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MARKET SEGMENTATION

What is Market Segmentation?

Market segmentation is the process of dividing a market into smaller groups of consumers
who respond similarly to marketing stimuli. These groups, or segments, can be based on a
variety of factors, including demographics, psychographics, geographic, and behavioural
characteristics.

Why is market segmentation needed?

(Meeting Needs & Demands, Increasing Profits, Growth, Retain Customer Base, Gain Mkt.
Share of market Segment),

Market segmentation is needed for the following reasons:

(1)Meeting the needs and demands of customers:
Market segmentation helps businesses to better understand the needs and demands of
their customers. By dividing their market into different segments, businesses can identify
the unique needs of each segment and develop products and services that are better
tailored to those needs.
For example, a clothing retailer might segment its market by age and gender. This could
lead to different product offerings for teenagers, adults, and seniors. The retailer might
also use different marketing messages to appeal to each segment.
(2)Increasing Profits for Organisations:
When businesses are able to better understand and meet the needs of their customers, they
are more likely to generate sales and profits. Market segmentation helps businesses to
target their marketing efforts more effectively and to develop products and services that are
more likely to be purchased by their customers.
For example, a software company might segment its market by industry and business size.
This could lead to different marketing campaigns for small businesses, medium-sized
businesses, and large enterprises. The software company could also develop different
pricing plans for each segment.
(3)Greater Chances for Growth:
Market segmentation can help businesses to identify new growth opportunities. By
understanding the needs of different customer segments, businesses can develop new
products and services that appeal to those segments. They can also expand into new
markets.
For example, a food company might segment its market by dietary restrictions and
preferences. This could lead to the development of new products for people who are
vegetarian, vegan, gluten-free, or lactose-free. The food company could also expand into
new markets, such as the health food market.
(4)Retain Customer Base:
Market segmentation helps businesses to retain their customer base by providing them with
the products and services they need and want. When businesses are able to meet the needs
of their customers, those customers are more likely to continue doing business with them.
For example, a travel company might segment its market by interests and activities. This
could lead to the development of new travel packages for people who are interested in
adventure travel, luxury travel, or family travel. The travel company could also offer
personalized recommendations to each customer based on their interests.
(5)Target Marketing Communications:
Market segmentation helps businesses to target their marketing communications more
effectively. By understanding the needs and wants of each segment, businesses can create
marketing messages that are more likely to resonate with each group.
For example, a smartphone manufacturer might segment its market by age and income.
This could lead to different marketing messages for teenagers, young adults, and adults
with different income levels. The smartphone manufacturer could also use different
marketing channels to reach each segment, such as social media, television, or print
advertising.
(6)Gain Share of Market Segment:
Market segmentation helps businesses to gain share of their target market. By better
understanding and targeting their market, businesses can attract new customers and
increase their sales.
For example, a bank might segment its market by age and income. This could lead to
different marketing campaigns for millennials, Gen Z, and retirees. The bank could also
offer different products and services to each segment, such as student loans, mortgages,
and retirement planning services.
 What are the factors that can Segment a Consumer Market or that can lead to
Segmentation of Consumers?

Factor Sub-factors Explanation

Dividing a market into groups

based on location, such as
country, region, city, or zip
code. For example, a clothing
Geographic Segmentation Country, region, city, zip code
retailer might segment its
market by geographic region to
account for different climate
conditions.

Dividing a market into groups

based on demographic
characteristics, such as age,
gender, income, education
Age, Gender, Marital Status, Income, Social level, occupation, and family
Demographic
Class, Family Size , Occupation, Education size. For example, a baby food
Segmentation
level, Religion company might segment its
market by age group to
account for the different needs
of babies at different stages of
development.

Dividing a market into groups

based on psychological
characteristics, such as
lifestyle, personality traits,
values, opinions, and interests.
Psychographic Lifestyle, Personality Traits, Values, Beliefs,
For example, a sports car
Segmentation Interests
company might segment its
market by lifestyle to target
people who are interested in
luxury cars and high-
performance driving.

Dividing a market into groups

based on consumer behavior,
such as purchase history,
website browsing behavior,
Occasions(Regular, Special), Benefits
and social media activity. For
Derived by Consumer (usage), User
example, an e-commerce
Status(Non_User, Potential User, Regular
Behavioral Segmentation company might segment its
User, Ex- User, First Time User), Purchase
market by purchase history to
history, Website Browsing Behaviour, social
target customers who have
media activity,
recently abandoned their
shopping carts or who have
purchased a certain product
line.
Geographic segmentation

 Country: Businesses can segment their markets by country to target specific

geographic regions. For example, a clothing retailer might segment its market
by country to account for different cultural preferences.
 Region: Businesses can also segment their markets by region within a
country. For example, a food company might segment its market by region to
account for different regional cuisines.
 City: Businesses can also segment their markets by city. For example, a
restaurant might segment its market by city to target different demographics
and preferences in different cities.
 Zip code: Businesses can even segment their markets by zip code. For
example, a direct marketing company might segment its market by zip code to
target specific neighborhoods.

Demographic segmentation

 Age: Businesses can segment their markets by age to target specific age
groups. For example, a toy company might segment its market by age to
develop toys that are appropriate for different age groups.
 Gender: Businesses can also segment their markets by gender to target
specific genders. For example, a clothing retailer might segment its market by
gender to develop different clothing lines for men and women.
 Marital status: Businesses can also segment their markets by marital status to
target specific groups. For example, a wedding planning company might
segment its market by marital status to target couples who are planning to get
married.
 Income: Businesses can also segment their markets by income to target
specific income levels. For example, a luxury car company might segment its
market by income to target high-income earners.
 Social class: Businesses can also segment their markets by social class to
target specific groups. For example, a magazine publisher might segment its
market by social class to target different types of readers.
 Family size: Businesses can also segment their markets by family size to
target families with different numbers of children. For example, a minivan
manufacturer might segment its market by family size to target families with
three or more children.
 Occupation: Businesses can also segment their markets by occupation to
target people with specific jobs or professions. For example, a medical device
company might segment its market by occupation to target doctors and
nurses.
  Education level: Businesses can also segment their markets by education
level to target people with different levels of education. For example, a
software company might segment its market by education level to target
people with different levels of technical expertise.
 Religion: Businesses can also segment their markets by religion to target
specific groups. For example, a kosher food company might segment its
market by religion to target Jewish consumers.

Psychographic segmentation

 Lifestyle: Businesses can segment their markets by lifestyle to target people

with different lifestyles. For example, a fitness company might segment its
market by lifestyle to target people who are active and health-conscious.
 Personality traits: Businesses can also segment their markets by personality
traits to target people with specific personality types. For example, an
adventure travel company might segment its market by personality traits to
target people who are adventurous and outgoing.
 Values: Businesses can also segment their markets by values to target
people with shared values. For example, a socially conscious company might
segment its market by values to target people who are interested in
supporting sustainable and ethical businesses.
 Beliefs: Businesses can also segment their markets by beliefs to target people
with shared beliefs. For example, a religious publisher might segment its
market by beliefs to target people who share a particular religious faith.
 Interests: Businesses can also segment their markets by interests to target
people with specific interests. For example, a sports retailer might segment its
market by interests to target people who are interested in different sports,
such as basketball, football, or baseball.

Behavioral segmentation

 Occasions: Businesses can segment their markets by occasions to target

people who are likely to purchase their products or services on specific
occasions. For example, a greeting card company might segment its market
by occasions to target people who are shopping for birthday cards, holiday
cards, or sympathy cards.
 Benefits derived by consumer (usage): Businesses can also segment their
markets by the benefits that consumers derive from their products or services.
For example, a toothpaste company might segment its market by usage to
target people who are looking for a toothpaste that whitens their teeth,
prevents cavities, or freshens their breath.
 User status: Businesses can also segment their markets by user status. For
example, a software company might segment its market by user status to
target non-users, potential users, regular users, ex-users, and first-time users.
 Purchase history: Businesses can also segment their markets by purchase
history to target customers who have purchased certain products or services
in the past. For example, an e-commerce company might segment its market
by purchase history to target customers who have recently abandoned their
shopping carts or who have purchased a certain product line.
 Website browsing behavior: Businesses can also segment their markets by
website browsing behavior to target customers who wish to purchase a
product.