Market Segmentation

The process of dividing a

potential market into
distinct subsets of
consumers and selecting
one or more segments as
a target market to be
reached with a distinct
marketing mix.

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Three Phases of Marketing

Strategy
Phase 3
Product/Brand Positioning

Phase 2
Target Market and Marketing Mix Selection

Phase 1
Market Segmentation

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Segmentation Studies
Discover the needs and wants of
groups of consumers to develop
specialized products to satisfy group
needs
Used to identify the most appropriate
media for advertising

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Bases for Segmentation

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Bases for Segmentation

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Geographic Segmentation
Region
North, East, West, South
City Size
Metros, Tier 1, Tier 2 Tier 3, Tier 4 towns
Density of area
Urban, suburban, rural
Climate
Temperate, hot, humid, rainy
Demographic Segmentation
Age
Under 12, 12-17, 18-34, 35-49, 50-64
Sex
Male, female
Marital status
Single, married, divorced, living together, widowed
Income
Rs per month: under 10000, 10001-25000, 25001-35000,
35001-50000, 50001-75000; 75000 and above
Education
Some high school, high school graduate, some college,
college graduate, postgraduate
Govt. Service, Homemaker, Retired, Self employed
Occupation
professional, Businessperson, Student

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SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES

Psychological Segmentation
Needs-motivation
Shelter, safety, security, affection, sense of self-worth
Personality
Extroverts, novelty seeker, aggressives, innovators
Perception
Low-risk, moderate-risk, high-risk
Learning-involvement
Low-involvement, high-involvement
Attitudes
Positive attitude, negative attitude
Psychographic
(Lifestyle) Segmentation
Economy-minded, couch potatoes, outdoors enthusiasts,
status seekers
Sociocultural Segmentation
Cultures
American, Italian, Chinese, Mexican, French, Pakistani
Religion
Hindu, Catholic, Jewish, Muslim, Sikh
Subcultures (Race/ethnic)
African American, Caucasian, Asian, Hispanic
Social class
Lower, middle, upper
Family life cycle
Bachelors, young married, full nesters, empty nesters

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SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES

Use-Related Segmentation
Usage rate
Heavy users, medium users, light users, non users
Awareness status
Unaware, aware, interested, enthusiastic
Brand loyalty
None, some, strong
Use-Situation Segmentation
Time
Leisure, work, rush, morning, night
Objective
Personal, gift, snack, fun, achievement
Location
Home, work, friends home, in-store
Person
Self, family members, friends, boss, peers
Benefit Segmentation
Convenience, social acceptance, long lasting, economy,
value-for-the-money
Hybrid Segmentation
Demographic/
Combination of demographic and psychographic profiles
Psychographics
of consumer segments profiles
SRI VALSTM
Innovators, Thinkers, Believer, Achievers, Strivers,
Experiencer, Makers, Survivors

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Social Class
Status (social class) is usually measured as a
combination of several demographic variables, such
as education, occupation, and income.
Indian SEC system based on education and
number of consumer durables owned (out of a list of
11 items ranging from cars to agricultural land to
AC)
Social class implies a hierarchy whereby individuals
in the same class generally have the same degree of
status, although members of other classes have
either higher or lower status.
Studies have shown that consumers in different social
classes vary in terms of values, product preferences, and
buying habits
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Different Psychological Segments:

Two High-End Watches

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Psychographic Segmentation
Also known as Lifestyle Analysis
Psychographic variables include
attitudes, interests, and opinions
(AIOs)

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Excerpts from AIO Inventory

Instructions: Please read each statement and place an x in the box that best indicates how
strongly you agree or disagree with the statement.

I feel that my life is moving faster and faster,

sometimes just too fast.

Agree
Completely

Disagree
Completely

[1] [2] [3] [4] [5] [6] [7]

If I could consider the pluses and minuses,

technology has been good for me.
[1] [2] [3] [4] [5] [6] [7]

I find that I have to pull myself away from e-mail.

Given my lifestyle, I have more of a shortage of
time than money.
I like the benefits of the Internet, but I often dont
have the time to take advantage of them.

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

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Psychographic Statements:
Examples
Vacation Travel attitudes

On my vacations, I prefer traveling to places Ive never been

Concerns about security issues have made me less likely to travel
I love doing research on a location before I go on vacation
When I learn about a great vacation, I typically recommend it to
people
I frequently choose active vacations with lots to do
Im happy to do very little, if any, sightseeing on my vacations
I am willing to pay more for a flight in order to travel on my favorite
airline
Group tours are fun and a good way to meet people
People often ask my advice when it comes to vacation travel
The internet is not a secure way to book travel
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Psychographic Statements:
Examples
Food and Nutrition / Eating Out

I try to eat healthy these day and pay attention to my nutrition

During a given week, I end up eating out frequently
I barely pay attention to prices when the food offered is healthy
and fresh
I want to try out new cuisines / dishes each time I eat out
While dining out with family, I take care that I choose a
restaurant which offers healthy food alternatives
When by myself, I tend to eat junk food more
Frozen dinners are a convenient alternative for a meal
I am a creature of habit I stick to the food I know I like
I prefer cooking with fresh food rather than canned or frozen
food
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While demographics determine customer

needs for products and ability to buy
them, psychographics explain
purchase decisions and the choices
made within the buying options.

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Use-Related Segmentation
Rate of Usage
Heavy vs. Light

Awareness Status
Aware vs. Unaware

Brand Loyalty
Brand Loyal vs. Brand Switchers

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Usage-Situation Segmentation
Segmenting on the basis of special
occasions or situations
Example Statements:
Whenever our daughter gets a raise, we always
take her out to dinner.
When Im away on business, I try to stay at a
Ginger hotel.
I always buy my wife flowers on Valentines Day.

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Benefit Segmentation
Segmenting on the basis of the most
important and meaningful benefit

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Hybrid Segmentation
Approaches
Use a combination of several segmentation
bases to create rich and comprehensive
profiles of particular consumer segments
Psychographic-Demographic Profiles
Geodemographic Segmentation
SRI Consultings VALS

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VALS an acronym for Value

and Lifestyles
Major groupings are defined in terms of three
primary motivations:
the ideals motivated (those consumer segments
are guided by knowledge and principles);
the achievement motivated (these consumer
segments are looking for products and services
that demonstrate success to their peers),
the self expression motivated (consumer
segments that desire social or physical activity,
variety and risk)

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VALS segments
Innovators High Resources, High Innovation
Successful, sophisticated, take charge people, with high self esteem.
They have abundant resources and exhibit all 3 qualities in varying
degrees. They are change leaders and most receptive to new ideas &
technologies. Purchases reflect cultivated taste.

Thinkers
Motivated by ideals, high resources
Mature, satisfied, comfortable, reflective. Well educated and actively
seek out information in the decision making process. Favour durability,
functionality and value in products.

Believers
Motivated by ideals, low resources
Strongly traditional, respect rules and authority. Fundamentally
conservative, slow to change and technology averse. Choose familiar
products and established brands.
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VALS segments
Achievers
Motivated by achievement, high resources
Goal oriented lifestyles that center on family and career. They avoid
situations that encourage high degree of stimulation or change. Prefer

premium products that demonstrate success to their peers

Strivers
Motivated by achievement, low resources
Trendy, fun loving. Have little discretionary income, have narrow
interests. Favour stylish products that emulate purchases of people with
greater wealth.

Experiencers
Motivated by Self Expression, High resources
Appreciate the unconventional. Active, impulsive, seek stimulation from
what is new, offbeat and risky. Spend high proportion of income on
fashion, socializing and entertainment.
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VALS segments
Makers
Motivated by Self Expression, Low resources
Value practicality and self sufficiency. Choose hands on constructive
activities, spend leisure time with family and close friends. Prefer value
to luxury and buy basic products.

Survivors Low Resources, Low Innovation

Lead narrowly foucssed lives. They have fewest resources, do not
exhibit a primary motivation and feel powerless. Concerned about safety
and security and tend to be brand loyal and buy discounted
merchandise

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The VALS system reveals a kind of continuum

in terms of resources and innovation

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Criteria for Effective Targeting of

Market Segments

IDENTIFIABLE: a marketer must be able to identify common or

shared characteristics for people within segments
STABLE: preferable segments are those relatively stable in terms of
demographic & psychological factors and needs & that are likely to
grow larger over time. Eg. Developing products/services catering to
a teenage fad may not be worthwhile as it may wane by the time the
offering is ready
SIZEABLE: segment must consist of sufficient number of people to
warrant tailoring a product or promotional campaign to its specific
needs
ACCESSIBLE: marketers must be able to reach the market
segments they want to target in an economical way
CONGRUENT WITH A COMPANYS RESOURCES AND
OBJECTIVES
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Implementing Segmentation
Strategies
Firms can pursue a concentrated marketing strategy
(one segment) or a differentiated marketing strategy
(several segments with individual marketing mixes)
In certain instances, they might use a
countersegmentation strategy
Sometimes companies find that it is beneficial to recombine
some segments into a new single segment that could be
targeted with an individually tailored product or promotional
campaign

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