Module 2

Market segmentation
Introduction:
“Marketing is the activity, set of instructions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large.”

OLD view of marketing NEW vie w of marketing

Making a sale-“telling and selling” “ Satisfying customer needs”

The Four Ps and the Four Cs

 Traditional Organization Chart

Customer-Oriented Organization Chart

 Core Concepts of Marketing

The Marketing Process:

A simple model of the marketing process:

✔ Understand the marketplace and customer needs and wants.

✔ Design a customer-driven marketing strategy.

✔ Construct an integrated marketing program that delivers superior value.

✔ Build profitable relationships and create customer delight.

✔ Capture value from customers to create profits and customer quality.

Customer Value and Satisfaction:

Dependent on the product’s perceived performance relative to a buyer’s expectations.

Care must be taken when setting expectations:

● If performance is lower than expectations, satisfaction is low.

● If performance is higher than expectations, satisfaction is high.
Customer satisfaction often leads to consumer loyalty.

Majority firms seek to DELIGHT customers by exceeding expectations.

Market Segmentation:

An organisation can not satisfy the needs and wants of all consumers. It is attempts to do so, it
may result in a massive drain of company resources Segmentation is simply the process of
dividing a particular market into sections, which display similar characteristics or behaviour
There are a number of segmentation variables that allow an organisation to divide their market
into homogenous groups. .

As you can see below the example of Taj group, Oberoi group and Marriott group of hotels have
business class hotels, Heritage Hotels, Resorts, budget class hotel; it is just because they wish to
cater to the needs of different types of guest.

“The Marketer should stop thinking of his customer as part of some massively homogeneous
market. He must start thinking of them as numerous small islands of distinctiveness, each of
which requires its own unique strategies in product policy, in promotional strategy, in pricing, in
distribution methods, and in direct selling techniques.”

“A market segment is a sub-group of people or organizations sharing one or more characteristics

that cause them to have similar needs.”

“Market Segmentation is the process of grouping buyers common desire or needs, having
into different categories. It is the process of identifying the groups of buyers on the basis of
differences in their desires and requirements.”

Why do you need market segmentation….?

Main reason behind is better services to the customers coupled with achievement of the firm’s
objectives.
It is feasible for the firm to adapt the marketing mix for specific target markets it will help the
firm to better satisfy the need of customer instead of offering the same marketing mix to the
different customer with different needs.

To be more precise on the benefits of using market segmentation are:

- More effective use of marketing
- Clearer understanding of the needs and wants of selected customer groups
- More effective positioning
- Greater precision in selecting promotional vehicles and techniques..

In other word…….there are two distinct and sequential steps in market segmentation

A) Dividing the whole market into groups with common characteristics.

B) Selecting those market segments that the organization is best able to serve.

Differentiation vs. Segmentation:

Product differentiation is the attempt to bend the demand to the will of supply.

On the other hand

Market segmentation is bending supply to the will of demand.

Differentiation means distinguishing your product or service from those of other firms for the
entire potential market so that the demand will come our way. This is based on the assumption
that the customer will perceive greater quality, better price/value, and better problem solution in
your product or service.

Look, the basic distinction is that Product differentiation is an attempt to bend the demand to the
will of supply; on the other hand market segmentation is bending supply to the will of demand.

Appropriation of differentiation strategy:

1. The total market is demographically, geographically, and psychologically similar.

2. The market is sensitive to differences between establishments.

3. The establishment is relatively new.

4. The establishment is distinctive.

5. There are few competing establishments.

6. Most competitors employ a differentiation strategy.

The question may arise that how to manage differentiation::::

● Solution to price competition:- As many customers are price-sensitive, it’s very important
to create a competitive edge with regard to the product or service you are delivering.
● Differentiation through people, physical environment, and processes:- To make a product
or service more marketable, the marketer has to differentiate their people (customers as
well as employees), physical environment (atmosphere, location), and the process of
service delivery.
● Differentiation through branding:- To differentiate a product, the marketer can brand
each product differently based on the benefits the product offers to its customers.
Appropriation of segmentation strategy:

1. The total market is demographically, geographically, and psychologically different.

2. The market is not too sensitive to differences between establishments.

 3. The establishment has been in operation for several years.

4. The establishment is not distinctive.

5. There are several competing establishments.

6. Most competitors employ a segmentation strategy.

Seven Steps in Market Segmentation:-

1. Identify and name the Broad Market.

2. Identify and make an Inventory of Potential Customers’ Needs
3. Formulate Narrower Markets
4. Identify the Determining Dimensions
5. Name Possible Segment Markets.
6. Evaluate the Behavior of Market segment
7. Estimate the Size of each Market segment

Levels of Market Segmentation:

1. Mass Marketing or Undifferentiated Marketing:

The marketer engages in serving a broad range of customer and in mass promotion of one
package for all guest and or tourist. Mass marketing creates a large potential market, which leads
to the lowest cost, which in turn can lead to lower prices or higher margins. But with the
increasing splintering of the market, mass marketing gets more difficult. For example, a
two-weeks North and or South India tour package attracts people from different geographical
locations, age groups, income levels etc.

2. Segment Marketing or Differentiated Marketing:

A market segment consists of a large identifiable group within a market with similar wants,
purchasing power, geographical location, buying attitudes or buying habits.

Buyers from each segment are assumed to be quite similar in needs and wants. It is
advisable to present a flexible market offering instead of a standard offering(one size fits all) to
all members within the segment. A flexible market offering consists of two parts:

● Naked solution: Product and service elements valued by all segment members.
 ● Options: Product and service elements valued by some segment members. Each
option caries extra charge.
3. Concentrated or Niche Marketing:
A niche is a more narrowly define group, typically, a small market whose needs are not well
served. Marketers usually identify niches by dividing a segment into sub-segments or
defining a group seeking a distinctive mix of benefits. Niches are fairly small and attract very
few competitors. Large companies lose pieces of their market to niches. Niche marketing
requires more decentralization and changes in the way normal business is done. Niche
markets understand their customers so well that customers willingly pay a premium.
Attractive niches are characterized by the following:-

● Customers in the niche have a distinct set of needs.

● Hey will pay a premium to the firm that best satisfies their needs.
● The niche is not likely to attract other competitors.
● The nichers gain certain economies through specialization.
● The niche has size, profit and growth potential.
4. Customized or micro Marketing:
In this type of marketing, the individual customer preference is important as the marketer
specifically focuses on the needs of the individual customer and how to best satisfy these needs.
For example, the business process outsourcing (BPO) industry caters to the specific requirements
of different clients by deputing a specialized workforce.

STP (Segmentation – Targeting – Positioning )

Once the market has been segmented, the marketers need to decide which segment are going to
be focus their activities on. Thus, targeting is the choice of a single segment or group of
segments that the organization wishes to select. Once the segments have been evaluated the
market to be targeted can be selected on the basis of – undifferentiated, differentiated,
concentrated or customized marketing.

Target marketing is the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.

- Characteristics for targeting effective segment:

 ▪ Segment size and growth

▪ Segment structural attractiveness

▪ Company objectives and resources

Hence, targeting is the choice of a single segment or group of segments that the organization
wishes to select.

Companies can evaluate and select market segments on the basis of –

* Segment size & growth
* Segment structural attractiveness
* Company objectives & resources.

Positioning

The concept of positioning coined by Jack Trout and Al Ries in 1969, came into prominence
when they elaborated on it in 1972. These authors emphasized in their book that the positioning
is the battle for a place in the consumer’s mind. According to them positioning should not be
confused with strategy, even though the two are inextricably related.

Product positioning is the process of developing a competitive positioning for the product and an
appropriate marketing mix. The way the product is defined by consumers, depends on the
important attributes of the product that occupies the consumers’ mind, relative to competing
products.

The basic two steps in market positioning are:

1. Develop positioning for target segments

2. Develop a marketing mix for each segment.
STP Strategy:

o The first step in market segmentation is to identify the base for segmenting the market an
developing the various segment profiles.
o The second step is about Target marketing, where the marketer concentrates on
developing various techniques to attract the various segments of market to the products
 and services offered, and selects those target segments which are appropriate for the
organisation.
o The third step I concerned about the appropriate positioning. Here, the marketer has to
position his product and service with respect to the target customers and thereby develop
the optimum market mix to service the customers.
The Positioning Process:-

(i) Determine the ideal mix for customers

(ii) Measure consumer perception of available services.
(iii) Look for gaps in coverage and select a desired position.
(iv) Develop a strategy for obtain the desired position.
Checklist for developing positioning strategies:

▪ Company
▪ Product/Service
▪ Brand position
▪ Customers
▪ Competition
▪ The Marketplace
▪ Opportunities
▪ Decision

Distinction between Individual and Organizational Customer Market Segmentation Options

Segmentation Base Individual Customer Organizational Customer

Who? Geography Type of Industry
Country Growth
Location Profitability
Language Turbulence
Urban/Rural Competitiveness
Climate
Size
Demography Location
Age Ownership
Gender Local
Education Multinational
Family Life Cycle
Occupation Sector
Religion Private
Income Public
Social Class
 Market served
Behaviour Corporate Culture
Usage Conservative Spending
Travel Patterns Market Oriented
Media Consumption Sales Oriented
Past Oriented
Interests Future Oriented
Sports
Hobbies Usage Patterns
Network Linkages
Corporate Life Cycles

Why, How? Psychographics Decision Type

Personality Rebuy
Lifestyle Partial Rebuy
New Buy
Benefits Sought
Appearance Stages Involved
Reliability Roles Played
Responsiveness Benefits Sought
Assurance Facilities
Empathy Location

Decision Process Type of Use

Stages Price Sensitivity
Information Needs Use of Consultants
Influential Capacity Utilization
Contractual Period
Price Sensitivity
Image Perceptions
What, When, where Type of Facility Type of Facility
Hotel Rooms
Resort Communication Links
Size
Room Type Timing
Urgency
Timing Access
Duration of stay Location
Reservation Support Facilities
No Reservation Transportation
Entertainment
Access Sports
Airport Adventure
Connections Flexibility
Networks

Location
Urban
Rural
Effective Segmentation:

The market is replete with great ideas turning into failure…. WHY !!??
You see, there are many ways to segment a market but all are not equally effective for different
services provided by different service providers.

Therefore, following are the some useful characteristics and way to do effective Segmentation.

So, once the market has been segmented, the marketers need to decide which segment they are
going to focus their activities on.

▪ Measurable
▪ Substantial
▪ Accessible
▪ Differentiable
▪ Actionable

Measurable: Measurable refers to the fact that the market size, purchasing power and profiles of
the segments needs to be measured. Certain segmentation variables are sometimes difficult to
measure.

If you are taking Demographical factors like age, education, income, etc. as variables of
segmentation then it needs to be measurable.

Substantial: It refers to the fact that the market segments are large or profitable enough to serve.

Some segments have one or few customers but the marketers can sell huge volume of their
products to these customers.

For example: Tomato Ketchup goes to different fast food shops such as Pizza Hut, KFC,
Helvetia, etc. in huge volume rather than individual customers.
Accessible: It refers to the fact that the market segments needs to be effectively reached and
served.

- For example: Like in Cantonment areas, the businessmen needs to take special permission
from the defense authority to do business, therefore in order to segment such markets, the
marketers must make special arrangement so that the segments can be reached and served.

Differentiable: It refers to the fact that the segments are conceptually distinguishable (separable
from each other) and respond differently to different marketing mix elements and programs.

- For example: Married and Unmarried women can respond differently to different products
such as dress materials, cosmetics, household products, etc. Again Consumption of Students and
Executives is quite different.

Actionable: It refers to the fact that effective programs can be designed and implemented for
attracting and serving the segments.

- For example: Cigarette manufacturers cannot promote their product directly through the
different medias (Television Commercials, Newspaper Advertisements etc.), therefore they have
to take different action to promote their product.

Seven Steps in Market Segmentation:

1. Identify and name the broad market

The first step is to figure out what broad market the business aims at. If the company is already
into a market, this can be starting point; more options are available for a new business but
resources would normally be limited. The biggest challenge is to find the right balance for the
business: use the experience, knowledge, and common sense to estimate if the market identified
earlier is not too narrow or too broad.

2. Identify and make an Inventory of Potential Customers’ Needs

This step pushes the creativity challenge even farther, since it can be compared to a
brainstorming session. It is necessary to figure out what needs the consumers from the broad
market identified earlier might have. The more possible needs can be identified, the better. To
proceed with segmentation it is necessary to understand: Why would they buy the product? What
could possible trigger a buying decision? Answering these questions can help list most needs of
potential customers in a given product market.

3. Formulate Narrower Markets

In this step, it is necessary to start building a column with dimensions of the major needs to be
covered: this will make it easier to decide if a given person should be included in the first
segment or a new segment should be formed. There is no exact formula on how to form narrow
markets; the best judgment and experience have to be relied on. On should avoid asking opinions
even from non-marketing professionals, as different people can have different opinions.

4. Identify the Determining Dimensions

Firstly, the list prepared from the previous step should be reviewed. A list of need parameters for
each market segment will emerge, then those needs that carry a determining power should be
identified from this list. Reviewing the needs and attitudes of those included within each market
segment can help figure out the determining dimensions.

5. Name Possible Segment Markets

Once dimensions of the market segments are identified, they have to be reviewed one-by - one
and then given a appropriate name. A good way of naming these markets is to rely on the most
important determining dimensions.

6. Evaluate the Behavior of Market segment

After each segment is named, it is necessary to consider what other aspects are known about
them. It is important for a marketer to understand market behaviour and what triggers them.
Though most segments have similar needs, they are still different needs, understanding the
difference and acting upon it is the key to achieve success using competitive offerings.

7. Estimate the Size of each Market segment

Each segment identified, named, and studied during the pervious stages should finally be given
an estimated size, even if, for lack of data, it is only a rough estimate. Estimates of market
segments will come in and later, by offering a support for sales forecasts and help plan the
marketing mix. The more data that is gathered at this moment, the easier further planning and
strategy will be.
Bases for segmenting consumer markets:

Different segmentation variables can be used to segment a market. There is no single way and a
marketer has to try different variables. Some principal segmentation variables can either be based
on the consumer or the buying situation. Consumer – based segmentation can be further
segmented by the following:-

Bases or variables Typical breakdown

Geographic
World region or country North America, Western & Eastern Europe, Middle east,
Asia etc.,
Country region India, Singapore, Japan, South Korea etc.
City or metro size Under 5000, 5000-20000, 20000-50000, 50000-100000,
100000 – 250000, 250000 – 500000 etc.
Density Urban, suburban, rural, etc.
Climate Northern, Southern, Tropical etc.

Demographic
Age Under 6, 6 to 11, 12 to 19, 20 to 24, 35 to 49, 50 to 64,
65+
Gender Male, female
Family Size 1-2, 3-4, 5+
Family life cycle Young, single, married, no children, youngest child,
older, with children, etc.
Income Under 200000, 200000 – 500000, 500000 – 1000000,
1000000 - 1500000, 1500000 – 2500000, etc.
Occupation Professional and technical, managers, officials, sales
man, farmers, house wives, students, retired,
unemployed. etc.
Education Grade school or less, high school, graduate, post
graduate, doctorates etc.
Religion Hindu, Catholic, Muslims, Jewish, others etc.
Race Asian, black, white etc.
Generation Baby boomer, Gen X, Gen Y etc.
Nationality North & South Americans, British, Indians, Germans,
French, Japanese etc.

Psychographic
Social class Lower class, upper class, working class, middle class,
upper-middle class, upper class, elite etc.
Lifestyle Straights, swingers, longhairs etc.
Personality Compulsive, gregarious, authoritarian, ambitious etc.

Behavioral
Occasions Regular occasion, special occasion, holiday, seasonal
etc.
Benefits Quality, service, economy, convenience, speed etc.
User status Non-user, ex-user, potential user, first-timer user, regular
user
Usage rate Light user, medium or heavy user.
Loyalty status None, medium, strong, absolute.
Readiness stage Unaware, aware, informed, interested, desirous,
intending to buy.
Attitude toward product Enthusiastic, positive, indifferent, negative, hostile etc.
Advantage of Market Segmentation for a Firm:

✔ A more Precise definition of Market

✔ A more effective marketing programme
✔ Better assessment of the competition
✔ Better Allocation of Resources
✔ Improved Communication
✔ Better consumer relationship
✔ Customer retention
✔ Improved service
✔ Cost-cutting

CASE STUDY

ABOUT THAILAND

Thailand is the travel hub of Southeast Asia. Most visitors coming into the region fly into
Bangkok and make that their base for doing the circuit as they backpack around Southeast Asia.

It’s the most visited country in the region and with good reason! Thailand speaks for itself.
When you hear its name, you already think about beaches, beauty, jungles, and food. And your
thoughts are spot on.
With its lush jungles, famed beaches, world-class diving, amazing food, friendly and cheap
prices it’s an easy country to travel and you can discover a lot of other surprises.
Thailand has a lot to offer travelers, no matter your budget. You can backpack Thailand here on a
limited budget or you can live the luxurious travel life in fancy resorts on the beach or just travel
on a modest budget and get a lot of bang for your buck. The country has something for everyone.
Backpacking Thailand is often the way most people travel around but that doesn’t mean really
roughing it. You can travel Thailand well without spending a lot of money. I consider myself a
backpacker but that doesn’t mean I’m in dorm rooms all the time. You can get private rooms and
nice meals for cheap.
The country is a well-worn destination on the backpacking trail and everything is convenient and
easy. However, there are still many off the beaten path destinations away from the crowds and
the prices they bring.

MARKET SEGMENTATION

TO SEGMENT THE MARKET ON THE BASIS OF DEMOGRAPHIC PROFILE OF

CUSTOMER.
 BASIS OF SEGMENTATION
The following Customer segmentation have been done keeping in mind their

● Lifestyle
● Age
● Income
● Interests
● Buying patterns
● Purchasing preferences
● Stage of life

PROFILES OF SEGMENTS

Senior citizens
✔ This segment consists of travelers who could pay extra amount for their comfort and
safety. They have adequate amount to afford premium services
✔ Rather than thrill, they would be looking for peaceful products or destinations in this
case.
✔ What they want is to enjoy scenic beauty of places, history, religion &culture.

Group of friends
✔ They look for packages that offer group of discounts.
✔ Their spending capacity depends on their income.
✔ Mostly looking out for adventure activities and capturing memories.
Honeymooners
✔ Their spending power can vary, as they have different economic profiles.
✔ They seek for a destination that offers romantic environment, i.e., less of hustle and
bustle, crammed noisy places.
✔ They prefer places with serene beauty.

Family with kids

✔ A mix of generation, they will seek diverse form of activities. They would look for both
peaceful beauty along with thrill and adventure
✔ They might seek for kids discount.
✔ They are ready to pay the price for safety and security.

MEASURES OF SEGMENT ATTRACTIVENESS

Quantifiable:
The segments can be measured in scale, purchasing power, and characteristics. For Thailand the
highest number of visitors would be young generation, enthusiastic about adventure activities.

Economy of Scale:

Needs to be included in assessing an desirable segment of the market. When a really niche
business segment joins, the economies of scale won't make a big difference. So Tourism requires
large scale marketing for Thailand.

Discrete:

The four segments are distinctive and therefore can react to marketing-mix elements and
programs differently. Seniors and young people will definitely need a different marketing blend.
The approach to both segments will be very complex. Their Thailand’s needs and expectations
would have been very different.

Accessible:

The segments can be reached and served with effectiveness. Young adults/Adults could be
targeted in malls and colleges through advertisements, newsletters, online ads etc. Elderly’s
could be targeted in newsletters, papers.

Sizeable:

The segments are large and profitable enough to serve It would also attract people seeking
spiritual peace to Thailand. They would have a pretty salary or an adequate amount of savings to
give Thailand's revenue the valuable profit.
THE SEGMENT SELECTION
All the four segments are attractive and profitable if distinct and correct marketing mix is used.

POSITIONING

FAMILY WITH KIDS:

IN BANGKOK

o SAFARI WORLD
o SEA LIFE BANGKOK OCEAN WORLD
o DUSIT ZOO
o SIAM NIRAMIT SHOW

IN PHUKET

o PHUKET ZOO
o PHUKET AQUARIUM
o CROCODILE FARM
o SEA AQUARIUMKHAI ISLAND TOUR

IN PATTAYA

o UNDERWATER WORLD
o KHAO KHEOW OPEN ZOOPATTAYA
o DOLPHIN WORLD RESORT
o RIPLEY’S BELIEVE IT OR NOT

GROUP OF FRIENDS:

IN BANGKOK:

o MUAY THAI BOXING

o SIAM OCEAN WORLD
o RED SKY ROOFTOP BAR
o SIAM NIRAMIT SHOW

IN PHUKET:

o PHI -PHI ISLANDS

o ZORBING
o BANGLA ROAD
o PATONG BEACH
 IN PATTAYA:

o WATER SPORTS
o WALKING STREET
o ALCAZAR CABARET
o PATTAYA BEACH

HONEYMOONERS:

IN BANGKOK:

o BAIYOKE SKY TOWER

o THE GRAND PALACE
o SPA
o CALYPSO CABARET

IN PHUKET:

o PHANG NGA BAY

o PHUKET ORCHID FARM
o FANTASEA
o PROMTHEP CAPE

IN PATTAYA:

o WALKING STREET
o KHAO PATTAYA VIEWPOINT
o SPA
o ALCAZAR CABARET

SENIOR CITIZENS:

IN BANGKOK:

o WAT PHO TEMPLE

o SIAM PARAGON
o MADAME TUSSAUDS MUSEUM
o THE GRAND PALACE

IN PHUKET:

o PHI - PHI ISLANDS

o FANTASEA
o PROMTHEP CAPE
o CENTRAL FESTIVAL SHOPPING MALL
 IN PATTAYA:

o PATTAYA BEACH
o SPA
o BIG BUDDHA
o PATTAYA FLOATING MARKET

MARKETING MIX

The Traditional Marketing Mix

Product
Product is the first step of the marketing process, because we need to create a product that
consumers want. As a tour and activity provider, we must offer an amazing tour to Thailand and
provide activity that is in demand. It should be a high-quality tour and an authentic experience of
every part of Thailand. We should strive to exceed our customers’ expectations.

Place
We have to make our product available. Decades ago, tour and activity providers simply sold
their products through their storefront and through travel agents. Today, we have to make our
tours and activities available for booking on a wide variety of platforms. Most travelers want to
book online in order to make their reservations, and it’s essential to have a mobile-friendly
website that accepts bookings.
 Price
We need to price our tours and activities according to demand and value. We don’t need to give
away our product in order to attract customers — we simply need to offer them a valuable
experience that they find worthwhile. There should be different pricing packages for Young
adults/Honeymooners/family/elderly.

Promotion
We should utilize a variety of advertising techniques and marketing campaigns to promote our
business. Don’t forget to include social media, newsletters, TV advertising in our promotion
strategies! We can also get ourselves promoted alongside official Thailand tourism
advertisement.

 People
Invest in the right employees for our tour and activity company. Hiring enthusiastic and
entertaining guides can help draw more customers to our business, Knows every detail of
Thailand its geography, history, culture, tradition E.T.C. and one who can enhance the overall
experience.
Processes
Make sure our tours run on schedule, and always give the customers the experience they have
been promised. Delivery of our final product is key to continuing to book tours. Make sure we
are on top of our operations. Avoid waiting times for customers, make our customers walk for
too long. In short, make sure our tours and activity run smooth.

Physical Evidence
Give our customers physical evidence of what they paid for when they booked their tours. Make
sure vehicles, gear/kits given for watersports or other adventures and other material aren’t broken
or out-dated, they will feel, see and experience.