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Concept of market segmentation

Since not all consumers desire the same product, a separate value addition should be made for each group of customers. The purchase behavior of consumers is the best way to determine segments. Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers.

Segmentation is the process of dividing the market of a product or service in smaller groups of customers. The customers in one group should a) Buy the product for the same purpose, or b) Use the product in the same way, or c) Buy the product in the same way. For e.g. A sportsperson buys Nike shoes to enhance his performance, whereas the same shoes are used as casual shoes by some other people.

Need for Market Segmentation

Helps in better understanding of the customers and in satisfying their needs.

Allows economies of scale to be realized through mass production, mass distribution, and mass communication.
Offers the same marketing mix to all customers in the same homogenous group.

Requirements of Market Segments

Measurability of segment: Can you measure the size and growth of the segment. Is the segment growing? In the UK the DVD market is growing at an extremely fast pace. From January 2002 June 2002 900,000 DVDs were sold. The fast growth rate is attracting many players within the market.

Accessibility of segment: Is it easy for you to target and reach your segment? Can they be reached with basic communication tools such as radio and TV advertising? If you cannot target your segment effectively with marketing communication then it is not viable.
Suitability of segment: Is there enough spending power within the segment for the company to sustain itself.? Will spending within the DVD marketing continue? Actionability of segment: Does the organization have enough resources to reach their segments?. It is no point in targeting segments you do not have the resources to cater for. If you were a car manufacturer the organization would not concentrate on the affluent and price sensitive market if they did not have the resources to do so.

The Process
Select a market Or product for study Choose a bases For segmenting

Design, implement and Maintain appropriate marketing mixes

Select the specific Segmentation variable

Select the target market

Profile and evaluate Segment(s)

Bases for Segmentation





Factors of market segmentation

Age Gender Geographic location Income Marital status Language Cultural factors Education Mobility Demographic variables Personality lifestyles

Psychographic segments

Personality Lifestyle Attitude




Psychographic segmentation
Psychographic is the science of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided in to different groups on the basis of psychological, life style or values .People within the same demographic group can exhibit very different psychographics profile. Values and lifestyles significantly affect the product and brand choices of consumers. Religion has significantly influence on values and lifestyles. Titan watches have a wide range of sub- brands within their brand such as Edge, Regalia, Nebula and Raga, to appeal to different lifestyles segments.

contd. Our lifestyle, our every days activities, our interest, opinions and beliefs on certain issues dictates who we are. Marketers develop and aim products/services at particular lifestyle groups and develop lifestyle profiles on their target market. If we understand the lifestyle of a particular group we can sell them a product/services on the basis that it will enhance their lifestyle.

Yuppie Associations

Third Agers associations

Mobile High valued house/flat Good Salary Young branded car

50's Retired early from profession. Time to spare Adventure Seekers

Behavioral Segmentation

Brand loyalty Perception & Belief Usage of the product Benefit Purchase behavior Purchase occasion

Behavioral Segmentation

Brand Loyalty

Perception & Belief

Usage of the Product


Purchase Behavior

Purchase Occasion

Behavioral Segmentation
In behavioral segmentation buyers are divided in to groups on the basis of their knowledge, attitude towards, or response to a product. Many marketers believe that the behavioral variableoccasion, benefits, users status, loyalty status, buyer reading stage and attitude are the best starting points for constructing market segments.

Profile Segmentation
b) c)

gender age lifecycle


Socio-economic variables
occupation income


Profile Segmentation
Even if the behavior and/or psychographic segmentation has distinguished between the buyer preferences, there is need to analyze the resulting segments in terms of profile variables such as age and socio-economic groups.

Profile Segmentation

Profile Segmentation

Demographic (age, gender, lifecycle)

Socio-economic Variables (occupation, Income)

Geographic (state, country, Region etc)

Concept of Target Marketing

Target marketing recognizes the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segments and their needs.

Target Market

A target market is a group of people or organizations for which a company designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually beneficial and satisfying exchanges.

Process of target marketing

Once the firm has identified its market segment opportunities, it has to decide how many and which ones to target. Basically target marketing involves three activities: market segmentation, market targeting, and market positioning.

Market segmentation: Basically not all types segmentation are useful. It is important to recognize that a marketer needs to use relevant variables to segment a market. For example: segmenting a market based on a persons age is not relevant for a product like salt. To be useful, market segments must rate favorably on five key criteria: Measurable, substantial, accessible, differentiable, and actionable. Market targeting: The firm must look two factor in targeting the market: the segments overall attractiveness and the companys objective and resources. There are basically five patterns of target marketing: single segment concentration, selective specialization, product specialization, market specialization, full market coverage.



Market positioning: The creation of an image for a product or service in the minds of customers, both specifically to that item and in relation to competitive offerings. In marketing, positioning is the technique by which marketers try to create an image or identity for a product, brand, or organization. It is the 'place' a product occupies in a given market as perceived by the target market.

Factors of Target market

Target marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives, resources, and capabilities.

Attractiveness of a Market Segment

The following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment: a. Size of the segment (number of customers and/or number of units) b. Growth rate of the segment c. Competition in the segment d. Brand loyalty of existing customers in the segment e. Attainable market share given promotional budget and competitors' expenditures f. Required market share to break even g. Sales potential for the firm in the segment h. Expected profit margins in the segment

Suitability of Market Segments to the Firm

Market segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of it include:

Whether the firm can offer superior value to the customers in the segment The impact of serving the segment on the firm's image Access to distribution channels required to serve the segment The firm's resources vs. capital investment required to serve the segment The better the firm's fit to a market segment, and the more attractive the market segment, the greater the profit potential to the firm.

Target market strategies

There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following:

Single-segment strategy - also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources. Selective specialization- this is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different - in many cases only the promotional message or distribution channels vary. Product specialization- the firm specializes in a particular product and tailors it to different market segments. Market specialization- the firm specializes in serving a particular market segment and offers that segment an array of different products.

Full market coverage - the firm attempts to serve the entire market. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment.

Some Indian examples of market segmentation

PEARS SOAP The glycerin soap, pears, has launched a new variant for children, called pears junior. The active ingredient in the soap is olive oil, and is also transparent. The variant capitalizes on the brand equity of pears. HUL decided to bridge the gap in the kids segment, which is less crowded compared to the baby soap segment.

HDFC bank, in collaboration with MasterCard, launched a credit card for small and medium enterprises (SMEs). The credit card is named PowerPlus Business Card. It operates from the current account of the company, and expenses can be debited directly from the account by using this card. The charges on the card can be treated as expenses by the company.