Chapter-IV

Market Segmentation
 Introduction of Market

• In narrow sense, a market is a place where buying

and selling of goods and services take place.
• But in broader sense, a market is not only a place,
but also an area and or demand.
• Place concept,
• Space concept, and
• Demand concept
The Place Concept
• Place concept is a narrow and traditional concept
of market.
• In this concept, the market is defined as a physical
or convenient place where buyers and sellers come
together for buying and selling purpose.
• The convenient place maybe a wholesaler’s store
or retailer’s store, or a department store or a
supermarket.
Space Concept
• In this concept, a market may be defined as an area
consisting of many places, where prices for the
products is determined by the free play of demand and
supply.
• Exchange processes can take place continuously
without direct contact or face-to-face contact between
the buyers and sellers.
• This may use various means of communication like
telephone, letters, television, etc.
The Demand Concept
• Market is the group of the customers .
• Market refers to aggregate demand of
customers.
• Segmentation is segregation.
• Segmentation is an act of dividing.
 Concept of Market Segmentation
• Market segmentation is the process of dividing
large, heterogeneous (dissimilar) markets into
smaller, homogeneous (similar) sub-markets.
• In other words, market segmentation is the
process by which an organization attempts to
match a total marketing programs to the
unique manner or needs in which one or more
customer groups behave in the marketplace.
• Consumers are divided into different groups on the
basis of their consumption pattern or behavior.
Consumption pattern may differ from age, sex,
needs, locations, occupations, festivals, etc.
• With the increase in competition in business it
becomes difficult for the marketers to satisfy the
mass consumers.
• Therefore, it becomes necessary for the marketers
to segment such a mass or aggregated market into
smaller or differentiated markets so that market
will be capable to satisfy consumer needs.
Objectives of Market Segmentation
• To match the product with the specific market
needs.
• To minimize the effect of market competition and
to win the market competition.
• To assure the sale of product and survive for the
longer period in the market place.
• To maximize the gains from business.
• To assure regular satisfaction to both customers
and the market.
Process of Market Segmentation
• Identify Market Segments
• Develop Profiles of Segments
•  Evaluate Market Segment
•  Select Target Market
•  Develop a Positioning Strategy
•  Establish Market Plan Program

 
 Process of market segmentation
A meaningful segmentation consists of step by step process.
It usually involves the following steps:
1. Survey: The first process of market segmentation is
survey which includes collection of data and information.
• This first step is basically a data collection stage of
costumer’s taste, needs, preferences, age- group, product
characteristics etc.
• What are the needs of the customers and how can you group
customers based on their needs.
2. Analyze: After collection of data and information, the
marketer should properly analyze to determine their
similarities and dissimilarities.
• Once needs of the customers are identified, organizations
need to identify that which type of segmentation to be used.
4. Profiling: After analyzing collected information
then marketer should prepare separate profile for
each segment .
5. Evaluation
• After the separated profile has been developed, the
marketer should evaluate each profile on the basis
of cost and benefits.
6. Segment select
• After the segments are properly evaluated the
marketer should select the best segment that will be
the target market for the company.
• A best segment is one, which offers the greatest
opportunities for the company.
  
Requirements of market segmentation

• Large enough : Market must be

heterogeneous and divisible.
• Measurable: Customer response should be
clearly identified or measured. Customer
response based on quantifiable information is
easily measureable.
• Accessible: Segment should be accessible or
reachable.
• Actionable :Effective program can be designed
for attracting and serving the segments.
• Sustainable : The market segments are of
profitable enough to serve.
• Differentiable : The segment is conceptually
distinguishable and responds differently to
different marketing mix elements and programs.
 
Base for segmenting consumer market
1) Geographic variables:
a. Area: On the basic of Area market can be
segmented into constituent, District, Zone, province etc.
b. Topography : The market can be segmented
according to topography. In Nepal, market can be
divided into mountain, hill and terai from topographical
perspective.
c. Population density: The market can be divided into
urban, suburban and rural.
2) Demographic variables:
a. Age: The market can be segmented into
young, teenage, middle age, and old age.
b. Gender: Market segmentation can be done by
gender of costumer –male and female.
c. Occupation: The market can be segmented
into unemployed, student, service holder,
professional, farmer etc.
d. Income: The market can be divided into high income,
low income and middle income.
• Up to Rs 50000 Low incomes
• Rs 50000-100000 Middle income
• R.s 100000-and above High income
e. Ethnicity: Caste, race, nationalities and ethic group can
be used for market segmentation. Nepal has about 60 ethnic
groups.
f. Religion: Major religions such as Christian, Hindu,
Islam, and Buddhist can be used for segmentation purpose. 
 3) Psychographic variables:
a. Social class: While segmenting the marker on the
basic of social class people are classify into upper
class, lower class, and middle class.
b. Life style: Life style is the people’s pattern of living.
It is reflected in his activities, interest, and opinion.
c. Personality: Personality is the sum total of ways in
which an individual react and interacts with others. It
is an individual pattern of traits.
4) Behavioral variables: They refer to the
consumer response to the product. The
behavioral variables for segmentation consist
of:
a. Occasions: They can be segmented into:
• Regular occasion: Daily routine needs.
• Special occasion: Festival, marriage, death
needs.
b. Benefits: Benefits describe consumers felling of
satisfaction and outcomes of buying product. They
can be functional and emotional.
c. User status
• Regular user: uses the product regularly.
• First time user: first time experiment with product.
• Ex user: Stopped using the product.
• Potential user: can use the product in future.
• Non user: not using the product.
d. Usage rate: It is the rate at which consumers use or consume
product. It can be segment into:
• Heavy user: They account for high consumption.
• Medium user: They account for moderate consumption.
• Light user: They are user of the light quantity.
e. Loyalty status
• Consumer loyalty to brand can be used for segmentation.
Loyalty pattern can be:
• Hard core: One brand bought all the. There is no brand
switching.
• Split loyal: Two or more brands are bought .Divided loyalty is
present.
• Shifting loyal: Loyalty shift from one brand to another brand.
• Switcher: No loyalty to any brand .switch from brand to brand.
• f) Attitude towards the product
• Attitude is judgment concerning objects, people or events.
• Consumer attitude towards product can be used for
segmentation into:
• Enthusiastic; Consumers is enthusiastic to buy the
product.
• Positive: consumer has the positive attitude about the
product.
• Negative: Consumer has negative attitude about the
product.
• Hostile: consumers has hostile attitude towards the
product.
Base for segmenting the industrial market
Industrial markets buy product for business use, resell,
or to make other product. Industrial buyer is usually
well informed.
1) Geographic variables: Market can be segmented
according to:
a. Location: It can be local, national, regional, global .It
sets the boundary.
b) Topography: It can be mountain, hill, and terai. It
affects the movement of the product.
c) Climate: It can be tropical, temperature, alpine.
2) Demographic variable
a. Type of industry
• Agriculture, forestry, fishing
• Mining and construction
• Transport and communication
• Finance , insurance ,real estate
• Services
b. Size of customers
• The basic for segmentation can be;
• Cottage and small units: Small customers
• Medium size units : Medium customer
• Large size units : Large customers
3) Operating Variables:
a. Technology: set of knowledge procedures
and methods.
• Manual technology: Human labor is used.
• Automated technology: Automatic machine
are used.
• Computerized digital technology: Computer
is used.
• Robotic technology; Roberts are used.
b. Usage Rate
Usage Rate affects the frequency and quantity of
product use. Users can be classified as:
• Heavy users : big size order for products
• Medium users: Medium size order for product
• Light users ; small size order for product
• Non users : No order for product
c. Service needs
Customer may require various types of services. The
bases for segmentations can be:
• Before sales services: It is information based.
• After sales services: It is repair and maintenance base.
• On the sales service:
4) Purchase related variable
a. Purchase organization: They can be centralized
and decentralized.
b. Purchase policy: Individual, purchase committee,
and purchase department.
c. Purchases documentation: Some industries
make direct purchase. Others need documentation
such as quotation, tenders, and contract.
d. Negotiation periods: Time periods for
negotiation and completion of sale. Segmentation
can be done according to the negotiation periods.
Segment Evaluation analysis and selection

Normally, three tools are available for evaluating

market segment: size and growth of segment,
structural attractiveness of segment, and company
objectives and resources.
Size and growth of segment:
• A market segment must have a right size. A right
size is one, which is manageable and profitable.
• Similarly, the market segment must have
appropriate growth characteristics.
Structural attractiveness of segment:
• Structural attractiveness indicates long term
profit.
• A market segment might have desirable size and
growth characteristics and still not to be
attractive from the view point of profitability.
• Profitability of company depends upon several
forces: No. of competitors and their strength, rate
of new entrance in the target market, availability
of potential substitutes in the market, bargaining
power of buyers and suppliers.
 Selection of the Target market

Single coverage market

• The single coverage market is also known as
single segment.
Limited coverage market
• In this market coverage the company
concretes on only certain selected segment
(i.e. more than one segment) may be two or
more than two segment but it does cover all
segments. Under this market coverage three
types of market segments can be developed.
Product specialization
• Here the company concentrates on making
and distributing a particular product to a
variety of customer group i.e. single product
for many markets.
Market specialization
• Here the company concentrates on serving
needs of a particular customer group i.e. many
products for single markets.
Selective specialization
• In this market coverage the company selects
few markets segment, each of which is
objectively attractive and matches the
company objectives and resources. this
strategy also known as multi segment
coverage.
Full coverage market
• In this market coverage, the company attains
to select and serve all customer groups.
Greater penetration into each segment is
combined with broad coverage of a total
market. This is a high sells strategy. For
example coca cola, general motors’ etc.
 Product Positioning
• Positioning is one of the most powerful marketing
concepts.
• Positioning refers to the place that a brand occupies in
the mind of the customer and how it is distinguished from
products from competitors.
• Company tries to emphasize their product feature, create
suitable image through marketing mix.
• Positioning must be simple, creative, and unique.
• Identification of target market, the market need, the
product name and category, the key benefit delivered and
the basis of the products differentiation from any
competing alternatives persuade the customer toward
products or brands.
 Types of product positioning
• Product positioning is necessary in every organization
to capture and expand market segment.
Attributes positioning
• Attributes positioning is associate with product features.
Most companies enhance product attributes for the
purpose of building good image and effective
marketing.
• For e.g. Samsung manufacturing company offers its
product with various features like strong and long
battery life, camera that deliver sharp photos, eye
catching design and display, sound feature, etc.
Benefits positioning
• Benefits positioning is such types of strategies,
where company focuses on defining and
communicating the product benefit that the
product offers to the targeted customers. In this
strategy the companies emphasizes various
product benefits.
• Manufacturer of Colgate Tooth Paste may
communicate the customers that the product
protects the uses from gum problem, solves their
respiratory problems and helps to keep the teeth
strong.
Usage positioning
• These types of product positioning strategies
are done to explain the usage of product.
• Product is used twice a day, thrice a day, after
meal before meal.
User category
• This approach focuses on certain specialized
products, which are used by particular market
segment only.
• Basically products are categorized according
to classes like High class, Middle class, and
Low class
Competitors positioning
• Product of the company must have leading,
ideal, superior attributes to compete against
competitors.
• This strategy helps to differentiate a product in
the dominant market and helps to reduce
competition.
• For e.g. Coke is better that Pepsi, Apple brand
is better than Samsung, etc.
 Process of product positioning
There are 5 main steps in positioning process.
1. Identification of actual competitors. A first
step is to identify of actual competition.
Basically there are two types of competitors.
• Primary competitors are those competitor
that offers a similar products or services
Secondary competitors are those competitors
who offer a high or low-end version of your
product.
2. Determining how the competitors are
perceived and evaluated
• The second step is to determine the product
positioning which is done to see, when the
competitors product is purchase by the customers.
• Basically this step is applied to understand how
the target customer evaluates the competitor
performance and programs. 
 
3. Determining the competitors positioning
• This step is use to understand the status of
competitors in market in comparison to
concern firms and other competitors.
• Which competitors are perceived as similar
and which as different?
• This judgment can be made subjectively.
4. Analysis of customers objectives, preferences,
tastes, problems, needs
• Customers’ needs, preferences, tastes, interest are
frequently change.
• In this step, concern firms analysis the customer’s
habits and behavior in a particular market segment.
• A firm tries to identify and understand the main
objective of buying the product, in which feature of
product they give more preference, what problems
they faces in selecting and using the product, etc.
5. Selection of best position
• The above four steps provides a useful
backgrounds and necessary statistics to take a
best decision for positioning that can motivate
and attract the target customers.
• Whether it should be low price, better quality
product, made by advance technology, helps in
problem solution, so on.
Than you