Market Segmentation

Introduction
• A company cannot service entire market
• It needs to identify market it can serve
effectively
• Levels of segmentation, methods of
segmentation, segmentation pattern etc need
to be examined properly.
• The aim is to distinguish market segments,
target one or more markets and direct
marketing effort accordingly.
 Levels of market segmentation
• Mass marketing
• Mass production, mass distribution and mass
promotion of one product to all buyers. Lower price

• Micromarketing
• Segments
• Niche
• Local Areas
• Individuals
 Segments
• Customers forming a segment have similar set
of wants. Young, Middle Income buyers
etcetera.
• Product fine tuned for target customers at appropriate
price
• Suitable distribution and communication channel can
be designed
• It can compare with competitors on defined
parameters specific to the segment
 Niche Marketing
• It is a subgroup within a segment with distinct
wants. An attractive niche has following
features.
• Distinct set of needs
• They will even pay premium if distinct demands are
met
• The niche is not likely to attract competitors
• Niche gains certain economies through specialization
• It has size profit and growth potential

Examples:- Organic Foods, High end coffee, Religious channels

 Other Micro-markets
• Local Area Marketing:-
• Tailored to the needs and wants of local customer
group. (Props and costumes for bollywood, Universities
)
• Individual Customer Marketing:-
• One to one marketing
• Individually customized- Tailors, cobblers etc
• Mass customization- Shampoo in Sachet
• Choice board- Paint companies
• Customerization- Open Software programs, SAP
 Patterns of Market Segmentation
• Homogeneous:-
• Where all customers have roughly similar preferences.
Fruits, vegetables

• Diffused:-
• Preferences are scattered and usually the first one to enter
the segment takes market share.

• Clustered Preferences:-
• Preferences are usually clustered in groups with each group
having slightly different taste. Cater to largest cluster or one
product for each cluster.
 Market Segmentation procedure-
Need based by Roger Best
1. Need Based segmentation-
a) Group customers based on similar needs which solves
similar problem
2. Segment Identification-
a) Identify the demography, lifestyle, user behavior that makes
the group distinct
3. Segment Attractiveness-
a) Use attractiveness criteria viz market growth, competitive
intensity and market access to determine attractiveness.
4. Segment Profitability-
a) Determine Segment Profitability
 Market Segmentation procedure-
Need based by Roger Best
5. Segment Positioning-
a) For each segment create a “value proposition strategy” and
product price strategy based on segment needs and
attractiveness

6. Segment Acid Test-

b) Create storyboard to test the attractiveness of each of each
segment’s positioning strategy

7. Marketing mix strategy-

c) Expand the segment position strategy to include marketing
mix of product, price, place and promotion.
 Not all segmentation are useful-
Effective Segmentation
• Effective Segmentation should be:-
• Measurable
• Substantial
• Accessible
• Differentiable
• Actionable
 Segmentation variable of consumer
and Business Markets
• Geographic Segmentation
• Demographic Segmentation-
• Age and Life Cycle – Ford Mustang
• Life Stage- Marriage, divorce, retirement
• Gender
• Income
• Generation- Concept of Cohorts
• Social Class
• Continues…….
 Segmentation variable of consumer
and Business Markets
• Psychographic Segmentation:-
• Lifestyle- Attitude, interest and activities
• Personality- features, services and images
• Values- Deeper than behavior or attitude. Determines
consumer choices over long term
 Segmentation variable of consumer
and Business Markets
• Behavioral Segmentation- On the basis of knowledge
of, attitude towards, uses of or response to a product:-
• Occasions
• Benefits- Road warriors, Generation F, True Blues, Home Bodies
and price shoppers
• User Status- Ex user, current user, potential users, first time users,
regular users
• Usage rate- Heavy, medium, light
• Loyalty Status- Hardcore, Split, Shifting loyalty, Switchers
• Buyer Readiness- Awareness, Informed, interested, desire to buy
and intended to buy
• Attitude- Enthusiastic, positive, indifferent, negative and hostile