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Market segmentation

Unit 2 (part2)

Topics to be covered

Market segmentation Non segmented markets Analysis of business markets Analysis of consumer markets

Market Segmentation
Market Segmentation is the sub-dividing of customers into homogenous sub-set of customers where any sub-set may conceivably selected as market target to be reached with distinct Marketing Mix Philip Kotler

Segmentation is essentially the identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behaviour. The world is made up of billions of buyers with their own sets of needs and behaviour. Segmentation aims to match groups of purchasers with the same set of needs and buyer behaviour. Such a group is known as a 'segment'.


Segmentation is the process of dividing the market of a product or service in smaller groups of customers. Segmentation is the process of grouping people or organizations within a market according to similar needs, characteristics, or behaviors. The customer in one group should Buy the product for the same purpose. Use the product in the same way. Buy the product in same way's Customers of one segment should be different from customers of any other segment in one or more of the above parameters. Segmentation of a market makes sense only when the company has to design a separate value proposition for each segment.

Market segment is a portion of a larger market whose needs differ somewhat from the larger market. Market segmentation involves four steps:
Identifying product related need sets Grouping customers with similar needs

Selecting an attractive segment to serve

Describing each group

Benefits of segmentation

Helps in achieving better competitive position Effective positioning of brands Minimize overlapping Identify gaps in market which represent new product opportunities Identify potential new buyers for the product

Ex :1. Sportspersons buy Nike shoes to enhance their performance, whereas the same shoes are used as casual shoes by some other people. 2. People drive their cars in different ways. Some are rough" drivers, while others take it easy on the road. 3. The same grocery items are bought both at neighborhood stores and at upscale stores.

Criteria for Segmenting

It is possible to measure. It has to be large enough to earn profit. It has to be stable enough that it does not vanish after some time. It is possible to reached to potential customer via organization's promotion and distribution channel. It is internally homogeneous (potential customers in the same segment prefer the same product qualities). It is externally heterogeneous that is Heterogeneity between segments (potential customers from different segments have basically different quality preferences). It responds similarly to a market stimulus. It can be cost-efficiently reached by market intervention. useful in deciding on marketing mix

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

NON SEGMENTED MARKETS Very few products or services can satisfy all customers in a market. Not all customers want to buy the same product. Indian market fed it with one offering for decades Ex :- Ambassador, Fiat and later Maruthi 800 Now a new car launched in the Indian market once a month, sometimes even by the same company.

Customer Value Proposition

Segmentation refers to the process of identifying clusters of customers who desire the same value proposition. Customer Value Proposition is a unique mix of product and service attributes, customer relations and corporate image that a company offers. Customer Value Proposition defines how the organization will differentiate itself from competitors to attract, retain and deepen relationships with target customers.

The value proposition helps an organization connect its internal processes to improve outcomes with its customers. An effective process of segmentation should result in a different set of internal processes for each segment, Because only a unique set of internal processes will create a unique value proposition for the customer. These unique set of internal processes will necessitate creation of separate organizations to serve each of the segments.

Selecting Bases for Segmenting Consumer Markets

A company can segment a market in many ways. Segmentation variables are the criteria that a company uses to segment its market. The criteria that a company chooses should be good predictors of differences in customer needs and the way they buy. Three important segmentation variables to segment a consumer market are; Behavioural, Psychographic, and Profile variables.

Characteristics of an effective segmentation

Measurability Accessibility Substantiality Defensibility Durability competitiveness

Life-cycle stage: Dividing a market into different groups based on which stage in the life-cycle, presented in the table below, reflects the fact that people change the goods and services they want and need over their lifetime. Life-cycle stages

Bachelor Stage Newly Married Couples Full Nest I Full Nest II Full Nest III Empty Nest I Empty Nest II Solitary Survivor I Solitary Survivor II

young, single people not living at home young, no children youngest child under six youngest child six or over older married couples with dependent children older married couples, no children living with them

older married couples, retired, no children living at home

in labour force retired

Demographic segmentation examples

Geographic segmentation

Psychographic segmentation

Behavioral segmentation examples

SRI VALS - Life Style Segmentation

SRI VALS - Life Style Segmentation

Innovator. These consumers are on the leading edge of change, have the highest incomes, and such high selfesteem and abundant resources that they can indulge in any or all self-orientations. They are located above the rectangle. Image is important to them as an expression of taste, independence, and character. Their consumer choices are directed toward the "finer things in life." Thinkers. These consumers are the high-resource group of those who are motivated by ideals. They are mature, responsible, well-educated professionals. Their leisure activities center on their homes, but they are well informed about what goes on in the world and are open to new ideas and social change. They have high incomes but are practical consumers and rational decision makers.

Believers. These consumers are the low-resource group of those who are motivated by ideals. They are conservative and predictable consumers who favor American products and established brands. Their lives are centered on family, mosque, community, and the nation. They have modest incomes. Achievers. These consumers are the high-resource group of those who are motivated by achievement. They are successful work-oriented people who get their satisfaction from their jobs and families. They are politically conservative and respect authority and the status quo. They favor established products and services that show off their success to their peers. Strivers. These consumers are the low-resource group of those who are motivated by achievements. They have values very similar to achievers but have fewer economic, social, and psychological resources. Style is extremely important to them as they strive to emulate people they admire.

Experiencers. These consumers are the high-resource group of those who are motivated by self-expression. They are the youngest of all the segments, with a median age of 25. They have a lot of energy, which they pour into physical exercise and social activities. They are avid consumers, spending heavily on clothing, fast-foods, music, and other youthful favorites, with particular emphasis on new products and services. Makers. These consumers are the low-resource group of those who are motivated by self-expression. They are practical people who value self-sufficiency. They are focused on the familiar-family, work, and physical recreation-and have little interest in the broader world. As consumers, they appreciate practical and functional products. Survivors. These consumers have the lowest incomes. They have too few resources to be included in any consumer self-orientation and are thus located below the rectangle. They are the oldest of all the segments, with a

Theyre mature, satisfied, and reflective people motivated by ideals and who value order, knowledge, and responsibility. They seek durability, functionality, and value in products. Here were considering Mont-Blanc

Theyre the young enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment, and socializing.

Theyre successful, goal oriented people who focus on career and family. They favour premium products that demonstrate success to their peers. In this segment we can consider most of the premium timeless luxury watches, such as Rolex, TAG Heuer, and Omega. Neil Armstrong gave Omega speed master the ultimate endorsement when he wore it on his historic moon walk in 1969.

Theyre conservative, conventional, and traditional people with concrete beliefs. They prefer familiar, Indian made products and are loyal to established brands. Here we consider Bisleri. As one of the worlds most trusted brands. Bisleri is leading the way in bringing about positive change in our daily lives. They believe in being a part of a meaningful movement called the Aqua Green Revolution

Theyre trendy fun loving people who are resource constrained. They favour stylish products that emulate the purchases of those with greater material wealth. They favour stylish products that emulate the purchases of those with greater material wealth

Theyre practical, down to earth, self sufficient people who like to work with their hands. They seek Indian made products with a practical or functional purpose.


Theyre elderly, passive people concerned about change and loyal to their favourite brands. While to the consumers it's a beacon of faith and trust, competitors look upon them as an example of marketing brilliance.