Market Segmentation

Principle of segmentation Basis and types of segmentation of

product and service sector segments in detail

According to Philip Kotler, “Market segmentation is the sub dividing of market into homogenous subsection may conceivably be selected as a market target to be reached with a distinct marketing mix.

Efficient use of marketing recourses Better understanding of customer

needs Better understanding of the

competitive situation Accurate measurement of goals and

performance

Geographic segmentation Demographic segmentation Economic Segmentation Pshyographic segmentation Buyer behaviour segmentation Volume segmentation Benefit segmentation

Segment selection = f(Value, Cost) The value (sales volume) of a

segment as a marketing choice is a function of four other factors

Value=f(U, F,C, D)

The tourism market can be segmented by using variables like•Age group•Number of trips taken per annum/season•Income and education•Purpose of the trip

Characterestics Travelling on

business(demographic segmentation)

Visiting clients within a defined area around the hotel( geographic segmentation)

Willing to pay a certain daily room rate(user response)

It can be segmented on the basis of 1.Geographical areas2.Product related factors3.Size of the customer, and4.Type of buying situation

Services Market Agriculture forestry and fishing Manufacturing industries Transportation, communication and

other public utilities. Construction Mining and quarrying

• Customer size• Purchasing methods and policies• Geographical location• Kind of organisation

As competition intensifies organisations should differentiate their products meaningfully to customers.

In developed economies growth is slowing in industries such as banking, insurance, hospitality and education.

A market niche that may seem narrow to offer sufficient sales represents a substancial market when viewed globally.

Competive strategy may take different routes

Strategic marketing means STP marketing i.e. segmenting, targeting & positioning the product/ services for gaining operational efficiency.

In marketing terms, focus means providing a relatively narrow product mix for a particular market segment- a group of buyers who share common characteristics, needs purchasing behaviour or consumption patterns.

Market focus is the extent, to which a firm serves few or many markets, whereas service focus describes the extent to which a firm offers few or many services.

A fully focused organization provides a very limited range of services to a narrow & specific market segment.

Finally, many service providers fall into the unfocused category because they try to serve broad markets & provide a wide range of services.

As you aware focusing requires a company to identify the market segment that it can serve best with the services it offers.

Firms that are in tune with customer requirements may choose to employ a needs-based segmentation approach, focusing on those customers whom research shows to value specific attributes.

A strategy of mass customisation offering a service with some individualized product elements to a large number of customers at relatively low price-may be achieved by offering a standardized core product but tailoring supplementary service elements to fit the requirements of individual buyers.

A market segment is composed of a group of buyers who share common characteristics, needs, purchasing behavior, or consumption patterns.

Effective segmentation should group buyers into segments in ways that result in as much similarity as possible on the relevant characteristics within each segment.

A target segment is one that a firm has selected from among those in the broader market & may be defined on the basis of several variables.

An important marketing issue for any business is to accept that some market segments offer better opportunities than others do.

Target segments should be selected not only on the basis of their sales & profit potential but also with reference to the firm’s ability to match or exceed competing offerings directed at the same segment.

To select target segments & to design effective positioning strategies, value of current & prospective customers within different market segments is most important.

A company, therefore has to decide which segments of the market constitute its target audience.

It concentrates on the knowing, understanding & meeting the requirements of those segments of the market only. Marketing personnel call this “Niche marketing.”

The segmentation of the total market is based on several factors like Income of the household, the age group of consumers, Level of education, Size of the City or town of their residence, climate of the place etc.

In deciding the range of products & services, a company keeps in mind the requirements of the customers who constitute their target group.

They need to develop products to meet the expectations of their target group, promote these to the same target group in a manner that will specially appeal to them.

The understanding of market segments will be useful & necessary to understand the expectations of different segments.

Defence versus Offense

Using Research to Develop a product/Service Concept for a specific segment

1. Understand potential customers2. Pay proper attention to particular

areas3. Formulate marketing programmes4. Select channels of Distribution5. Understand competition6. Use marketing resources efficiently7. Design marketing mix- product,

price, place & promotion

Market Segmentation User characteristics: These may vary from

one person to another, reflecting demographic & psychographic characteristics.

Techno graphics: A term recently trademarked by technology consulting firm Forester Research- that group’s customer according to their willingness & ability to use the latest technology.

User behaviour relates to how a product is purchased, delivered & used.

Among such variables are: When & where purchase and consumption

takes place. The quantities consumed Frequency & Purpose of use Occasions under which consumption takes

place Availability of alternate delivery systems

Dr. S. Shajahan BFSc., MBA, Ph.D., is a  Associate Professor & Founder Head-Accelerated Learning Centre of IIM Shillong, Founder co-ordinator, CRM Today Inc. ,India Chapter .

…working as a strategic marketing, CRM, Retailing  &  Branding consultant of  several corporate

houses since 1997.

He has Written 12 books and published 125 research papers of national and international repute. Most of his books are listed as text book/ reference books for the MBA programme of Indian and overseas Universities.

His professional life divides between teaching, writing and consultancy. Dr.Shajahan has keen interest in academic research and UGC has awarded fellowship for his research work.

Dr.Shajahan won several awards and citations . This includes listing by American Biographical Society, USA as the successful academicians from Asia in their millennium Directory of Distinguished Leadership in 2000 for publishing the maximum articles/papers, Honoured by Indian Society for Training and Development(ISTD) , New Delhi as Title of the year award for his book International Business Text and cases in February 2009, Enrolled as Resource person for SPSS , USA

And panel consultant / Associate Member, Subcommittee on Education and Management(Lot-9) of European Union/ADE Berlin since 2005,MBA Examination paper setter and Inspection commission member for affiliation of new courses for half a dozen universities in India. He is also reviewer of Journal of Asian case research from National university of Singapore

Dr.Shajahan has devised certificate ( CRM) and

Diploma programmes( SERM) and associated modules, lesson and cases for ALC ,IIM Shillong ,Indian Institute of Plantation management Bangalore, ICFAI University Hyderabad , University of Madras MBA-DLP and IGNOU since 2000.He can be contacted: drss@iimshillong.in /shaangrila@gmail.com

blog: www.alciims.blogspot.com andweb link:

http://www.iimshillong.in/academics/profile-shajahan.asp

1.KOTLER, PHILIP, Marketing management, 13th edition, Pearson Education 20082.S.SHAJAHAN, Applied cases in MarketingPRIMUS books, NEW DELHI 20093.S.SHAJAHAN, Strategic Marketing-Text &Cases under IT enabled environment in Indian perspective,VIVA books, NEW DELHI 20094.S.SHAJAHAN, Services Marketing- Text & cases, 2nd Edition Himalaya Publishing House(P) LTD 2007