Chapter 2

Consumer Analysis, Segmentation, and Strategy

Chapter 2 1
 Learning Objectives

Define and explain market segmentation, target markets,

and product differentiation.
Understand the criteria used for segmenting consumers.
Understand the role of market segmentation in making
marketing strategies.
Learn about the bases for segmenting consumer and
business-to-business markets.
Evaluate alternative approaches for pursuing segmentation
strategies, such as counter-segmentation.
Evaluate micro-targeting and mass customization.

Chapter 2 2
 What is Segmentation

A market segment is a group of customers within a

market who share a similar level of interest in the same,
or comparable, set of needs.

Market segmentation involves viewing a heterogeneous

market as a number of smaller homogeneous markets, in
response to differing preferences, attributable to the
desires of customers for more precise satisfactions of
their varying wants

Chapter 2 3
 Need for Segmentation
Segmentation analysis helps to achieve the following aims:
Direct promotional efforts to the most potentially profitable
segments of the market
Design a product line that meets the specific demands of the
market
Catch the major trends in a swiftly changing market and thus
take advantage of them
Create appeals that are most effective in advertising and thus
become more efficient
Choose advertising media that are more likely to be seen by
targeted segments
Correct the timing of advertising and promotion so that they
are used at times when selling resistance is least
Understand demographic market information and understand
customers better
Design effective and cost-efficient marketing strategies
Achieve accurate positioning of products with customers and
for effective competitive analysis
Achieve reduction of competition and establishing a niche

Chapter 2 4
 To be an effective target

A market segment must be:

Identifiable

Sizeable

Stable and growing

Reachable

Congruent with the marketers objectives and resources

Chapter 2 5
Chapter 2 6
 Bases of Segmentation

Measurable: Its size, purchasing power, and characteristics of the

segments should be measurable.
Substantial: The segment must be sufficiently large to provide
revenues and profits.
Accessible: The buyers in the segment must be reached through
appropriate promotional and distribution channels.
Differentiable: The segments should be conceptually
distinguishable and respond differently to different marketing
mixes.
Actionable: Effective programmes should be formulated for
attracting and serving the segments.

Chapter 2 7
 Bases of Segmentation

1. Geographic (physical location of the customer)

2. Demographic (population and its characteristics)

3. Psychographic or lifestyle segmentation

( Activities, Interests and Opinions - AIO)

1. Socio-cultural segmentation

2. Use- related /Profit-related segmentation

3. Hybrid segmentation

4. Benefit segmentation

5. Psychological segmentation

Chapter 2 8
Chapter 2 9
 Clustering Techniques

PRIZM: Potential Rating Index By Zip Markets (PRIZM) Modelin

United States classifies every household in terms of 66

demographic and behaviour types or segments

ACORN ( A Classification Of Residential Neighborhoods ): A geo-

demographic segmentation of the UKs population. It segments

consumer households into five categories, 17 groups, and 56

types.

Such data is not available for Indian households.

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Chapter 2 11
 Value and Lifesystles (VALS) Segments

Chapter 2 12
 Indian Market Segmentation

Chapter 2 13
 Future Trends

Microtargeting: Narrowing the segment size to the point of

customizing products and marketing programmes for specific
individuals. It involves the use of local and direct marketing data
mining techniques that involve predictive market segmentation.

Mass customization: 3D printing makes it as cheap to create

single items as it is to produce thousands and thus undermines
economies of scale. It may have as profound an impact on the
world as the coming of the factory did. (The Economist, 2011).

Co-creating: The customer is no longer isolated from the

manufacturing process, but an active participant in the design or
manufacturing process.

Chapter 2 14
 Behavioral Targeting

Sending consumers personalized and prompt offers

and promotional messages designed to reach the right

consumers and deliver to them highly relevant

messages at the right time and more accurately than

when using conventional segmentation techniques

Chapter 2 15
 Tracking Online Navigation Includes:

Websites visited

Engagement on sites

Lifestyles and personalities

Purchases, almost purchases, returns, exchanges

Chapter 2 16
 Predictive Analytics

Measures that predict consumers future purchases on

the bases of past buying information and other data,

and also evaluate the impact of personalized

promotions stemming from the predictions.

Chapter 2 17
Chapter 2 18