Retailers recognized a variety of characteristics that uniquely defined their market segments.
Many of these characteristics were also acknowledged by Kotler and Keller as “major
[market] segmentation variables.” Major market segmentation variables reflected throughout
retailer interviews included geographics (e.g. by location/outlet); demographics such as age,
occupation (e.g. off-farm job), and generation (e.g. father and son within same operation);
psychographics, or personality traits (e.g. innovative/progressive, traditional, loyal,
professional); and behaviors such as user status (e.g. custom application versus farmer
applied crop inputs), usage rate (e.g. proportion of business done by crop input category:
fertilizer, crop protection chemicals, seed), and loyalty (e.g. high level of loyalty evaluated by
consecutive years of retailer/farmer relationship). No single unifying set of characteristics
(demographics, psychographics, behaviors) was used across the sample of retailers to
segment their markets. Rather, various combinations of geographics, demographics,
psychographics and behaviors were used by these retailers to define unique market segments.
Among retailers who segmented their markets, the core basis (variable) for segmentation
beyond geographics (outlet/location) included some combination of personality traits and
buying behavior that dictated services valued (6); acreage operated (3); service required (no-
service vs. other)/service level (number of services, sophistication of services) (2);
personality traits that dictated services valued (2); some combination of personality traits and
demographics (generation, occupation) that dictated services valued (1); some combination of
acreage operated and crop grown (1); types of product (fertilizer, chemical, seed) purchased
(1); and personality traits (pre-season planning) that created operational efficiencies for the
retailer (1). A second tier of market segments (sub-segments) were identified by 7 retailers
who segmented their markets. The broader, more encompassing segments discussed above
were further segmented on bases including: service level (number of services, sophistication
of services)/service required (no-service vs. other); off-farm employment (full vs. part -time);
product required (no product purchased, or purchased elsewhere); product usage (bulk
quantities, direct shipment); and buying behavior. This distinction does not imply increased
effectiveness of the market segmentation process; it simply indicates another level of
complexity and illustrates the types of sub-segments formally acknowledged during the
interview process by retailers in this sample. The most unifying market segment recognized,
regardless of whether business was transacted with that segment, was a price/economic buyer
segment. Every interviewee recognized the existence of this type of customer in their market
area. The recognition of the price buyer segment transcended market segmentation schemes,
where the scheme was clearly centered on market segments characterized by psychographics,
or some behavior other than buying behavior. This was clearly apparent with three retailers
and is illustrated by the following transcribed description of one retailer‟s market segments:
“Loyal: … value service over price, long time business partners, tend to be multigenerational,
depend upon us for agronomic information. Business: … value service we provide, but tend
to analyze the value it brings to their operation (evaluate ROI), little more price sensitive than
the loyal segment, very analytical Price buyer: want bottom-line input prices, base buying
decisions upon this factor alone” Clearly this retailer‟s method of identifying market
segments is centered on psychographics (personality traits) as illustrated by the descriptions
for the loyal and business segments. The price buyer segment stands out as it is described by
customers‟ buying behavior alone. The remainder of the interviewees (14) expressed the
price/economic buying behavior as a characteristic of a market segment (e.g. no-service,
mega grower, cash & carry). Market segments based on the demographic acreage operated
had no consistent size across the retailers‟ different market areas. Of the retailers that
segmented their markets on acreage operated (3), and some combination of acreage operated
and crop grown (1); a pair of retailers used two different sized acreage segments, while
another pair of retailers used three different sized acreage segments. Other commonly
identified market segments included a “relationship segment” (7), a “business segment” (4),
and a “technology segment” (4). An aggregate description from the retailers who identified
these segments is transcribed: “Relationship: long-time customers, loyalty transcends
salesman, less price sensitive than other segments, desires more traditional product/service
offering Business: analytical, must show added value that service provides, prefer sales
appointments, more price sensitive than a relationship customer, conversations revolve
around specific business topics only Technology: desires efficiency, desires precision
services like … VRT fertilizer application, data management of yield data, desires latest seed
technologies/traits, lack labor (time and expertise) to support these services, more
opportunities relative to other segments to provide services” The relationship and business
segments were identified through two different segmentation schemes. Based on personality
factors (psychographics), the relationship segment was commonly cited as having high
retailer loyalty and being least price sensitive while the business segment was identified by
their analytical nature and their overwhelming desire for retailers to “prove the value” of a
service offering. The second way in which the relationship and business segments were
identified was by buying behavior. Two retailers claimed that their relationship and business
segments matched well with that identified in studies conducted by Purdue University
(Alexander et. al.). In this context, the relationship segment “values personal communication
and traditional service and information,” while the business segment desires a “high quality
product and information at a reasonable price, and relevant, timely information” (Alexander
et. al.). 13 The technology segment was always identified through personality traits
(psychographics). These were customers who were driven by technologies and saw value in
operational efficiency, but lacked the labor and/or technical expertise to maintain these
technologies. Two of the three firms which did not segment their markets were cooperatives.
Additionally, the most formal set of market segments belonged to an independent. This
independent retailer‟s segments were first identified by acreage, and then each acreage
segment was divided into sub-segments based on buying behavior. The buying behaviors
formed three distinct segments including a price buyer, business buyer and relationship
buyer. Within the mid-sized relationship buyer sub-segment, a technology segment was also
identified.

Step 2: Market Segment Attractiveness

Market growth, competitive intensity and market access are measurable and/or observable
across most markets (Best). Best suggests these commonly observed market characteristics be
used to evaluate a particular market segment‟s attractiveness. Best articulates the details of
these measures: “Large, growing segments with potential for future growth are more
attractive than combinations of small segments without potential for growth. The number of
competitors, the number of substitutes, and the competitive rivalry among competitors affect
the attractiveness of a segment. An attractive segment is one with relatively few competitors,
little price competition, very few substitutes and high barriers to competitor entry. Market
access requires a good fit between a business‟s core capabilities and target segment needs.
The better the match between customer needs and a business‟s sources of advantage, the
easier it is to access markets. Without sufficient marketing resources, market access is greatly
impeded. Segment attractiveness is greatly enhanced when a business has good customer
access, sufficient marketing resources to access customers and a good fit between business
capabilities and customer needs” (Best). Best argues that a market segment assessment using
these measures combined with an evaluation of segment profitability will determine which
segments a firm should pursue with a tailored offering and positioning strategy. Clearly, this
framework encourages the firm to place a priority on market segments meeting and/or
excelling with respect to these measures. In contrast, market growth, competitive intensity
and market access were rarely cited as ways in which retailers prioritized their market
segments. Three of 17 retailers said that they did not prioritize their market segments, while
an additional pair of retailers admitted that prioritizing market segments based on
attractiveness was an area of weakness for them. Of the two retailers that reported a weakness
in this area, one said: “We don‟t do a good job at that, and I don‟t think that happens like it
should. Even though we talk about it in weekly sales meetings, I think my sales people don‟t
do too much prioritizing and they go wherever they have to go to get sales.” 14 This retailer
also noted that only one market segment may exist at a particular location/outlet within his
market territory. Accordingly this would dictate the market segment prioritization that could
take place at the location/outlet level across a retailer‟s territory. The example highlights a
sales force organizational issue that may need to be addressed in order to implement an
effective market segmentation strategy. Interestingly, only five retailers‟ responses reflect
attractiveness measures suggested by Best. Profitability was the focal measure of market
segment attractiveness with these retailers. Analysis of the retailers‟ ways of measuring
segment attractiveness and prioritization revealed an important gap in the market
segmentation process. While attractiveness measures including market growth (future
customer growth through acquisition) (3) and market access (organizational fit) (2) were
cited, competitive intensity was never cited as a measure used to prioritize market segments.
Interestingly, retailers in this sample are aware of competitive intensity in their respective
market areas, responding most frequently that retail capacity to provide agronomy products
and services was somewhere between 1% to 50% greater than farmers‟ needs in their
respective market areas. Retailers also gave some indication about the type of customer that
aligns well with their core capabilities (market access). On average, retailers in this sample
rated their performance relative to similar retail competitors in their market areas highest on
service elements, rather than product or service prices. This could indicate that in terms of
organizational fit, a market segment such as a technology segment (values a retailer‟s
provision and support/expertise of site-specific services such as field mapping, grid-soil
sampling, or custom application), or a relationship buyer segment (values personal contact
and more traditional agronomic services/information) may be a better fit than a segment that
is characterized by owning application equipment and employing an agronomist. Naturally,
this type of market segment may not require any of the items that a high-service retailer
performs exceptionally well. Although market growth rate was not cited by retailers as a
segment attractiveness measure, it was considered in the context of which customers will
continue becoming larger through acquisition, and therefore operating a greater number of
acres. One retailer stated: “I can say all kinds of things like, [market segmentation is] going to
lead to a deeper long term partnership, I think its going to create this -- going to create that,
but the reality is [prioritization] still comes back generally to business growth.” An important
gap between theory and practice appears to be evaluating segment attractiveness with a multi-
faceted (market size, market growth rate, and market growth potential concurrently) approach
and then determining which segments to target based on these measures.

Step 3: Market Segment Profitability

Best states that “although market attractiveness of a segment may be acceptable, a business
may elect not to pursue that segment if it does not offer a desired level of profit potential.”
Therefore, retailers were asked if they determined the potential profitability of each of their
market segments, and if so how they measured that profit. The most common response was
that firms do not determine each market segment‟s profitability (14). Of retailers who
responded this way, 2 acknowledged the desire to become more sophisticated in this area as
illustrated by the following quotations: 15 “That‟s an area where we‟d like to become more
sophisticated.” “In the past we‟ve measured profitability by branch (location). We are not to
the point where our operating system allows us to go back to profitability per territory. We
are trying to move that direction or even profitability by customer. I think that refinement
probably needs to happen to really get a better assessment on our efforts and see how
effective we are with certain [marketing] programs.” Another retailer confirmed the challenge
of developing a system to manage the information needed to track profitability at a more
refined level similar to the previous quotation: “I‟d like to tell you we‟ve got a great
information system that dices these customers up for us and tells us exactly how much we are
making on each one and what segment they bucket into. Unfortunately, I feel we‟ve got a
weakness in being able to specifically track some of the activities of these customers. I think
the reality of it is that it‟s more of a generality that we do see the revenues being driven, or
the margins we are able to capture by being able to tie up that customer with the services of a
salesperson as compared to what margins are out there when you talk about purely a price
conscious buyer.” One retailer supplemented his response indicating that instead of
measuring potential market segment profitability his firm focused on determining customer
profitability of their key accounts (20% of customer base that comprises 80% of business) as
demonstrated through the following quotation: “We‟re more focused on determining any
given customer‟s profitability on a one-on-one basis. When you get up into this business
segment and especially when you get up into the price segment, each individual is a case of
its own. There are no averages there. We‟ve got some out there we have to do that on
because you want to make sure you‟re not giving it all away. It‟s not a high percentage.
Anymore, of our customer base, if you look at it from an acre standpoint sometimes it gets a
little higher because most of the guys that fall in that category (price segment) are farming
quite a few acres, but we‟re still talking roughly 20% of the customers.” The remaining
retailers (3) responded yes to the question of measuring segment profitability. As mentioned
previously two retailers expressed that their attempts to measure potential segment
profitability were a work in progress. Only one retailer provided a precise explanation of
how, and what measurements/tools were used to determine potential segment profitability
within his firm. A description of the measurements/tools used by this respondent follow: The
Profit Calculator: Microsoft Excel spreadsheet developed in conjunction with an outside
consultant that determines profitability per customer Lifetime value number: takes into
account the customer‟s remaining active years in farming and then relates a profitability
figure over that time period 16 A proprietary customer information database management
system supported through a supplier that tracks sales by individual customers per input
category including  Services (e.g. custom application)  Micronutrients  Crop nutrients
(N-P-K)  Crop protection chemicals  Seed As evidenced through interview responses, it
appears that the information and accounting systems to track market segment profitability
have not reached an adequate sophistication level in at least two of these firms. This might be
attributed to the size of the firm and subsequent available resources. Again, this sample of
crop input retailers struggled to successfully complete this step in the market segmentation
process. Eighty-two percent of the retailers who segmented their markets did not evaluate the
potential profitability per market segment. This illustrates an important area for improvement
within this group of retailers.
Step 4: Segment Positioning

The next step in the market segmentation process is positioning, which involves creating a
value proposition and positioning strategy for each target segment. A value proposition
ideally, “should be built around the needs/desires by a target customer” (Best). The second
element is creating a product-price positioning strategy based on the segment‟s unique needs
and characteristics (geographics, demographics, psychographics, behaviors)” (Best). This
step was addressed with the question: How do you create a tailored offering for each market
segment? Seven retailers described creating tailored offerings based on the needs of their
customers in all identified market segments. An additional 8 retailers cited ways in which
their offerings could vary (product price breaks on volume purchased, product price terms
based on mode of shipment, service level, financing, etc.), but did not relate a specific
tailored offering to any particular market segment. The remaining retailers (2) did not create a
tailored offering for their market segments as evidenced by these quotations: “I can‟t say as
there is any segment that is tailored [too]. Our number one concern would be treating
everybody equal. Every customer no matter how much they farm is important to our
business.” “We will come up with a tailored offering, but on a per customer basis rather than
per segment basis. Occasionally we will spread fertilizer or spray some acres at a reduced rate
(service price), however not a reduced product price! We do nothing else beyond that on a
regular basis.” While the quotations show that these retailers did not create tailored offerings
by segment, common to both retailers‟ responses was an emphasis on treating customers
„equally‟ through pricing of products. This might indicate that the level of comprehension
regarding the creation of tailored offerings at the crop input retail level is not widely
understood. The focus of the previous two quotations was tailoring an offering on product
price alone. This highlights the importance of understanding every step in the market
segmentation process at all levels (sales staff, sales management, department management) of
the organization in order to achieve an effective market segmentation strategy. 17 Only seven
retailers created a tailored offering and then developed a product-price positioning strategy
directed at each of their market segments. This finding points to another gap in the market
segmentation process. Fifty-nine percent of the retailers who segmented their markets in this
sample could improve upon execution of their tailored offering product-price positioning
strategy. This finding is consistent with the way in which retailers rated the challenges to
implementation of a market segmentation strategy in their survey responses. Inability to tailor
bundles to fit individual market segments was rated as being an important overall (mean =
3.19) challenge to implementation of a market segmentation strategy.

Step 5: Segment “Acid Test”

The segment “acid test” proposed by Best hinges on the idea of presenting a set of tailored
offerings in association with their respective product-price positioning strategies to a small
sample of potential customers in the market. If the strategy (i.e. tailored offering in
conjunction with positioning strategy) is successful, the majority of the test customers will
select the tailored offering/positioning strategy created for them (Best). Because this method
represents only one of many ways to gauge acceptance of a tailored offering/positioning
strategy from the market, an open question was asked of retailers: Do you have a formal way
of gauging the receptiveness of a tailored offering before its introduction into the market?
Seven retailers had no formal way to gauge the receptiveness of a tailored offering before its
introduction to the market. These retailers cited soliciting feedback from sales staff/growers
after the introduction (4), trial and error method (2), and simply a process of recognizing
needs and then reacting to them with a tailored offer to meet those needs (1). The remaining
retailers (10) had a way to gauge receptiveness of an offering before the introduction of a
tailored offering in their respective markets. Methods included a test market by
location/outlet, or by a small group of target customers (4), presenting the offering to a small
group of target customers individually (4), and talking with a small group of target customers
in a round table format collectively (2). This lack of fulfillment could be directly related to
the performance of the previous step which involved creating a price-product positioning
strategy for each market segment. Ten retailers did not execute the previous step versus 7
retailers who did not have a way to gauge receptiveness of a tailored offering before its
introduction to the market. Again, the inability to tailor bundles to fit individual market
segments (mean = 3.19) could partly explain this breakdown in the market segmentation
process.
Step 6: Marketing-Mix Strategy

“A major cause of failure is ineffectively executing the market segmentation strategy. To be

successful, the market segmentation strategy needs to be expanded to include all elements of
the marketing mix, including place (sales strategies) and promotion (communications)”
(Best). Retailers were asked to explain steps taken to communicate a new tailored offering to
sales staff, and then articulate how its intended implementation was ensured through sales
staff. Retailers responded to this question in a variety of ways, but common themes were
noted among responses. These common themes included: general sales staff meetings
occurring on a regular basis (weekly, monthly) (5); involving the sales staff from ground zero
in development of a new tailored offering through sales/administrative staff meetings (4); a
third party and/or internal 18 sales training effort (3); and general sales staff meetings
occurring on an as-needed basis (2). Three retailers reported doing little in the way of
communicating new tailored offerings to sales staff. Of the 17 retailers who segmented their
markets, 6 cited specific ways in which they ensured implementation of marketing strategies
by sales staff. Common responses included: established a special resource team comprised of
senior level agronomists/sales management/general management and made sales calls as a
team with junior salesman to monitor progress (2); sales management specifically follows-up
with individual salesman (2); aligned sales staff with the segment/customer their capabilities
allowed them to best serve (1); and management delivered a consistent message to sales staff
so that marketing strategies were presented in the same fashion from location to location (1).
Two retailers admittedly said that they were not sure how to ensure implementation, noting
that implementation of marketing strategies was flexible per location. One of these retailers
stated: “That‟s the million dollar question! We have always allowed quite a bit of autonomy
to our lead field people in terms of adapting their style to their marketplace, to their
customers‟ personalities, etc. The face of our business is a lot the face of our key lead person
at each of our locations. One of the things we‟ve always in a way wished we could have is
the ability to be like a [major crop protection chemical company]. When the [crop protection
chemical company] representative gets his packet in the fall and it‟s the new program for the
next year, he reads it, he gets his script down, he goes to market, and he sells it like it‟s his
livelihood complete. When you roll out tailored offerings to others and you say „this is how it
is,‟ and you want your customers to be able to choose and select the levels of service they
want…it‟s hard! We don‟t have a way to sit down on top of people and say you will follow
this exactly. That‟s just not been our style and culture inside the business. So, we‟ve tended
to let people take this to market. What happens then is that the personality of the individual
presenting the program takes over, and in many cases the offering takes on the shape and
form of how that individual views it.” While 14 retailers who segmented their markets
explained steps which they took to train sales staff and emphasize sales strategies, 11 did not
report a specific way to ensure implementation of a new tailored offering (sales/marketing
strategy) by sales staff. The previous quotation illustrates some challenges including limited
access to marketing expertise to develop and/or execute a market segmentation strategy, and
inexperienced managers that lack the expertise incorporating a market segmentation strategy
into the firm‟s marketing/strategic plan. Both these challenges were rated as somewhat
important challenges by this group of retailers with overall mean ratings of 3.13, and 3.06,
respectively. In order to evaluate if retailers‟ market segmentation strategies encompassed the
complete marketing-mix, a final question was asked regarding communication strategy.
Retailers were asked if and how the communication strategy varied between market
segments. Eleven retailers responded that their communication strategy did vary between
their respective market segments, while 6 did not. Common ways in which communication
strategies varied was by: length of time spent personally communicating with a customer of a
particular market segment (5); type of communication (direct mail, email, web-site) used with
market 19 segments (2); type of personal conversation conducted between salesman and
customer of a particular market segment (e.g. more professional, or required prior preparation
to prove value to customer) (3); a combination of time spent, products/services offered and
type of communication (direct mail, email, web-site) used with market segments (1). In total,
1 independent and 5 cooperatives that segmented their markets successfully expanded the
market segmentation strategy to include the sales and communication elements of the
marketing-mix, and also were able to ensure sales strategy implementation through sales staff
by some methods previously described. Clearly, independents struggle relative to
cooperatives with employing methods to ensure implementation of a marketing strategy for a
particular market segment. Otherwise, there were no important differences noted between
independents and cooperatives.

Step 7: Progress with Segments

The final step of the market segmentation process is to measure progress within the segments
through customer satisfaction and/or broader measures of success. Retailers were asked if
their market segmentation strategy had a way to measure customer satisfaction within
segments. None of the retailers reported having a way to measure customer satisfaction by
market segment. Common alternative measures of generic customer satisfaction included:
repeat business (6); personal communication with customer about satisfaction (5); a
combination of repeat business and customer surveys (2); customer surveys (2); a
combination of key account grower meetings and customer surveys (1); and sales
growth/sales margin level (1). Ideally, each particular market segment has a unique tailored
offering developed for customers within that segment. Therefore, it is necessary to measure
satisfaction within the segment to evaluate the effectiveness of the market segmentation
strategy. Accordingly, retailers in the sample rated lack of evaluation criterion (no way to
determine effectiveness, measure benefits, or success) for a market segmentation strategy as
an important (mean = 3.13) challenge to implementation. This could explain the
overwhelming lack of fulfillment of this step by retailers.
Summary

It is virtually impossible to satisfy all customers, so it is up to the company to select the

specific parts of the market which they can best serve. Therefore, businesses could identify
market segments, select a few profitable segments, and develop products and marketing
mixes that are aimed at particular customers. Target marketing is made up of three stages:
market segmentation, marketing targeting and product positioning.

Segmentation is the identification of customer groups who share similar characteristics. This
process has a number of advantages, and enables a marketing manager to design an effective
plan for each segment. Usually, tourism companies segment their market by using
demographic, geographic, psychographic, behavioural and product-related variables. The
chosen segments ought to be measurable, accessible, substantial and actionable.

Three market coverage alternatives including; undifferentiated marketing; differentiated

marketing and concentrated marketing were also put forward in this chapter. Businesses
should consider the most appropriate market coverage strategy according to their resources,
the type of service to be offered and the diversities within the market. However, they should
also evaluate their competitors’ market coverage strategies.

The final stage in target marketing is product positioning. Consumers have different
perceptions of products or services. Therefore, business should underline their products’
unique attributes, features and value propositions to differentiate themselves from other
competitors in the marketplace.
Conclusion

In a nutshell, it is important for international firms that entering to a foreign market or

international market, taking into account the sub-cultural groups and focusing on their needs
as many large international companies finding it increasingly difficult to operate in global
stage and retain customers’ loyalty.

To be effective, after suitably researching the market , probably the most important this is to
carry out the process of market segmentation in logical and systematic manner. If the process
of market segmentation is carried out thoroughly, then the firm should benefit in terms of
better competitive position for its products or services, resulting in greater sales and
profitability. After all, the whole rationale of the marketing concept is increased business
effectiveness through the provision of customer satisfaction.
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had seen evidence of a new trend and added a fourth era, termed Hyper-segmentation (post
1980s); See Tedlow, R.A. and Jones, G., The Rise and Fall of Mass Marketing, Routledge,
N.Y., 1993, Chapter 2
6.  Fullerton, R., "Segmentation in Practice: An Overview of the Eighteenth and Nineteenth
Centuries," in Jones, D.G.B. and Tadajewski, M. (eds), The Routledge Companion to
Marketing History, Oxon, Routledge, 2016, p. 94
7.  Alberti, M. E., "Trade and Weighing Systems in the Southern Aegean from the Early Bronze
Age to the Iron Age: How Changing Circuits Influenced Glocal Measures," in Molloy, B.
(ed.), Of Odysseys and Oddities: Scales and Modes of Interaction Between Prehistoric
Aegean Societies and their Neighbours, [Sheffield Studies in Aegean Archaeology], Oxford,
Oxbow, (E-Book), 2016
8.  Cox, N.C. and Dannehl, K., Perceptions of Retailing in Early Modern England, Aldershot,
Hampshire, Ashgate, 2007, pp. 155–59
9.  McKendrick, N., Brewer, J. and Plumb, J.H., The Birth of a Consumer Society: The
Commercialization of Eighteenth Century England, London, 1982.
10.  Fullerton, R.A., "Segmentation Strategies and Practices in the 19th-Century German Book
Trade: A Case Study in the Development of a Major Marketing Technique", in Historical
Perspectives in Consumer Research: National and International Perspectives, Jagdish N.
Sheth and Chin Tiong Tan (eds), Singapore, Association for Consumer Research, pp 135-139
11.  Pressland, David, Book of Penny Toys, Pei International, 1991; Cross, G., Kids' Stuff: Toys
and the Changing World of American Childhood, Harvard University Press, 2009, pp 95-96
12.  Jones, G.D.B. and Tadajewski, M. (eds), The Routledge Companion to Marketing
History, Oxon, Routledge, 2016, p. 66
13. Lockley, L.C., "Notes on the History of Marketing Research", Journal of Marketing, Vol. 14,
No. 5, 1950, pp. 733–736
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no. 5, 1950, p. 71
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Theory", Journal of Historical Research in Marketing, vol. 4, no. 3, 2012, pp. 347-368; DOI:
10.1108/17557501211252934
16.  Cano, C., "The Recent Evolution of Market Segmentation Concepts and Thoughts Primarily
by Marketing Academics," in E. Shaw (ed) The Romance of Marketing History, Proceedings
of the 11th Conference on Historical Analysis and Research in Marketing (CHARM), Boca
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Management, vol. 4, no. 3, 1995, pp. 63–65
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Brands in the Global Market Place, 1900–1930" CGR Working Paper, Queen Mary University,
London, 18 August 2008
19.  Kara, A. and Kaynak, E., "Markets of a Single Customer: Exploiting Conceptual
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