Market Segmentation

What is a market segment?

Why is it important?
What is a “Market
Segment”?
 Set of potential customers
 Who have similar needs
 Who reference each other when
buying
 Are alike in the way they:
 Perceive value
 View products and services

 Purchase products and services

Why Define a Market Segment?
 Easier to understand customer
needs
 Focus “whole solution” to a
narrower set of customer needs
 Easier to become a leader in a
smaller market (Big fish in small
pond)
 More effective use of marketing
dollars
 Generally more profitable
 Market Segmentation

“Market segmentation consists of taking the total

heterogeneous market for a product and dividing it into
several sub-market or segments, each of which tends to
be homogeneous in full significant aspects.”
- William J Stanton

“ Whenever a market for a product or service consists of

two or more buyers, the market is capable of being
segmented, that is divided into meaningful buyer
groups. The purpose of segmentation is to determine
differences among buyers which may be consequential
in choosing away then or marketing to them.”
- Philip Kotler
 Markets: Geographic
Variables
Pacific, Mountain, West North Central,
West South Central, East North
Region Central, East South Central, South
Atlantic, Middle Atlantic, New England
Under 4,999; 5,000-19,999;
City or Metro Size 20,000-49,999 . . .
1,000,000-3,999,999;
4,000,000 and over
Density Urban, rural, suburban

Climate Northern, southern, tropical

Markets: Demographic
Variables
Age

Gender

Occupation

Family Size

Education

Nationality

Religion

Income

Ethnicity
Markets: Psychographic
Variables
Lifestyle Personality

Hobbies
Compulsive
TV viewing habits
Outgoing
Social Activities
Authoritarian
Club Memberships
Ambitious
Vacation Preferences
 Markets: Usage Variables

Occasions Regular occasion, special occasion

Benefits Quality, service, economy, speed
Nonuser, ex-user, potential,
User status
first-time, regular
Usage rate Light user, medium user,
heavy user
Loyalty statusNone, medium, strong, absolute
Buyer-
Unaware, aware, informed,
readiness
stage interested, intends to buy
Attitude Enthusiastic, positive,
toward indifferent,
product negative, hostile
 Strategic Segmentation
• different marketing strategies
Differentiated for multiple segments
Marketing • increased penetration into each
segment
• higher sales and higher costs

Undifferentiated • market aggregation

Marketing • one strategy for entire market
/ Mass Marketing • opposite of segmentation

•target a small market

Concentrated •go after a large share
Marketing •small firm survival strategy
Requirements to Segment:

Sizeable (substantial in Text)

in terms of dollars

Identifiable (measurable plus differentiable in Text)

surrogate variables exist

Reachable (accessible plus actionable in Text)

by a marketing strategy

Stability
avoidance of fads
Importance Of Market
Segmentation

 Adjustment of Product & Marketing

Appeals
 Better positions to spot marketing
opportunities
 Allocation of marketing budget
 Making the competition effectively
 Effective marketing programme
 Evaluation of marketing activities
 Increase in sales volume