MARKET SEGMENTATION

• CONCEPT AND DEFINITION The concept of market segment is based on the

fact that the market of commodities are not homogeneous but they are heterogeneous. Market represent a group of customer having common characteristics but two customer are never common in their nature, habits, hobbies income and purchasing techniques.

• According to Philip kotler , “ Market segmentation is sub-dividing a market into distinct and homogeneous subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct marketing mix.”

• Market Segmentation is a method of “dividing a market (Large) into smaller groupings of consumers or organisations in which each segment has a common characteristic such as needs or behaviour.”

Henry Ford epitomized this strategy when he offered the Model- T Ford in one colour , black.

LEVELS OF MARKET SEGMENTATION

1. SEGMENT MARKETING Consists of a group of customers who share a similar set of needs and wants.

Identifiable Group with in a Market with Similar

• Wants• Purchasing Power• Geographical Location• Buying Attitudes

FLEXIBLE MARKET OFFERING

• Even in segments 100 % needs are not same – consists of two parts

1.Naked Solution :- products and services that all members of the segment values.

2.Discretionary options :- that some segment members value. Each option might carry an additional charge.

Example: Automobile industry – basic model is same but for A.C , power steering, power window buyer

has to pay extra price. Delta Airlines offers all economy passengers a

seat and soft drinks. It charges economy passengers extra for alcoholic beverages.

Market Segments can be defined in many different ways. One way to carve up a market is to identify Preference segments

Suppose ice cream buyers are asked how much they value sweetness and creaminess as two product attributes. Three different patterns can emerge.

Homogeneous preference : – where all the consumer have roughly the same preferences.– We would predict that existing brand would be similar and cluster

around the middle of the scale in both sweetness and creaminess.

Diffused preference :– consumers vary greatly in their preferences

Clustered preference :

creaminess

sweetness

Homogeneous Preference -no natural segments -all buyers have same preference

creaminess

sweetness

Diffused Preference -no pattern (…or poor research) -take center position

creaminess

sweetness

Clustered Preference -natural segments -increases as number of competitors increases

2. NICHE MARKETING Group of customers seeking a distinctive mix of benefits who are ready to

pay extra premium. Niche = segment sub – segments

Eg. Washing detergents hard & gentle washes . Surf excel for tough stains ( hard on clothes) & Ezee from Godrej for delicate clothes.

--- Astha , Sanskar , Q TV – focus on religion & spiritualism. DISTINCT NEEDS PAY PREMIUM SPECIALIZATION LESS COMPETITION POTENTIAL

• Because niche products are fulfilling a particular specialist demand, we find that demand tends to be more price inelastic. This enables a firm selling niche products to generate a higher mark-up and profit margin – this can compensate for the lower volume.

• Niche products can be provided by multinational companies, but they also give a better chance for smaller, private firms to be able to compete – because there is less need for economies of scale and high output.

Examples

Consultants Business consultants often adopt a niche marketing strategy. They will specialize in providing advice in a particular area, often to a well-defined segment.For example, there is a sales training expert in America who teaches financial planners how to generate referrals from customer at the close of the selling process. Therefore, he specializes in one minor part of the sales process only.

Education Some non-traditional schools and other education providers could be considered niche marketers.For example, the Montessori school system (which can be found in some countries) focuses upon what is referred to as natural learning. This type of school system only appeals to a small proportion of parents, and the Montessori offering is virtually the only alternative for parents who do not want a structured/traditional education process for their kids.

Professional services

Some professional service providers will operate as niche marketers. In this category you would include medical specialists, legal firms, sophisticated accounting firms, various experts and/specialists in their field, and so on.These firms usually only provide advice/services on a very limited area of expertise, such as very precise medical conditions or a very narrow range of legal situations.

ROLLS ROYCE

3. LOCAL MARKETING• Marketing programs tailored to the needs & wants of local customer

groups in trading areas, neighborhoods , etc.• this trend is called grass roots marketing.

Ex. – Spiderman 3 was released in 5 different language in India including bhojpuri.

Chitle Pune sarees

Kashmiri silk

4. INDIVIDUAL MARKETING

• Ultimate segmentation – segments of 1 or customized marketing or one to one marketing.

• Customerization – empower the consumers to design the product or service offering of their choice.

• Ex. Paint companies have started doing this- Asian Paint , Nerolac , Berger Paints

• Arvind mills launched Ruff’n Tuff Jeans, branded ready – to – stitch

GEOGRAPHIC SEGMENTATION

Divide the market into different group based on :• Region – South India , North , Western Region, East• City – metro cities, cities with population more than 1 million• World• Density• Climate• States

Ex.- Mcdonalds globally, sell burgers aimed at local markets, for example, burgers are made from lamb in India rather than beef because of religious issues. In Mexico more chili sauce is added and so on.

ExamplesSeasonalSeasonal products, such as coats and winter gear and swimwear and beach attire, often are marketed to geographic segments. Winter gear is promoted for several months leading up to late fall in the Midwest and northern regions of the United States where harsh weather is common. Beach attire is often targeted year-round in California and much of Florida. In areas with distinct winter, spring, fall and summer seasons, swimwear normally is promoted for a few months, including late spring and the summer swimming season.

New TerritoryIn some situations, companies use geographic segmentation selectively to target new local territories or regions. Starbucks often distributes coupons for coffee drinks in certain regions when it opens several new stores. In this case, the company has a promotional objective of customer growth in a new market, but it may emphasize other goals, such as increased market share or higher profits, in more established markets.

DEMOGRAPHIC SEGMENTATION

As people age their needs and wants change, some organisations develop specific products aimed at particular age groups for example  nappies for babies, toys for children, clothes for teenagers and so on.   

Gender segmentation is commonly used within the cosmetics, clothing and magazine industry.

In the UK we have also seen the introduction of Maxim, (www.maxim-magazine.co.uk)  a male lifestyle magazine covering male fashion, films, cars, sports and technology. \

• • Income segmentation is another strategy used by

many organisations. Stores like Harrods, Harvey Nicohals are predominantly aimed at the affluent market. Daewoo aim their vehicles at price sensitive buyers who require a bundle of benefits for the price. In today's globally competitive environment brands are specifically developed and positioned within particular income segments inorder to maximise turnover.

• Products and services are also aimed at different lifecycle segments. Holidays are developed for families, the 18-30's singles, and for those in their 50's.

PSYCHOGRAPHIC SEGMENTATION

Psychographic segmentation is dividing your market based upon consumer personality traits, values, attitudes, interests, and lifestyles. Segmentation will allow you to better develop and market your products because there will be a more precise match between the product and each segment's needs and wants.

For example, some people really care about the environment, while other people don't. Some people are very fitness and health conscious while others are foodies. Some people take sports very seriously, while some just want to have some fun on the weekends. Psychographic segmentation occurs when you break your market down along these interests and attitudes so you can market the appropriate product to each segment of the market.

You are the president of an automobile company and decide to segment your market into consumers who are interested in luxury, consumers who are interested in practicality, and consumers who are interested in the environment. You focus your product design and marketing of luxury sedans on one segment, station wagons and SUVs on another segment, and your electric hybrids on the environmentally-conscious market segment.

You produce and distribute organic foods. You segment your market into consumers who purchase organic foods for the sake of the environment, consumers who purchase organic food for health reasons, and consumers who purchase organic foods because it's the latest thing. You direct your advertising of organic foods to appeal to the unique values of each of these segments.

• Lifestyle groups Yuppie Associations• Mobile• High valued house/flat• Good Salary• Young branded car. Third Agers Associations.• 50's• Retired early from profession.• Time to spare• Adventure Seekers

BEHAVIOURAL SEGMENTATION

OCCASIONS - Archies and Hallmark cards, Monaco at tea time.

BENEFITS – Shampoo for hair conditioning, cleaning , hair fall defence dandruff control

USER STATUS- light – medium – heavy user LOYALTY STATUS- hardcore loyal , split loyal-

loyal to 2-3 brand ,shifting loyal, switcher

Another segmentation approach often used by marketers is based on product or brand usage by consumers. Usage segmentation can take a number of directions. For example, the marketer may want to identify various segments of users for a particular product category or users of the company’s brand. In other cases, one may want to segment users into those who buy frequently versus those who only buy occasionally (either product or brand), or into those users who usually purchase just one brand versus those who switch from brand to brand. It may also be useful for the marketer to understand how segments arise based on different product usage situations. Ay usage segmentation approach needs to specify the relevant dimensions of interest.