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Market Segmentation
The process of dividing a market into distinct groups of buyers who might require separate products i.e. goods or services.

Segmentation Works Because ...


Not all buyers alike Subgroups may be identified Subgroups smaller and more homogeneous Easier to satisfy smaller groups

Major Steps in Segmentation & Targeting

1. Break market down 2. Group into segments 3. Choose target market


Market Segmentation

Geographic segmentation (geographic units). Demographic segmentation (demographic characteristics). Psychographic segmentation (social class, life-style, or personality characteristics). Behavior segmentation (knowledge, attitude, use, or responses to a product).

Ideally a seller might design a separate marketing program for each buyer. Because of the high cost, however, companies look for broad classes of buyers who differ in their product needs or buying responses. There is no single way to segment a market. A marketer has to try different segmentation variables, alone or in combination, hoping to find the best way to view the market structure .

Market Segmentation
Geographic Region Cities States Towns Countries

Age Gender Family size Family life-cycle stage Income Occupation Education

Demographic factors are the most popular bases for segmenting customer groups; consumer needs, wants, and use rates often vary closely with demographic variables. Also demographic variables are easier to measure than most other types of variables. Consumer needs and wants change with age. Age and life-cycle variables can be misleading. Why?

Gender segmentation in the hotel industry? Income does not always predict which customers will buy a given product or service. Income alone can be misleading as a segmentation variable. Why? Income segmentation is commonly believed to be one of the primary variables affecting pricing strategies .

Market Segmentation
Geographical Segmentation-It involves segmentation of the market by dividing it into different Geographic units such as Nations,States,Regions,Cities

Eg- Pizza Hut started with Pan Pizza especially for Indians,Mc Donald introduced a burger in Texas successfully,serving it with Pickles& Mustard as per the taste of people there.

Demographic Segmentation

It consists of dividing the market into groups based on demographic variables such as Age, Gender, Family Life cycle, Income, Occupation, and Education

A bank establishes an executive banking group specifically for accountants, doctors and professionals.

Age & Life- Cycle Stage

Consumer needs and wants change with Age. There are some companies that offer different products or marketing strategies to various Age & Life Cycle Segments.

Eg. Mc Donald offers Happy Meals that include toys,aimed at children & they have Salads to attract the Health Conscious adults.

Gender Segmentation

Used in marketing clothing, hairdressing, cosmetics ,magazines & hotel industry

Eg- Hotel Corporations are now taking women into consideration in designing their hotel rooms, Taj Hotels- created a Special Area Zone for females.

Market Segmentation

Behavior Occasions Benefits sought User status Usage rate Loyalty status Buyer readiness stage

Social class Lifestyle Personality

People in the same demographic group can have very different psychographic profiles.

Life Style

Marketers are increasingly segmenting their markets on the basis of consumer life style analysis.

Eg- Night Clubs are designed with young clientele in mind

Marketers use personality variables to segment markets. Products with personalities that correspond with those of consumers . Eg Theme park promotion showing seniors having fun(appealing to active senior).


A bank might identify young professionals on the fast track as the prime market for credit cards sales. A bank may concentrate on conservative consumers who want to shield their savings by marketing them 5 years compulsory deposit schemes.

Social Class
Social class has strong effect on preferences for cars, clothes , home furnishings ,leisure activities and reading habits Afternoon tea at the RITZCARLTON is aimed at upper-middle and upper classes. A bar near the factory targets the working class.

Behaviour Segmentation
On the basis of Knowledge,Attitude, Response to a product
Occasion segmentation helps firms build product use. The honeymoon market represents an occasion with excellent potential for the hotel industry.

User Status Marketers segment market as Non Users,Ex Users, Potential Users, First Time Users,& Regular Users of a product Major Airlines are particularly interested in keeping regular users and attracting potential users

Usage Rate
Segmenting them on the basis of Light, Medium, & Heavy- User Groups. Heavy users are small % but account for high % of total buying 80-20 principle Programs employed by hospitality & travel industry- FFP & FGP

Loyalty Status Very Loyal:No Switching over from one brand to another ,Some-what loyal: loyal to 2 or 3 brands, Not loyal:seek variety Loyalty gets build through relationship marketing. One restaurant keeps file on frequent customers detailing their preferred crew member,wines,table choice,last visit & even appearance .VIP (special reservation phone number)

Buyer Readiness Stage

Unaware of product Some are aware Some are informed Some want the product Some intend to buy

Benefits Sought Knowing the attributes or benefits sought by customers is useful in two ways: what to provide and promote to attract a specific segment; to identify customer types.

1) 2)

Benefits Sought Five major appeals for restaurant consumers Food Quality Menu Variety Price Atmosphere Convenience Marketers understand what to provide & promote to attract a specific segment

Benefits Sought

A bank may offer the benefit of after working hour appointment for the upper income segment. A bank might target the segment that seek the benefit of speed and convenience. Telephone loan service-same day approval.