Segmentation

Customer in a market vary widely in terms of their

level and sophistication of need , in the way they
like the product to be delivered to them, in their
ability and willingness to pay a certain amount for
getting their needs satisfied, and their most
preferred method of receiving communication from
company. All customers in a market cannot be
served by single marketing mix. Although each
customer is different from the other in a some way
.It is not economically viable to have a tailored
marketing mix for each customer. Segmentation is
the process of clubbing together similar customer in
a group ,so that they can be served by a marketing
mix especially designed for group segment.
 Market segment
 Market segmentation is the process in marketing of
dividing a market into distinct subsets (segments) that
behave in the same way or have similar needs. Because
each segment is fairly homogeneous in their needs and
attitudes, they are likely to respond similarly to a given
marketing strategy. That is, they are likely to have similar
feelings and ideas about a marketing mix comprised of a
given product or service, sold at a given price, distributed
in a certain way and promoted in a certain way.
 Broadly, markets can be divided according to a number
of general criteria, such as by industry or public versus
private sector. Small segments are often termed
niche markets or specialty markets. However, all
segments fall into either consumer or industrial markets.
Although it has similar objectives and it overlaps with
consumer markets in many ways, the process of
Industrial market segmentation is quite different.

 The process of segmentation is distinct from
targeting (choosing which segments to address)
and positioning (designing an appropriate
marketing mix for each segment). The overall
intent is to identify groups of similar customers
and potential customers; to prioritise the groups
to address; to understand their behaviour; and to
respond with appropriate marketing strategies
that satisfy the different preferences of each
chosen segment. Revenues are thus improved.
 Improved segmentation can lead to significantly
improved marketing effectiveness. With the right
segmentation, the right lists can be purchased,
advertising results can be improved and
customer satisfaction can be increased.
The requirements for successful
segmentation are:
 homogeneity within the segment
 heterogeneity between segments
 segments are measurable and identifiable
 segments are accessible and actionable
 segment is large enough to be profitable
 These criteria can be summarized by the word DAMAS:
 D Differential: it must respond differently to a different marketing mix
 A Actionable: you must have a product for this segment to be
accured
 M Measurable: size and purchasing power can be measured
 A Accessible: it must be possible to reach it efficiently
 S Substantial: the segment has to be large and profitable enough
 The variables used for
segmentation include
 Geographic variables
 region of the world or country, East, West, South, North, Central,
coastal, hilly, etc.
 country size/country size : Metropolitian Cities, small cities, towns.
 Density of Area Urban, Semi-urban, Rural.
 climate Hot, Cold, Humid, Rainy.
 Demographic variables
 age
 gender Male and Female
 sexual orientation
 family size
 family life cycle
 Education Primary, High School, Secondary, College, Universities.
 income
 occupation
 education
 socioeconomic status
 religion
 nationality
 language
 Psychographic variables
 personality
 life style
 value
 attitude
 Behavioural variables
 benefit sought
 product usage rate
 brand loyalty
 product end use
 readiness-to-buy stage
 decision making unit
 profitability
Target Market
 In any market there are normally many
segments .A company may not have the
resources and the capabilities to design
marketing mixes to serve all the segments.
 A company will decide to serve one or more
segments depending upon its capabilities and
resources. The segments that a company
choose to serve by designing special marketing
mixes are called as target market
 Targeting is the second stage of the SEGMENT
"Target" POSITION (STP) process. After the
market has been separated into its segments,
the marketer will select a segment or series of
segments and 'target' it/them. Resources and
effort will be targeted.
 Positioning
 In most markets there will be many companies providing
the same basic solutions to customer has to be distinct,
so that customer are able to make choice by matching
their requirements with the offering of various providers.
Positioning is the process of creating a distinct offer and
communicating it to the customer.
 Positioning is created by designing a marketing mix
which is suitable for the target market but it is different
from marketing mix of other providers. The chosen
marketing mix has to be then communicated to the
customers. The smaller and more homogeneous the
target market is for which a marketing mix is designed,
the stronger will be the positioning, i.e. the fit between
the marketing mix of the company and requirement of
the customer of the target market will be stronger.
 The process of positioning is continuous in nature and it
should always be proactive becoz new needs and
competitors keep cropping up.
 Elements Of Positioning
 Target Market
 The company has to select the segment to
which it will offer its products. It is very tempting
to select the largest segment or the most
profitable one but company should have done a
comprehensive research of requirements of
customer of various segments and honest audit
audit of its own resources and competencies.
Quite often a company believes that it will be
able to develop or acquire the required
resources and competencies after identifying a
target market .But it is never easy. A company
should have a clear road map of how it will
acquire or develop the required competencies
and resources.
 Undifferentiated Targeting
 A company Using an undifferentiated targeting strategy
essentially adopts a mass marketing philosophy. It views
mkt as a single unified big mkt with no segment.
 Uses one mktg mix for entire mkt .
 The company assumes that individual customers need
are similar that can be met with a common mktg mix.
 When there is no competition to certain extend the
company doesn’t feel the need to tailor mktg mixes to
the need of mkt segment.
 Since only one product is produced the company
achieves economy mktg cost is less since only product
has to be promoted and there is a single channel of
distribution.
 Hardly ever well considered strategy.
 There for companies following this strategy will be
susceptible to incursions from competitors who design
their mkt mixes specially for smaller segments.
 Concentrated Targeting
 A company select one segment to serve ,it understands the needs
and motives of the segments.
 Concentrating resources and meeting the needs of a narrowly
defined mkt segment is more profitable than spreading resources
over several different segments.
 ‘Starbucks ’became successful by focusing exclusively on customer
who wanted gourmet coffee products.
 Problem arises when segment shrinks in size.
 Shifting to other segment becomes problem.
 Customer of other segment find it difficult to associate that product.
 The image of association with one particular segment. e.g.
Mercedez car looks for upper segment.
 Multi Segment Targeting
 In this targeting strategy the company serves
two pr more well defined segments and develop
a distinct mktg mix for each one of them.
Strategy has potential to generate sales
volume ,higher profits ,larger market share.
 But strategy involves greater product design
production, promotion, mktg resources.
 Before deciding to use this strategy, a company
should compare the benefits and cost of multi
segment targeting to those of Concentrated
Targeting, Undifferentiated Targeting.
 positioning
 "A product's position is how potential buyers see
the product", and is expressed relative to the
position of competitors.
 In marketing, positioning has come to mean the
process by which marketers try to create an
image or identity in the minds of their target
market for its product, brand, or organization. It
is the 'relative competitive comparison' their
product occupies in a given market as perceived
by the target market.
 After the organisation has selected its
target market, the next stage is to decide
how it wants to position itself within that
chosen segment. Positioning refers to
‘how organisations want their consumers
to see their product’.
 Developing a positioning strategy
 Developing a positioning strategy depends much
on how competitors position themselves. Do
organisations want to develop ‘a me too’
strategy and position themselves close to their
competitors so consumers can make a direct
comparison when they purchase?
Or
 Does the organisation want to develop a
strategy which positions themselves away from
their competitors? Offering a benefit which is
superior depends much on the marketing mix
strategy the organisation adopts.
 The position of the brand has to be carefully
maintained.
1 When Marlboro reduced its prices, sales
dropped immediately because its customers
began associating it with the generic segment.
2 Rolex watches are even more dramatically
positioned as a luxury items, and have become
a symbol for accomplishment in life.
 Steps for Positioning a Product
This focus on new product development, relaunch with new features or for a
repositioning of an existing product too.
 
 1.   Define the segments in a particular market.
 2.    Decide which segments to target.
 3.    Understand what the target consumers expect and
believe to be the most important considerations when
deciding on the purchase.
 4.    Develop a product (or products) that caters
specifically for these needs and expectations.
 5.    Evaluate the positioning and images, as perceived
by the target customers, of competing products in the
selected market segments.
 6.    Select an image that sets the product apart from the
competing products, thus ensuring that the chosen image
matches the aspirations of the target customers.
 7.    Inform target customers about the product
(promotion).
 Re-positioning involves changing the
identity of a product, relative to the identity
of competing products, in the collective
minds of the target market.
 De-positioning involves attempting to
change the identity of competing products,
relative to the identity of your own product,
in the collective minds of the target
market.
 " Positioning - a battle for your mind". They
iterate that any brand is valued by the
perception it carries in the prospect or
customer's mind. Each brand has thus to
be 'Positioned' in a particular class or
segment. For example, Mercedes is
positioned as a luxury brand, and Volvo is
positioned for safety.
 Differentiation
 Product Differentiation
 Differentiation means added feature which gives
customer benefits that rivals cant match.
 Product parity-customer will product on the basis
of price .and competitors will be forced to cut
prices to grab customers from each other. The
profit of every company will go down. The only
way out of this mess company should have
courage, arrange resources, start differentiating
from each other .Price base competition should
be avoided.
 Promotional Differentiation
 Identifying responses of target. People in
different target market are likely to react
differently to stimuli, images, story lines,
celebrities .It Is intricate task.
 Whether member prefer emotional or rational
messages, like humor or select message,
whether they like narratives or musicals.
 Different target market different type of sales
presentation, persuation, relationship with seller.
 Distribution Differentiation
 Arises by making situation more convenient for
customers.
 Different activities to make buying situation more
convenient for them. Customer hard pressed for
the time have welcomed introduction of
Automated Teller Machines .But some customer
would still prefer to visit a bank, to conduct
transaction which can easily be carried through
the ATM.
 Cans of carbonated soft drinks from vending
machines are finding with youngsters from upper
strata in India who believe that is the original
coke or Pepsi.
 ‘Lakme’ maintains three types of distinctive
distribution for its three target mkt.
 Small neighborhood shop for commonly used
skin care products
 Bigger shops in central mkt places and specialty
store for the complete range of personal care
products.
 Exclusive salon started by HUL targets elite
group for exclusive range of premium cosmetics.
 Impulsive buying can be leaded by readily
availability.
 Price differentiation
 It involves the estimating the price sensitivity of
the target market.
 1)Price insensitive market-
 the desired values of the highest order, these
values can be exclusively, sheer, luxury, symbol
of status or royalty ,owners passionate
attachment to products.
 2)Highly Price sensitive-
 preferably goes for mere functionality of the
product .customer of this target market yearn for
better product, but will not be willing to pay. if
company offers a better product at existing price
level, such customer would buy it.
STP