MARKET SEGMENTATION

Contents

Evolving Marketing Strategies What is Market Segmentation? Why segmentation? What are the requirements of Segmentation? Benefits & Limitations of Segmentation Segmenting Consumer Markets

- Geographic Segmentation

- Demographic Segmentation

- Psychographic Segmentation

- Benefit sought Segmentation

- Behavioral Segmentation

Evolving Marketing Strategies Mass Marketing :The term mass market refers to a large, undifferentiated

market of consumers with widely varied backgrounds. Products and services needed by almost every member of society are suited for the mass market. Such items as electric and gas utilities, soap, paper towels and gasoline, for example, can be advertised and sold to almost anyone, making them mass market goods

Mass Marketing – An attempt to appeal to an entire market with one basic marketing strategy

utilizing mass distribution and mass media. Also called undifferentiated marketing.

The appeal of mass marketing is in the potential for higher total profits. Companies that employ the system expect the larger profit to result from (1) expanded volume through lower prices and (2) reduced costs through economies of scale made possible by the increased volume.

Henry Ford applied the concept in the automobile industry. His Model T was conceived and marketed as a "universal" car—one that would meet the needs of all buyers.

Product Variety

After the mass marketing strategy another strategy with similar characteristics but overcoming its predecessor’s shortcomings came into existence. That is product variety strategy.

An attempt to appeal to the entire market with a huge variety of products produced in mass is made.

However, like Mass marketing in this case also the customers needs & wants are not taken into account while developing the product.

Target Marketing-

Is a market segmentation and market coverage strategy whereby a product is developed and marketed for a very well-defined, specific segment of the consumer population.

Target marketing is particularly effective for small companies with limited resources because it enables the company to achieve a strong market position in the specific market segment it serves without mass production, mass distribution, or mass advertising. It enables firms to capitalize on the respective serve market share

Requirements of Market Segments

In addition to having different needs, for segments to be practical they should be evaluated against the following criteria: Identifiable: the differentiating attributes of the

segments must be measurable so that they can be identified.

Accessible: the segments must be reachable through communication and distribution channels.

Measurable: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables.

Substantial: the segments should be sufficiently large to justify the resources required to target them.

Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes.

Durable: the segments should be relatively stable to minimize the cost of frequent changes.

Defining Marketing Segmentation

Market Segmentation

Market

Market Segment

Market Segmentation

People or organizations with needs or wants and the ability and

willingness to buy

A subgroup of people or organizations sharing one or more characteristics that

cause them to have similar product needs.

The process of dividing a market into meaningful, relatively similar,

identifiable segments or groups.

‘Market Segmentation’

Market Segmentation is the sub-dividing of customers into homogeneous sub-set of customers where any sub-set may conceivably selected as market target to be reached with distinct marketing mix.

- Philip Kotler

Market Segmentation is the process of splitting customers, or potential customers, in a market into different groups, or segments, within which customers share a similar level of interest in the same or comparable set of needs satisfied by a distinct marketing proposition.

Benefits and LimitationsBenefits:The Organisation gets to know its customers better.Provides guidelines for resource allocation.It helps focus the strategy of the organisation.

Limitations:Targeting multiple segments increases marketing costs.Segmentation can lead to proliferation of products.Narrowly segmenting a market can hamper the development of broad-brand equity.

Why Segmentation?

To develop marketing activities Increase marketing effectiveness Generate greater customer satisfaction Create savings To identify strategic opportunities and niches Allocation of marketing budget Adjustment of product to the market need To estimate the level of sales in the market To overcome competition effectively To develop effective marketing programmes To contribute towards achieving company goals

Segment Marketing Niches marketing Local Marketing Individuals Marketing

Levels Of Market Segmentation

1. SEGMENT MARKETING

Consists of a group of customers who share a similar set of needs and wants.

Identifiable Group with in a Market with Similar

• Wants• Purchasing Power• Geographical Location• Buying Attitudes

2. NICHE MARKETING

Concentrating  all marketing efforts on a small but specific and well defined segment of the population. Niches do not 'exist' but are 'created' by identifying needs, wants, and requirements that are being addressed poorly or not at all by other firms, and developing and delivering goods or services to satisfy them.

3. LOCAL MARKETING

Marketing programs tailored to the needs & wants of local customer groups in trading areas, neighborhoods , etc.

This trend is also called grass roots marketing.

4. INDIVIDUAL MARKETING

Ultimate segmentation – segments of 1 or customized marketing or one to one marketing.

Customerization – empower the consumers to design the product or service offering of their choice.

Bases for Segmentation

Usage Rate Usage Rate

Benefits Sought Benefits Sought

Psychographics Psychographics

Demographics Demographics

Geography Geography

Bases Used toSegment

ConsumerMarkets

Bases Used toSegment

ConsumerMarkets

Geographic Segmentation

When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions

Geographic Variables• Region• City or metro size• Density• Climate

Demographic Segmentation

Demographic segmentation is the most popular basis for dividing groups, primarily because consumer usage and wants or needs.

Demographic Variables• Age• Gender• Occupation• Family size• Education• Nationality• Religion• Income

Psychographic Segmentation

Grouping customers together based on social class, lifestyles and psychological characteristics

Psychographic Variables

• Hobbies Compulsory• TV viewing habits Outgoing

• Social activities Authoritarian • Club membership Ambitious

Lifestyle Personality

Benefits-Sought Segmentation

Markets can be segmented based on the benefits that consumers desire from using a specific product

Behavior/Usage Segmentation

Markets can be segmented by how often or how heavily consumers use a specific product

Behavioral Variables• Occasion• Benefits• User status• Usage rate• Loyalty status• Readiness stage• Attitude towards product

Market Segmentation

Differentiated Concentrated Undifferentiated

Differentiated Marketing An organization targets multiple market segments and develops

segment specific mixes

Concentrated Marketing When an organization concentrates its marketing efforts on a

smaller segment of a larger market

Undifferentiated Marketing An organization develops one strategy appropriate for all

members of the total market

Summary of Basic Methods

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