Chapter 3

MARKET
SEGMENTATION
Market Segmentation

May be defined as the process of identifying the

various segments of a company’s particular market.

A market segment is a sub group of a particular

market which is composed of units with more or less
similar characteristics people may have similar wants,
financial resources, geographic location, buying
attitudes and buying patterns. This variable may be
used individually to segment a market.
 ADVANTAGES OF MARKET SEGMENTATION
Market Segmentation offers the following advantages to the
marketer;

 Segmentation forces the marketer to be aware of

realities in the market
 Segmentation provides clues in the design of
products and marketing programs that will reach
the prospective customer
 Segmentation can help identify opportunities for
new product development
 Segmentation can help improve the strategic
allocation of marketing resources
Segmentation Strategies
In serving the target market the company or the
marketer may opt to adapt any of the following;

1. Concentration or Single Segment Strategy

Refers to that long term decision of the company to
deal only with a particular segment of the market.

2. Multi Segment Strategy

Calls for providing products or services to two or
more segments of the target market.
 BASES FOR MARKET SEGMENTATION
NEEDS AND WANTS SEGMENTATION
A major way segment a market is by identifying
costumers needs and wants.

DEMOGRAPHIC SEGMENTATION
Refers to dividing the market into segments on the
basis of demographic variables like Age, sex, family
size, family life cycle, income, occupation, education,
religion, race, and nationality.
PSYCHOGRAPHIC SEGMENTATION

Refers to the classification of buyers or consumers

by some psychological characteristic they possess in
common they maybe grouped according to social class
or lifestyle. Segmentation by social class rest on the
assumption that the human components of one social
class share similar values, interest, behaviors,
economic positions. Lifestyle refers to the person’s
pattern of living in the world as expressed in his or her
activities, interest and opinions .
BEHAVIOR SEGMENTATION
Is a term that refers to the groupings of buyers on
the basis of their knowledge, attitude, use, or response
to the product. Buyers behavior may be segmented
according to various categories namely;
• PURCHASE OCCASION
Occasion Segmentation calls for grouping of buyers
according to occasion when they get the idea, make a
purchase or use a product.
• BENEFITS SOUGHT
Buyers may also be segmented according to the
benefits they seek from a particular product.
• USER STATUS
In another example the very rich people exhibit
needs typical only to their class. They will not hesitate
to spend money if they think their prestige will be
compromised.
• USAGE RATE
Another useful way of segmenting a market is by
grouping product users according to status. User status
may be classified as follows: (1) Non Users (2) Ex users
(3) potential users (4) first time users and (5) regular
users.
• LOYALTY STATUS
Loyalty to a particular brand provides insight to the
marketer. If he is faced with the problems of inducing
buyers to switched loyalty his own brand, his first move
would be to determine loyalty status of buyers.

Buyers may also be grouped according to their

loyalty to particular brands. They may be classified as
follows;
1. Those who buy only one brand of a product
2. Those buy 2 or 3 brands
3. Those who shift from 1 brand to another
4. Those who have no brand reference
READINESS STAGE
Another way of segmenting the market to classify buyers
according to their readiness to buy. In this regard, they
may be categorized into the following stages;
1. People who are unaware of the product
2. People who are aware of the product
3. People who are informed of the product
4. People who are interested in the product
5. People who desires the product
6. People who want to buy the product
ATTITUDE TOWARDS THE PRODUCT
People’s attitude toward the product may also be
classified according to their degree of enthusiasm. These
are the following;
1. People who have an enthusiastic attitude toward the
product
2. People who have positive attitude towards the product
3. People who have an indifferent attitude towards the
product
4. People who have a negative attitude towards the
product
5. People who have a hostile attitude towards the product
Price Segmentation
Marketers can always do benefit segmentation by
price. Except for few categories such as those provided
by the government or the company, there will always be
buyers who are quite price sensitive whether in an
economic slowdown or not and buyers who are just the
opposite, such as those wanting superior product or
service, especially in an economic boom.
 
Business to Business Segmentation
It has fewer buyers who order in larger quantities
and has more levels of decision – makers.
REQUIREMENTS FOR EFFECIVE SEGMENTATION
To be useful and effective, market segmentation must
meet the following requirements

MEASURABLE
The variables of the particular segment must be
measurable.
SUBTANTIAL
The segment must be large or wide enough to be
economically feasible. A narrow segment consists of
members with highly identical needs, making it easier to
design an appropriate marketing program.
ACCESSIBLE
Segmentation will be useful only if the segment members can
be reached economically by a pre designed marketing effort

ACTIONABLE
For segmentation to be useful the firm must have the ability
serve the various segment.
Market Measurement
Composed of people or organizations that have
the need, have the ability and willingness to pay for
their purchase, and have the authority to decide. The
general criteria for market attractiveness are;
1. Market Size
2. Market Growth
TARGET MARKET
TARGET MARKET
A specific way of defining the target market is to identify the
primary target market (PTM) that is the most logical buyers to
generate the bulk of sales. Secondary target markets)
(STM)

SELECTING TARGET MARKET

The selection of targets is a marketing activity that should be
planned carefully. The consequence of picking the wrong
segments may lead to lost opportunities and waste of company
resources.
To determine which segments are right for the firm the
following criteria must be considered
Criteria to Choose Market Segment
There is no single way to segment a market. All possible
market segments must be considered and reviewed
periodically with the best target market being the segment
that offers the highest profitability in relation to the return of
invest.

Measures for market attractiveness

1. Market Size
2. Market Growth
3. Homogeneity
4. Ease of Creating Awareness
5. Purchase authority
6. Loyalty level
7. Responsiveness of customers