MARKET SEGMENTATION

SEGMENTATION

• Market segmentation is the process of dividing a heterogeneous market into

homogenous sub units.

• It also refers to the process of identifying clusters of customers who desire the
same value proposition.

• First Step in a three-phase marketing strategy.

SEGMENTATION

⚫ When marketers provide a range of products or service options to serve

diverse consumer preferences, they are more satisfied and happy. Market
Segmentation is a positive force for both marketers and consumers alike. In
his book, ‘Competitive Advantage,’ Michael Porter says:

⚫ The competitive advantage of a firm lies in being everything to

a select few. To be everything to everyone is a sure recipe for a
strategic failure.
PURPOSE OF SEGMENTATION

• Target Market Selection

• Tailored Marketing Mix

• Differentiation

• Opportunities and threats

BENEFITS BY MARKET SEGMENTATION

• Facilitates right choice of target market

• Facilitates effective tapping of the chosen market.
• Makes the marketing effort more efficient and economic.
• Helps in identifying less satisfied segments and concentrating on them.
• Benefits the Consumer as well
BENEFITS BY MARKET SEGMENTATION

• Is Unsegmented Marketing Not Possible at all?

•Unsegmented marketing is low on rewards, high on risks

• Unsegmented marketing misses out the advantage of STP
BASES FOR SEGMENTATION

(a) Customer based segmentation

(b) Product related segmentation

(c) Competition related segmentation

CUSTOMER BASED SEGMENTATION

• Geographic Segmentation
• Demographic Segmentation

• Socio-Cultural Factors

• Psychographic Segmentation

• Buying Behaviour Segmentation

GEOGRAPHIC SEGMENTATION

• Based on factors like climatic zone, continent/ country, region, state, district, urban/
rural area etc

• National marketers in India often segment the market by region, state, district and
urban/ rural areas, in the first instance, and then segment them further using other
bases

• Sometimes the marketers treat the north and south of India as two distinct segments
• When there are clearly identifiable differences between one region and the other,
with implications to marketing, geographic segmentation will be useful
DEMOGRAPHIC SEGMENTATION

• Age
• Tweens, a new segment based on age
• Gender
• Women as a market segment for apparels
• Adidas targets women in India

• Purchasing capacity, a major base in demographic segmentation

• HCL locates a new market segment based on purchasing capacity
SOCIO-CULTURAL FACTORS

⚫ Culture and social class the two main bases here

⚫ Culture includes religion, caste, tradition, language, pattern of social
behaviour and others.
⚫ Social groups of varying type exert influence on the consumers.
◦ Formal and informal
⚫ Consumer reference groups
⚫ Intimate Group
⚫ Secondary Group
PSYCHOGRAPHIC SEGMENTATION

•Lifestyle a major base in psychographic segmentation

•Psychographic segmentation helps in positioning/

repositioning, launch of new products, and brand
extensions
BUYING BEHAVIOUR SEGMENTATION

⚫ Usage-based segmentation
⚫ Start with current users of the brand
⚫ Tackle current users of competitors’ brands
⚫ Tackle non-users, entering the category for the first time
⚫ In India, in most categories, ‘First Time Users’ will mean a major segment
⚫ E.g. Pears
BUYING BEHAVIOUR SEGMENTATION

• ‘Benefit’ segmentation
Example of ‘calorie watchers’ and health seekers: Diet Horlicks, Diet Pepsi, Whole
Wheat/ Brown Bread, Sugar Free

• Volume segmentation
✔ Quantity of purchase- actual or potential- is the base
✔ Consumers segmented as light or medium or heavy users
✔ Consumers segmented as bulk buyers and small scale buyers
✔ Regular buyers and one-time buyers
BUYING BEHAVIOUR SEGMENTATION

• Purchase occasion
✔ Segmentation based on the specific occasion on which the consumers buy the
product
• Attitude towards the product
✔ Enthusiastic buyers, indifferent buyers, negative minded buyers
• Loyalty to the brand
✔ Extent of brand loyalty, another useful base
• Buying Behaviour Segmentation is especially useful with new products
PRODUCT RELATED SEGMENTATION

• Product Use situations – Different customers may use the same product in different
situations.

• Benefits Segmentation – Marketers identifies benefits that a customer looks for when
buying a product.

• Quantity consumed- one of the basis of segmentation beverages – tea ,coffee, soft drinks,
liquor and cigarette markets. Following segments are visible –

• Heavy users
• Moderate users
• Light users
 PRODUCT RELATED SEGMENTATION

• Decision Criteria – Used by customer to evaluate and buy a brand or the

product. Following four parameters are considered in consumer decision
making today –
✔ Price
✔ Perceived quality of the product/ service
✔ Service offered by the firm
✔ Technology
COMPETITION BASED SEGMENTATION

• Hard Core Loyal

• Soft Core Loyal

• Switchers
SEGMENTING INDUSTRIAL MARKETS

• Based on Size & purchase of the customer, there are

• Category customers – large buyers
• Category customers – medium sized buyers
• Small buyers
• Geographical Location – Firms located in a particular region form a part of segmentation
• End Use – by differentiating end users of firms products
• Within end use segment further market can be segmented on basis of purchase criteria.
• Combining purchase criteria, size and geography – Matrix form of market segmentation .
SEGMENTATION USING SEVERAL BASES

• Multi-Level Segmentation: A Market Can and Must be Segmented Using Several Bases
– The various bases discussed earlier are not mutually exclusive; it is not an either or
situation

– Since customer characteristics stand distributed over several variables, any market can be
segmented through several variables/ bases. They can also be used in combinations

– Multi-level segmentation enables sharper targeting and choice of sharply focused

marketing mix
Example of GM
GM

• General Motors identified 40 different customer needs in passenger cars and

corresponding 40 different market segment were developed in which it would
compete with its vehicles.
• Pontiac - active, sports oriented, young couples
• Chevrolet – price conscious, young families
• Oldsmobile – affluent families
• Buick – Older, conservative couple
 TASKS INVOLVED IN SEGMENTATION

Profiling the differences between one segment and the other in terms of their needs/value requirement

Finding out by what descriptive characteristics can consumers be tagged on to a specified segment

Disaggregating the consumers into suitable segments based on the above steps

Checking whether it is possible to formulate separate/ distinctive marketing programme/ marketing

mix for the different segments

Finding out which segments will be particularly happy with the offerings of the firm and considered as
the natural targets of the firm

Estimating the likely levels of purchase by each of the segments

Ensuring that the segments arrived at are effective

Target Market and Segmentation Strategy of Titan
Watches
TARGETING STRATEGIES

• Standardization – Firm offers the same product to different market

segments. It uses the same communication, pricing and distribution strategies.

• Differentiation
• Focus - Focus is a combination of standardization & differentiation, where the
core strategy remains the same, but differentiation is made to take into
account specific customer group requirements.
CHOOSING THE TARGET MARKET

• Illustration of Bath Soaps

✔ Carries two broad segments : premium and popular

✔ Evaluating the two segments

• Is it sizeable?

• Is it growing?

• Is it profitable?

• Is it accessible?

• Is it compatible with the firm’s ambitions, resources and capabilities?

✔ Further segmenting of both segments with other relevant bases

MARKET TARGETING

• Wrong targeting renders strategy ineffective; even MNCs seem to err in

targeting

• Example of Levi’s
• Example of Reebok
POSITIONING

• Act of developing the company’s offering and image to occupy a distinct

place in the minds of the target market.

• Helps the brand manager to identify the core meaning of the brand and
communicate these core meanings to customers who would buy the product.

• Involves implanting the brand’s unique benefits and differences to the

customers.
TASKS INVOLVED IN POSITIONING
• Deciding the Locus: Where to Lodge Your Brand in Consumers’ Mind?
• Analysing Competitors’ Positioning: Is there a Gap Somewhere?
• Fixing the Positioning Plank
• Ensuring the Infrastructure/Competitive Advantages for Delivering the
Promise

• Developing the Value Proposition

• Communicating the Value Proposition to Target Consumers
• Monitoring How the Positioning is Faring in the Market
• Repositioning the Offer, if Required
ASSIGNMENT

• Carry out a Segmentation based on the Buyers’ Preferred Price Slot and the
benefits the Buyers Sought from the Cars.