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Segmentation
 Segmentation
 The process of defining and subdividing a large
homogenous market into clearly identifiable
segments having similar needs, wants, or demand
characteristics.
Source: ttp://www.businessdictionary.com/definition/market-
segmentation.html#ixzz2lpsRYuiq
 Market segmentation is the process of dividing a
total market into market groups consisting of people
who have relatively similar product needs, there are
clusters of needs.
Source: http://www.udel.edu/alex/chapt9.html

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Its objective is to design a marketing mix
that precisely matches the expectations of
customers in the targeted segment.
Few companies are big enough to supply
the needs of an entire market;
Most must breakdown the total demand
into segments and choose those that the
company is best equipped to handle.

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Four basic factors that affect market segmentation are:
 clear identification of the segment,
 measurability of its effective size,
 its accessibility through promotional efforts, and
 its appropriateness to the policies and resources of the
company. 
The four basic market segmentation-strategies are based on
 behavioral,
 demographic,
 psychographic, and
 geographical differences.

Source:
http://www.businessdictionary.com/definition/market-seg
mentation.html#ixzz2lptN2lg6
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Demographic segmentation

Age: <1; 2-3; 4;5…-> Milk, Clothes, etc.

Life stage: children, tanager, youth, adult,
old, etc -> beer, cigarette, drink, clothes…
Gender: Male, female-> Clothes, cosmetic…
Income: Poor, medium, rich.
Generation: 8x, 9x,…
Social class: High social class, ….

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 Geographic segmentation

 Marketers can segment according to geographic criteria—

nations, states, regions, countries, cities, neighborhoods, or
postal codes.
 The geo-cluster approach combines demographic data with
geographic data to create a more accurate or specific
profile. With respect to region, in rainy regions merchants
can sell things like raincoats, umbrellas and gumboots. In
hot regions, one can sell summer wear. In cold regions,
someone can sell warm clothes.
 A small business commodity store may target only
customers from the local neighborhood, while a larger
department store can target its marketing towards several
neighborhoods in a larger city or area, while ignoring
customers in other continents.
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Psychographic segmentation
Lifestyle
Personality
Value

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 Behavioral segmentation
Behavioral segmentation divides consumers
into groups according to their knowledge of,
attitude towards, usage rate or response to a
product.

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 Segmentation by occasions

 Segmentation according to occasions relies on the

special needs and desires of consumers on various
occasions - for example, for products for use in relation
with a certain holiday. Products such as Christmas
decorations or Diwali lamps are marketed almost
exclusively in the time leading up to the related event,
and will not generally be available all year round.
 Another type of occasional market segments are people
preparing for a wedding or a funeral, occasions which
only occur a few times in a person's lifetime, but which
happen so often in a large population that ongoing
general demand makes for a worthwhile market
segment.
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Segmentation by benefits

Segmentation can take place according to

benefits sought by the consumer or
according to perceived benefits which a
product/service may provide.

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 Example of segmentation
Poor men Rich men live
live in city in countryside Rich men
live in city

Poor women Rich women

live in live in
countryside countryside

A market segment consists of individuals, groups or organizations with one or

more characteristics that cause them to have relatively similar product needs.
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Advantages and disadvantages of segmentation..

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 Market targeting
M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3
P1
P2
P3

1 2 3 4 5

1: Single-segment concentration
2: Selective specialization
3: Market specialization
4: Product specialization
5: Full market coverage/specialization
Evaluation of different market segments
Market segments can be evaluate by
marketers based on different parameters
which are mainly:
Size of market segment
Predictability and future growth
Profitability
Risk level

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SWOT Analysis
Strengths, Weaknesses, Opportunities and
Threats
It analysis is an ideal way to understand
your business and your market.
It is part of a situational analysis and
identifies the key issues that direct the
marketing strategy.
SWOT Analysis
SWOT Analysis
1: Single-segment concentration
Example: supplying internet service for
VIMARU students-> suitable for small firm
with limited forces.
Marketer selects a single segment and put
more concentration for that particular
segment. Here company modifies its product
based on the needs of the particular market
segment and tries to archive superior market
position in the segment. Company may earn
higher profit if it becomes market leader in
the segment.
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 Advantages and disadvantages
Understand the customer’s needs
There are some significant risks involved in
the single market segment due to high
concentration in only one market segment.
Company may face high drop in sales if the
market changes suddenly (VIMARU moves
to other place) or some competitors launches
a better product in the market.

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2: Selective specialization
Here marketers select a certain number of
market segments based on its range of
products instead of focusing only in one
market segment.
All the segments should be able to generate
profit for the company for being included in
the target market segment list.
Company should have at list one product
for each target market segment.

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 Advantages and disadvantages
 More than one segment helps the company to diversify
the risks involved in only one market segment.
 If there is sudden loss in market share in one market
segment, company can continue with the other market
segments until it devices a new strategy to regain the
market share.
 Example would be different range of cars
manufactured and marketed by General Motors in
different countries in the globe.
 Needs a lot of forces, and requires a good board of
management; sometimes it is costly.

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3: Market specialization
Here company concentrates in only one type
of market segment through different
products. All the products are designed to
cater (serve) to only one particular customer
group.
In this case, company specializes in that
particular product category and build a niche
(suitable) place for itself.
Example would be different baby products
produced and marketed by Johnson &
Johnson.
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4: Product specialization

Here company produces and promotes one

product in all the market segments or
concentrates in one product category that it
sells to several market segments.
Company should have very high economy of
scale to depend on only one product.
Here risk is high as the total sell depends on
only one product and any alternate product
from competitors or slight drop in brand value
can affect the profitability of the company.

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5: Full market coverage/specialization
 Company or marketer targets the whole market with its all
products.
 This is mainly done by big companies with superior
distribution system which has the capability to reach to all
customers in the market.
 Example would be Pepsico or Cocacola which sell all of
their products in cold drinks and snacks category to the
whole market.
 The whole market can be covered in two ways:
 In Differentiated Marketing, company operates in
different segments with different set of products.
 In In-differentiated Marketing, company targets the whole
market with only one product category.
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 After Market Targeting, marketers decide about market
positioning strategy to create a distinct space for a
product/brand in consumer’s mind.
 Product positioning is the way a product or service is seen
by consumers and how they view its important attributes
in relation to competitor’s products.
 For instance a car can be positioned on the basis of style,
performance, safety or economy whilst a computer might
be positioned on the basis of speed, capacity, reliability.
 Choosing and implementing your product positioning
strategy is an important task. You need to determine your
product’s competitive advantages (i.e: what sets it apart
from its competitors) and then based on this information,
decide how to position your offering in the market.
Quality, features, design, branding, packaging, labeling
and service all affect the way your product is positioned.
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 Market Segmentation Strategies
1. Concentration Strategy:
A single market segment with one Marketing-Mix strategy.

Market segment 1

Marketing -Mix Market segment 2

Market segment 3

 Objective is not to maximize sales, it is efficiency,

attracting a large portion of one section while controlling
costs.
 Examples include ROLEX, Anyone wear one.
Who form its target market?? Over $100,000
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 Advantages and Disadvantages
Advantages include:
 It allows a firm to specialize
 Firm can focus all energies on satisfying one group's
needs
 A firm with limited resources can compete with larger
organizations.
Disadvantages include:
 Puts all eggs in one basket.
 Small shift in the population or consumer tastes can
greatly effect the firm.
 May have trouble expanding into new markets (especially
up-market). Haggar having problems finding someone to
license their name for women’s apparel, even though
women purchase 70% Haggar clothes for men. 27
2. Multi-segment strategy

 Two or more segments are sought with a Marketing-Mix for

each segment, different marketing plan for each segment. This
approach combines the best attributes of undifferentiated
marketing and concentrated marketing.

Marketing –Mix 1 Market segment 1

Marketing –Mix 2 Market segment 2

Marketing –Mix 3 Market segment 3

Example: Marriott International:

Marriott Suites...Permanent vacationers
Fairfield Inn...Economy Lodging
Residence Inn...Extended Stay
Courtyard By Marriott...Business Travelers
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 Advantages and Disadvantages
Advantages include:
 Can achieve same market coverage as with mass marketing.
 Price differentials among different brands can be maintained
 Consumers in each segment may be willing to pay a
premium for the tailor-made product.
 Less risk, not relying on one market.

Disadvantages include:
 Demands a greater number of production processes.
 Costs and resources and increased marketing costs through
selling through different channels and promoting more
brands, using different packaging etc.
 Must be careful to maintain the product distinctiveness in
each consumer group and guard its overall image

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