Topic 2

Market Segmentation

Introduction

The first thing that every entrepreneur and businessman should consider before engaging a
business is to know the market. For in a marketing program to work two interrelated components – the
target market and the marketing mix, should be given ample consideration and focus.

If an inspiring fashion designer wanted to make a mark in the industry, she should consider what
specific type of woman she wants to dress. Now this specific kind of woman can be based on her size,
income, lifestyle or even behaviour. So by knowing the specific market, the fashion designer will know
what specific clothes to prepare hom she should sell the clothes.

Knowing your target market is a start. Once an entrepreneur is able to pin point their market,
the entrepreneur is on the right lane to a successful business. Knowing your market may appear easy
however, there are more things to consider before assuming that one has identified the market. This
topic will be a good guide for discovering who the markets are and why entrepreneurs need to spot
them.

At the end of the topic, the students are expected too:

▪ Identify the different ways in doing market segmentation;

▪ Compare the diverse methods in market segmentation;
▪ Use the market segmentation strategy in different ways;
▪ Categorize market segmentation method in making a marketing program;
▪ Plan marketing strategy using market segmentation methods; and
▪ Develop a market segmentation strategy for business.

Market Segmentation: Defined

Being the most basic and the primary business strategy, there are several definition of market
segmentation. Go (2010), defines market segmentation as the process of dividing the total market into
smaller groups seeking similar needs and wants from a product or service. To be effective, these two
important features must be present:

1. The needs and wants of each segment must be strongly defined especially how each segment
differ.
2. The firm must be capable of serving these different needs and wants.

This strategy can be very helpful just to focus on the customer that is most likely to become
happy clients of the business or enthusiastic consumer of one’s content. To segment a market, one split
it up unto groups having the same characteristics, basing on one or several qualities or features.
Splitting up an audience in ways like this will allow more specific targeted market and personalized
content.
 Go (2010), mentioned several examples of companies utilizing segmentation to combat
competitors and to survived in business. Listed below are some examples:

Toyota, has entered several market segments:

● Camry for upscale users looking for both quality and prestige
● Hi-Ace for big families
● Vios for more price-conscious

Procter and Gamble has four types of toilet soaps:

● Olay Beauty Bar which addresses the younger looking skin need for women
● Safeguard as the family health soap with superior skin germs protections
● Zest for active and on the go young adults
● Ivory in the mild soap/sensitive skin category

The approach market segmentation has is the polarity of the mass marketing or the Total Market
Approach. The latter assumes that all clients have the same needs and wants, and will search for the
same product or services.

Market Segmentation: It’s Function

Through market segmentation the firm is empowered to develop a positioning and strategies that
can fill a smaller, more specific ranged of client’s needs and wants when the right opportunities are
identified. The more specific is also known as niche. With these the result will enable the firm to a
direction where a more efficient utilization of resources especially in the aspect of communication and
distribution (Go; 2010). Furthermore, competitive pressure is reduced due to the fact that the firm is
more focused on its niche or a combination of the different niche seeking similar benefits.

Market Segmentation: It’s Types

Using market segmentation as a strategy can be done through different manner and the firm has
the liberty to choose their manner of doing so. The following are the most common ways in segmenting
a market.

1. By needs and want (or benefits)

2. By socio-demographic
3. By psychographic
4. By consumer behavior

Need Segmentation

Need based segmentation is one of the major way to segment a market. With this approach,
one will divide the market up into smaller group of people who have more or less the same basic need.
It was assumed in the past that consumer behaviour was determined by constant personality traits but
today the complexity of one’s personality is considered specially cause a person has various needs
playing a role and differing greatly depending on a given situation.
 Though needs identification, the firm can be confident to offer customers the right product in
the right manner. Need based segmentation enables the firm to take a differentiated marketing tactic to
customer segments, leading to:
a. Awareness that clients have different requirements and a better and clearer understanding
of the market;
b. Ensuring the products meets consumer needs through propositions made specifically for
individual segments;
c. More tailored communication (message, Tone voice) leading to greater impact;
d. Higher conversion rates by targeting specific segments

Go (2010), illustrates how this kind of segmentation can be used in the restaurant business.
● For fine dining with classy ambiance, Prince Albert at the Intercom Hotel, the Tivoli at the
Mandarin Oriental and Aubergine at the Fort.
● Quick dining with “value meal” prices can be found infast foods like Jollibee and McDonald’s
● Price – conscious eaters go to Manong Pepe and Burger Machine
● Regional food specialists abound like Saika (Japanese), Kamayan (Filipino), Thai at Silk (Thai)
and Gloriamaris (Chinese).
● Spealist for specific food chicken (mang inasal), Pizza (yellow cab) seafoods (tuna Terminal)
● For restaurants who are targeting with tight budget, Alva’s is the perfect place for them.

Socio-Demographic Segmentation

The most common forms pf market segmentation is through demographics. It splits up audience
s based on observable and tangible, people –based differences. Segmenting a market according to this
method is the most basic. Combining this method with other ways of segmenting market can narrow
down the market even more.
According to Go (2010), demographic segmentation deals with questions such as “who you are”
and “how much do you earn” and is commonly used in allocating selling efforts. Table 2.1 below will give
you clearer examples for this segmentation strategy,

Demographics Segmentation Variables

VARIABLES Examples

1. Age Infant, toddler, tween, teenager, work beginner,

yuppies, middle age, matured, retirees

2. Gender Male, Female, In between, LGBTQ

3. Civil Status Legitimate, married, divorced, single, single parent,

widow/er, separated

4. Income A, B, C, D, E

5. Education Illiterate, Grade School, High School, College, Post

 Graduates, Vocational

6. Profession Unemployed, white collar worker, executives,

professional, housewife, mother, students, blue
collar worker

7. Religion Catholic, INC, Born Again, Muslims, Protestants

8. Nationality Filipino, Japanese, Korean, Chinese, American

9. Climate Hot, Cold, rainy

Psychographics Segmentation

This form of segmentation is close to the demographic segmentation however, it deals with
features that are more mental and emotional. These characteristics may not be easily observed as the
demographics, but motivation, preference and needs of the client may serve as valuable insights to the
audience. Understanding these aspects can help create advertising content that attracts to the audience
more effectively. Examples of these segmentation includes personality traits, interests, beliefs, values,
attitudes and lifestyles.

According to Go (2010), this approached is more concerned with answers to questions such as
“what you do” (instead of “who you are”) and “how you spend your money” (instead of “how much you
earn”) and often used for creating advertising message. If members of the demographic segment are
responding contrary to what is expected, marketers might add in some psychographic information. While
demographic provides the basic facts about who your audience is, psychographics give marketers insight
into why people decide to patronize or not patronize your product, click on or ignore the ad and
otherwise interact with you.

Listed below are psychographic segmentation of the Philippine Consumer. This data is taken from
Go’s Fundamentals of Marketing in the Philippine Setting.

THE SMOOTH SAILERS (34%)

They are highly sociable, secure and active but conservative. They have a positive self-concept
and are security – conscious and prefer the simple and the essential, abhorring complications. They have
a relative high purchasing power among the five segments. They have a great propensity to buy things,
but are not known to be choosy about clothes. Price does not seem to be very important factor in their
buying decisions. About 57% of smooth sailers are below 30 years old and are from class ABC
household.

THE HIGH SPIRITS (31%)

They are the most vibrant and fun loving. They would like to maintain a high social profile, and
appears to be the trendsetter among the five groups, but are a rather self-centered group of consumers.
Typically image-conscious, they make purchasing decisions which are based on the image projected or
the reputation of certain name brand. They are not generally health conscious, but if they happen to
be, it might probably be the improvement of their appearance or to be “in” with the crowd. They think
positively and do not seem to be the homebody type. They would rather go out with friends than stay at
home.

THE TIGHT GUARDS (26%)

They have the strongest feeling of inadequacy and uncertainty compared to the others. The
great majority in this group may occasionally face financial constraints, and this is understandable since
74% of them belong to class D households. Members of this group lack life-goals and seldom take risks
for fear of failure. They also seem to put a lot of importance on trust, which is manifested in the factors
that influence them to buy the things they want – they rely more on information about brands from their
friends. They are health conscious and are meticulous about personal and family cleanliness. They are
slightly more females than males in the group, and over half of them are married. 55% of household
heads among this group have a college education.

THE HOMEMAKERS (5%)

These are the most upscale among the five lifestyle groups. Comprised mainly of women, they
espouse traditional values, even with regard to their roles in the family and society. They are proud to be
homebodies or house – proud types. Being relatively more upscale than other segment, they seem to be
relaxed , perhaps even content, with their status, images, and material possession. They tend to be a
very optimistic group, and relate well with people. They study the value of things first before purchasing
them. Their choice of a brand may not always be influenced by ads. The homemakers have the highest
percentage of college degree holders, and slightly more than half of this group belongs to class ABC
households.

THE BYSTANDER (4%)

These segments are rather passive people, usually “painfully shy” and not to inclined to socialize.
They are not driven to achieve anything, and as their name implies, would rather placidly look on as the
world passes them by. They go for external appearance, status and style, and material possessions.
However, they may not have the purchasing power to satisfy their whims. They are bargain hunters and
opt to buy cheap goods with multiple uses. Although conscious of style, they do not mind paying more
for prestigious brands but would not mind buying luxury premium goods if these were sold cheaply.
They may buy “tingi”. About 9 out of 10 bystanders belong to the lower income household. They also
appear to be the oldest of the five lifestyle groups.

Consumer Behaviour/ Behavioural Segmentation

This approach of segmenting the market starts with dividing the consumers according to
behaviour patterns as they mingle with the firm. By its name alsone, this category of segmentation
observes the behavioural trait s of consumers – their knowledge of, attitude towards, use of, likes and
dislikes of, feedback to a product, service, promotion or brand. The objectives of these segmentation
methods are the following:
▪ To understand how to address the specific needs and desire of customer groups;
▪ To tailor your product or service to meet those needs and desires;
 ▪ To discover opportunities to optimize the buyer’s journey;
▪ To quantify their potential worth to the business; and
▪ To improve a marketing strategy to develop and expand the customer base.

It is important to note that it doesn’t exist independently from other types of segmentation.
Characteristics such as a customer’s age, gender, location, income and occupation frequently correlate to
behavioural data. Data can often be used to confirm certain conclusions about other segmentation data.
Dividing the market into smaller niche, each with similar variables or features, allows brands to use
valuable time and resources more efficiently. By knowing the market better, and grouping them
accordingly, the firm can utilize advertising personalization to ensure their needs are delivered. These
kind of segmentation has four main advantages, these are:
● Personalization - Understanding how to target different groups of customers with different offers
— at the most appropriate times, through their preferred channels — increases personalization,
allowing you to nurture them further along their buying journey
● Predictive - Historical behavioral patterns help predict and influence future customer behaviors
and outcomes
● Prioritization - Identifying high-value prospects with the greatest potential business impact
enables you to make smarter decisions on how to best allocate time, budget, and resources.
● Performance -  Monitoring growth patterns and change in segments over time helps gauge
business health, and track performance against goals.
The following are examples of the segment:
1. Purchasing Behaviour.
2. Benefit Sought.
3. Buyer Journey Stage
4. Usage
5. Occasion or timing
6. Customer Loyalty
7. User Status
(https://instapage.com/blog/behavioral-segmentation) for further rreading.

Profitability is the key for there is is no single way to segment a market. All angles must be
considered once segmentation is to be used. What is relevant is not the quantity sold but what quantity
has been sold at a profit.

MARKET MEASUREMENT
A market is composed of customers and competition. It composed of actual and potential buyers with
the same needs and wants interacting with sellers offering different product or services to satisfy those
needs and wants. There are two criteria for attractiveness:
✔ Market size – dependent on the number of qualified customers and the frequency of purchase.
✔ Market growth

NPA for qualified customers, who are they?

Need - those who needs the product.
Pay – those who are willing to pay for the product and has the capacity to buy it.
Authority and Availability – those who have no legal impediment to purchase the item.

Activity 1. Research what a pantomime is. Perform a pantomime using the different psychographic
segmentation of the Philippine consumer. Each psychographic segment should be perform in 30 seconds
maximum. This could be done via video recording and to be submitted in my messenger account.
Deadline will be discussed.

Activity 2. Activity 2. (SSSSSSSHHHHHHH) Victoria Court (VC) Drive-in Hotel and Restaurant is a
group of full-service motels supplying to the very rich people market segment. Traditionally, drive-in
hotels and motels primary market are lovers who avail of one of the different unique designed “theme”
rooms (Japanese, jungle, oval office, game room etch.) for three hours (Now called wash – up time). In
the early 1990s, Victoria Court Boarded on an aggressive campaign to capture two extra segment of the
market: the husband and wife market and the partygoer market. Their purpose was to steadily and
slowly change their image by informing the public that their establishments could be used predominantly
for legitimate purposes like resting, or for group social occasions. They have bought Hotel La Corona
affiliated with the Best Western International Hotel Group.
a. Identify the needs and wants of each of the three market segments targeted by VC.
b. Who are the main competitors of each market segment?

Target Market Needs Wants Competition

Couples

Husband and wife

Partygoer

c. Knowing that drive in hotel has a kinky reputation, do you agree with strategy made by VC?
Defend your answer.
You may research further what victoria court is in the world wide web.