Introduction

Market segmentation and selectionis amarketing

strategywhich involves dividing a broadtarget
marketinto subsets ofconsumers,businesses,
orcountriesthat have, or are perceived to have,
common needs, interests, and priorities, and then
designing and implementing strategies to target
them.
Businesses may developproduct
differentiationstrategies, or anundifferentiated
approach, involving specific products orproduct
linesdepending on the specific demand and
attributes of the target segment.

Importance
From a high-level, the goal of a marketing strategy is
to identify a target market and develop a marketing
mix that will appeal to those potential customers.
Decisions regarding the ideal marketing mix can be
organized in terms of Price, Promotion, Product, and
Price. However, the goal is not to just come up with a
particular strategy, but rather to focus on providing
value to your key market segments.
segmentation is all about grouping your database
records based on some characteristic like
demographic information (e.g. age range) or
behavior (e.g. subscribe to newsletter ).

Approaches
Geographic segmentation:
Geographic segmentation is important and may
be considered the first step to international
marketing

Geographic criterianations, states, regions,

countries, cities, neighborhoods, or postal
codes
The geo-cluster approach combines demographic
data with geographic data to create a more
accurate or specific profile

Demographic segmentation
Based on variables such as age, sex, generation, religion,
occupation and education levelor according to perceived
benefits which a product or service may provide
Demographic segmentation divides markets into different
life stage groups and allows for messages to be tailored
accordingly
A variant of this approach known as firmographic or
feature based segmentation is commonly used
inbusiness-to-businessmarkets
Under this approach the target market is segmented
based on features such as company size (either in terms
of revenue or number of employees), industry sector or
location (country and/or region)

Behavioral segmentation
This segmentation divides consumers into groups according
to their knowledge of, attitude towards, usage rate,
response,loyalty status, and readiness stageto a product
Psychographic segmentation:
It is measured by studying the activities, interests, and
opinions (AIOs) of customers
It considers how people spend their leisure,and which
external influences they are most responsive to and
influenced by
Psychographics are very important to segmentation,
because psychographics identify the image target subject
are attempting to project


Behavioral segmentation
Divides consumers into groups according to their
knowledge of, attitude towards, usage rate,
response,loyalty status, and readiness stageto a
product.
Many marketers believe that behavior variables
are the best starting point for building market
segments.

Market Targeting
Market targeting involves assessing or evaluating the
goodness or badness, or soundness or unsoundness of
the segments, and then selecting the target market you
wish to pursue.

Undifferentiated Strategy- Rather than

subdividing segments, a marketer using this approach
will aim for the entire market.
He will essentially be focusing on what is similar across
consumers, rather than what is dissimilar.
This is not often used anymore simply because of the
magnitude of cultural diversity. The fact that peoples
needs are so dissimilar prevents this tactic from being
effective

Concentrated Strategy
- Here, a marketer has one or a few products in
marketing programs directed at one or a few
segments. Economies of scale help drive price
down.
Also, if the marketer chooses to go after a certain
segment, competition may choose not to go into
that segment because it then doesn't look as
lucrative.
This is risky because the marketer is putting all of
his eggs in one basket. If needs change, it may be
hard for him to redirect his efforts into another
area.

Differentiated Strategy
Using this strategy, a marketer will have a
number of different products and programs
aimed at a number of different segments.
This reduces risk. Sales and profits will be
higher.
This tactic assumes that all needs are
different. It tailors products to each individual
segment with differing needs. This limits
specialization, unlike concentrated and
undifferentiated strategy.

Product Positioning
Product positioning is the point in the
segmentation process where the marketer
creates the product offering in a way that hits the
consumers mind and separates the offering from
competition.
The marketer is trying to focus on attributes the
consumer considers to be very important.
There are two main types of positioning:
o Consumer Positioning
o Competitive Positioning

Consumer Positioning
-

The viewpoint taken by the company here is

"What needs are we trying to satisfy?
A good example of this would be toothpaste
companies.
Crest may choose to focus on whitening, while a
company like Colgate may choose to focus
heavily on cavity protection

Competitive Positioning

Using competitive positioning, a marketer tries

to distinguish himself from competition by
comparing himself to competition directly or
indirectly.
This can often be problematic because it gives
competition free advertising.
The consumer may even forget which company
is better if an ad discusses a comparison of two
companies.

Segmentation Process
Market Characteristics

Non Powered

Powered Walking

Powered Riding

Urban

10%

7%

3%

Suburban

8%

40%

6%

Rural

4%

7%

15%

In the above example, the company is in the lawn-care

product industry. They sell three different types of mowers
(non-powered, powered, and powered riding).
There are three different market segments (urban,
suburban, and rural).
The percentages reflect which consumers are using which
mowers the most.

Segmentation Process

In this scenario, it may seem more attractive to

go after the larger segments (suburban consumers
with powered walking mowers) However, this
segment may already be flooded with competition.
It may be more beneficial to target a small
segment of consumers, like urban consumers
using non-powered or powered walking mowers.
Many factors must be taken into consideration
when selecting a target market. The smallest
segment may be the most profitable and lucrative.

Advantages of segmentation

Identifying Customer Needs

Understanding CustomerBehavior
Customer retention
Have better communication
Increases profitability

Identifying Customer Needs

Needs-based segmentation is the best means by

which B-to-B companies can shift a strategy from
being product-oriented to marketing-oriented.
Its important for any company to continually
review what customers look for in their product or
service and respond by providing tailored
solutions to satisfy those needs.
if businesses can group customers according to
their requirements, they can be targeted with
tailored communications strategies.
voiced preferencesinsights obtained by
speaking with the customers themselves in an
unstructured manner, via detailed, one-on-one

Understanding CustomerBehavior

Segmenting customers based on their behavior is a half-way

house betweenfirmographicand needs-based segmentation.
While identifying customer desires is the ideal,behaviorcan
also be a usefulmeasure, providing important insights into
unseen requirements.
Customer retention
By using segmentation, Customer retention can be

encouraged through the life cycle of a customer.

In India, Titan is an example of products which are planned
through the life cycle of a customer. From fast track to Sonata
and the high range watches, Titan has them by price segment
as well as life cycle segment. Thus a watch is available for
any customer who enters a Titan showroom, whatever be his
age.

Increases Profitability
Segmentation increases competitiveness, brand
recall, brand equity, customer retention,
communications.
Thus if it is affecting so many factors of your
business, then definitely it affects the profitability
of the firm. Do you ever see people negotiating in
a Nike, Gucci orBMWshowrooms? You wont.
One of the USPs of these brand is their
segmentation. They are in fact targeting
segments which have no need of bargaining or
negotiation. Thus their profitability is high

Have better communication

One of the factors of marketing mix which is
absolutely dependent on STP is Promotions or
communications.
The communications of a company needs to be
spot on for its TARGET market.
Thus if you need a target market, you need
segmentation. Communication cannot be possible
without knowing your target market.
If you dont knowyour market segment, whatis
their demography,what is their psychology,
wherethey are from, then how can you form a
communication message.

Role of Market Segmentation on CRM

Customer relationship management, or CRM, is a

promotional tactic used in integrated marketing
and other types of consumer-focused marketing.
CRM programs use database management to
build long-term customer loyalty.
Marketers collect and store information on
customers so that they can personalize
promotions and advertisements.
Markets may be segmented according to a
number of criteria, including purchasing habits,
needs, lifestyle, age and interests.

Creating Market Segments

Marketing segments must be large enough to meet
the financial needs of the company and the product.
Segments may be chosen based on demographics,
the generation of the consumer or geological
location.
In most cases, business marketers have already
selected and grouped the products market
segments before the implementation of CRM.
Part of CRM is a secondary form of market
segmentation, with existing customers further
segmented so that post-purchase promotions may
be personalized.

CRM Database Management

CRM goes farther than initial segmentation and

target marketing because the marketer has more
information on the segments characteristics.
This information is collected as part of a
companys consumer transactions and sales
activities.
Some companies administer customer surveys
and store the results in their databases

Using CRM to Promote to Market Segments

CRM marketers take the information in the

databases and create promotions designed to
meet specific customer wants and needs.
Typical CRM promotions include customer loyalty
programs, personalized action between customer
service personnel and the customer, and the
ability to customize the product to suit the exact
needs of the customer.

Selection & Segmentation