Market Segmentation

market segmentation
- the division of a market into distinct groups of buyers who have different requirements or buying habits

► TALKING POINT

Task 1. Discuss the following questions with your friend: What distinct groups of buyers do you know?
Which group of buyers seems to be the biggest one (your opinion)?

► READING

Task 2. WORDLIST. Read the text and check the meaning of the words and phrases in bold. Learn the
items by their English definition.

1. marketing opportunities (n.) 23. mass marketing/undifferentiated marketing

2. unsatisfied needs (n.) (n.)
3. a potential customer (n.) 24. differentiated marketing (n.)
4. a niche (n.) 25. concentrated marketing (markets) (n.)
5. a differential advantage (n.) 26. an approach (n.)
6. market segmentation (n.) 27. cost economies (n.)
7. a submarket (n.) 28. an inventory (n.)
8. a segment (n.) 29. heavy competition (n.)
9. purchasing habits (n.) 30. total sales (n.)
10. demographics (n.) 31. marketing costs (n.)
11. psychographics (n.) survey,investigation is 32. niche marketing (n.)
psichologines puses 33. limited resources (n.)
12. income (n.) 34. a share (n.)
13. population (n.) 35. the bottom end (n.)
14. an occupation (n.) 36. a rate of return (n.)
15. spending habits (n.) 37. investment (n.)
16. personality traits (n.) 38. a homogeneous product (n.)
17. lifestyle (n.) 39. the product’s life-cycle (n.)
18. an image (n.) 40. a mature product (n.)
19. a consumer profile (n.)
20. a household (n.)
21. a marketing message (n.)
22. targeting (n.)

Market Segmentation

Companies are always looking for marketing opportunities, i.e. profitable possibilities of filling
unsatisfied needs as there might be a large number of potential customers but not all these people will
have exactly the same needs. It is therefore important for the company to fill in a particular niche or create a
new one in areas in which the company is likely to enjoy a differential advantage. Marketing opportunities
are generally isolated by market segmentation. It means identifying groups of buyers within a market into
submarkets or segments according to customers’ requirements, needs, wants, or purchasing habits.
There are many ways in which customers can be classified into segments. A company usually makes
use of different sources to obtain detailed information about its customers. Market segments are described
either by demographics or psychographics.
 DEMOGRAPHIC SEGMENTATION is the most popular method of market segmentation. This
type of segmentation uses the following criteria.
 Age. Many products are targeted at specific age groups. For instance, the fashion and music
industries target different products at customers of different ages.
 Sex. Many products are targeted at men or women. Obvious cases include clothing and special
interest magazines, for example, 75% of “Elle” readers are women.
 Income. This is a very popular segmentation method. The aspects as how much money a person
earns, or how affluent or rich customers are, are taken into consideration. Cars and holidays are
good examples of income segmentation.
 Religion. Sometimes goods are aimed at people with some belief or values, for instance,
Muslim, Jewish, etc.
 Ethnicity. Attention is paid to certain social groups with regard to their language, nationality, or
culture, for example, Hispanic, Asian, American, white, black, etc.
 Social class. Segmentation by social class is less common than it used to be. Critics consider
this method being old-fashioned, similarly as segmentation by religion and ethnicity. It does not
describe modern societies and does not take into account the great changes, both social and
economic, which have occurred in recent years. In Britain this system divides the population
into six social classes:
A – (upper middle class) higher managerial, administrative or professional occupations, e.g.
company director.
B – (middle class) intermediate managerial, supervisory or professional occupations, e.g.
middle manager.
C1 – (lower middle class) non-manual, junior managerial, administrative or professional
occupations, e.g. bank clerk.
C2 – (skilled working class) skilled manual occupations, workers, e.g. electrician.
D – (working class) semi-skilled and unskilled manual occupations, workers, e.g. labourer.
E – (people at lowest level of subsistence) people without employment income, e.g. state
pensioners or widows, casual or lowest grade workers.
 Family life-cycle. This method segments the market according to various stages in family
development, for example, single, married, or with children. The advantage of this method is
that it focuses on the spending habits of each group.
PSYCHOGRAPHIC SEGMENTATION. This approach to market segmentation classifies people
according to personality traits and lifestyles. This theory identifies the following criteria.
 Education level. Books, newspapers and magazines are often targeted at segments with
different educational levels.
 Attitudes and opinions. This segmentation method encompasses the ways people feel or think
about issues, brands, etc.
 Lifestyle. This is the analysis of a way of life that reflects a person’s values and attitudes.

The Efficiency of Market Segmentation

Demographical and psychographical data is used to build up the image of a typical consumer, also
called a consumer profile. People can be targeted as individuals or as a family group that lives together and
makes up a household. Housewives who stay at home and look after the family are often the main shoppers
and are frequently targeted by marketers for certain types of products. Marketing messages would also
differ considering unmarried people, or singles, and married people with kids, who might have some other
specific tastes. City dwellers, also known as urbanites, will have different preferences from country
dwellers.1

Targeting Strategies
The process of selecting a specific segment of the market is known as targeting. There are three basic
targeting strategies that a company can use:
 mass marketing/undifferentiated marketing
 differentiated marketing
 concentrated marketing
 MASS MARKETING or also called undifferentiated marketing ignores market segment
differencies and offers the same product for the whole market. This approach focuses on what is common
in the needs of consumers rather than on what is different. Products are designed to appeal to most buyers.
For example, Coca Cola was used to be marketed in this way as it was available in only one flavour;
however, the company has offered the product in different forms to suit different needs of its customers in
recent years.
The advantage of mass marketing is that it provides cost economies. Production, inventory,
transportation, advertising, market research and product management costs are kept low. Nonetheless,
most modern marketers have doubts about the efficiency of this strategy. It is very difficult to develop a
product that will satisfy all consumers. Heavy competition will usually be invited.
DIFFERENTIATED MARKETING consists of providing different products to different segments.
This happens in the car industry. General Motors tries to produce a car for every ‘purse, purpose and
personality’. Differentiated target marketing typically creates more total sales than undifferentiated
marketing. But the production and marketing costs are increased. Sometimes ‘oversegmentation’ can
occur and a company may try to broaden its base. To illustrate, the target market for Johnson & Johnson’s
baby shampoo was broadened to include adults.
CONCENTRATED MARKETING, which is also known as niche marketing, targets one particular
market segment with what the company believes to be the ideal offer. This strategy is most suitable for
companies with limited resources. Instead of going for a small share of a large market, the firm goes for a
large share of a submarket. There are many examples of concentrated marketing. Saab focuses on the luxury
sports car market while Sinclair targeted the bottom end of the home computer market. Using this approach,
a strong market position can be achieved, costs can be kept low and the firm can earn a high rate of return
on its investment. At the same time, higher risks are included as larger competitors may enter the same
segment with more marketing resources. That is why many companies prefer to diversify in several
segments.
In terms of realization, many factors must be considered when choosing one of the mentioned
strategies. When a firm’s resources are limited, concentrated marketing would be the most appropriate
decision. When the product is homogeneous like Apple, undifferentiated marketing would be most
suitable. The product’s stage in its life-cycle must also be considered. When a new product is introduced, it
is often practical to launch just one version and in that case undifferentiated or concentrated marketing
makes the most sense. Differentiated marketing is more applicable to more mature products. Finally, it is
crucial to take into consideration competitors’ marketing strategies. It would be unreasonable and suicidal to
use undifferentiated marketing when the competitors are in a full charge of the market. In contrast, when the
competitors are using undifferentiated marketing, a firm can be successful by using differentiated or
concentrated marketing.

Licensed under CC BY-SA 3.0

► COMPREHENSION

Task 4. Match the products in column A with the most likely segmentation method in column B.

A B
fashion items 1, 2, 3 Age 1
Holidays 3 Sex 2
Magazines 1, 2 Income 3
Cars 3 life-cycle 4
medical services 1, 3
baby products 1
Task 6. Fill in the segmentation matrix for the music industry based on the age group and musical category.
As a result of everybody’s perception, the answers may slightly differ.

Youth market 28-49 years old Third agers

Male group One direction Modern Talking Metalica
Female group Little Mix Mango Baltos varnos
Male vocal Zayn Malik Saulius Prūsaitis Vytautas Šiškauskas
Female vocal Monique Jazzu Vitalija Katunskytė
Rock icon Maroon 5 Džordana Butkutė The beatles
Classical Mozart Beethoven Bach
Film soundtrack Twilight Bohemian Rapsody Pink Floyd

► VOCABULARY PRACTICE

Task 7. Complete the synonymic groups below with one of the words from the table.

affluent approach habit homogeneous mature niche occupation

potential segment trait

1. rich, wealthy, prosperous – …affluent

2. characteristic, feature, quality – …trait
3. of the same kind, uniform – …homogeneous
4. part, section, division – …segment
5. job, position, profession, work – …occupation
6. suitable position, place, slot – …niche
7. possible, future – …potential
8. developed, ready – ……mature
9. method, technique, way – …approach
10. usual behaviour, practice – …habit

Task 8. Complete the following definitions using the words and phrases in bold in the text.

1. The amount of money or its equivalent received during a period of time in exchange for labour or
services, from the sale of goods or property, or as profit from financial investments –
…income/salary
2. The life of a product in the market with respect to business/commercial costs and sales measures; the
phases of production, growth, maturity and obsolescence of a product – …life cycle
3. The amount of profit that a company makes, expressed as a percentage of the amount they originally
invested – …a rate of return
4. A part or portion belonging to, distributed to, contributed by, or owed by a person or group – …a
share
5. The quantity of goods and materials on hand; stock – …inventory
6. A description of a person that contains all the details that someone needs – …consumer profile
7. Unique benefits or characteristics of a firm, product, or programme that set it apart and above its
competitors in the customer’s viewpoint – … a differential advantage
8. Selecting a demographic or other group of people to advertise to, and create advertisements
appropriately – … targeting
9. Careful management of resources to avoid unnecessary expenditure or waste – … cost economies
10. All the people living in one home – …household
► TALKING POINT

Task 12. Discuss the following with your partner.

 Your company wants to develop and market …. (something). Decide what that product is going to
be. Decide which market segments to target and which approach to use. Present arguments to support
your decision.