SEGMENTATION

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 SEGMENTATION
Markets are not homogeneous.
A company cannot connect with all customers
in large, broad, or diverse markets.
Consumers vary on many dimensions and
often can be grouped according to one or more
characteristics.
A company needs to identify which market
segments it can serve effectively.
Such decisions require a keen understanding of
consumer behavior and careful strategic
thinking.
Marketers some times mistakenly pursue the
same market segment as many other firms and
overlook some potentially more lucrative
segments.
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 Who is our Consumer ?

Is central to the marketing task.

If you think you have something for
every one, then a Mass Market
strategy is appropriate.
If your product satisfies the masses
then feed it to them.
If not you must choose a segment or
segments of the market to target.

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 Who is our Consumer ?

Segments are homogeneous groups of

similar consumers with similar needs and
desires.
Coca-Cola uses a mass market approach to
get everyone drinking the “real thing”.

Diet Coke is not for everyone. It is for calorie

conscious consumers. It appeals to a special
segments of the soft drink market.

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 Mass Marketing
In mass marketing the seller engages in mass production, mass
distribution, and mass promotion of one product for all buyers.

The argument is that it creates the largest potential market,

which leads to the lowest costs, which in turn can lead to lower
prices or higher margins.

However many critics point to the increasing splintering of the

market, which makes mass marketing more difficult.

The proliferation of advertising media and distribution channels is

making it difficult and increasingly expensive to reach a mass
audience. Some claims mass marketing is dying.

Most companies are turning to micromarketing at one of four

levels: Segments, niches, local areas & individuals

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 Segmentation

Segmentations of the market

serves the following functions:

1. To identify segments large

enough to serve profitably

2. To identify segments that can

be efficiently reached by
marketing efforts

3. To help develop marketing

programs

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 Segmentation

The marketer does not create the segments;

the marketer’s task is to identify the segments
and decide which one to target.
Segment marketing offers key benefits over
mass marketing.
The company can presumably better design,
price, disclose and deliver the product or
service to satisfy the target market.
The company also can fine tune the marketing
program and activities to better reflect
competitors’ marketing.

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 SEGMENTATION

By having a definite segment in

mind, you can effectively aim &
effectively execute your marketing
activities to yield the most sales
and profits.
Without a target, you risk wasting
marketing rupees on disinterested
people.

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 SEGMENTATION

Segmentation by Preference: 3 patterns

1. Homogenous preference- A market where all the

consumers have the same preferences

2. Diffused preferences- when the preferences are scattered

throughout the space, indicating that the consumers vary
greatly in their preferences.

3. Cluster preference- distinct preference clusters, called

natural segments

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 SEGMENTATION

Niche Marketing
A Niche is a more narrowly defined customers
group seeking a distinctive mix of benefits.

Marketers usually identify niches by dividing

a segment into sub segments.
E.g. “Ezee”, the liquid detergent (Godrej) for
woolen clothes. “Crack”, “Itchguard” (Paras)
Niche customers willingly pay a premium.

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 SEGMENTATION

Local Marketing
Target marketing is leading to marketing
programs tailored to the needs and
wants of local customer groups.
E.g. Many banks have NRI branches in
Kerala

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Four major segmentation variables

1. Geographic
2. Demographic
3. Psychographic
4. Behavioral

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Four major segmentation variables

Geographic segmentation, divides the

market into different geographical units

Nations: India, China, Russia, Brazil

State: Maharashtra, Gujarat,

Regions: North, East, West South,

Cities: Class I, Class II, Class III, Metro cities

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 Four major segmentation variables

Demographic segmentation,
Divides a population based on the following measurable variables to
reach a homogeneous group of people:
> Age: different generations’ different wants and needs.
> Sex: gender use and buying patterns.
> Income: the ability to purchase.
> Marital Status: family needs
> Family life cycle: starting out, empty nesters etc
> Education/Occupation: an indication of the sophistication of the consumer
> Ethnicity, Religion, and Race: particular tastes and preference

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Four major segmentation variables

Psychographic segmentation

Divides the market by psychological differences:

Life- style- activities, interests, and opinions.

Personality- conservative, risk taking, status

seeking, compulsive, ambitious, authoritarian,
gregarious

Psychographic segmentation is difficult.

Personality variables are tougher to identify
and quantify than demographics, but they can
be very valuable.

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Four major segmentation variables
Behavioral segmentation
Divides the market by observable purchase behaviors:

Occasions: regulars , special

Benefits: Quality, service, economy, speed

User Status: Nonuser, Ex-User, potential user, First time

Usage rate: Light , Medium, heavy

Loyalty Status: None, Medium, Strong, Absolute

Readiness stage: Unaware, aware, informed, interested

Attitude towards product: enthusiastic, positive, indifferent,

negative, hostile

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Four major segmentation variables

Marketers must not only select the “right”

group of variables but also decide how
many to use. The correct number of “useful”
variables will identify the most accessible
and receptive target, not the most specific.

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Four major segmentation variables

Major tendencies of 4 groups with higher resources:

1. Innovators: Successful, sophisticated, active,
upscale & niche products/ services
2. Thinkers: Mature, satisfied, motivated by ideals,
value, knowledge, responsibility-
product durability, functionality
3. Achievers: Successful, focus family & career-
premium products
4. Experiencers: Young, Enthusiastic, impulsive-
fashion, entertainment, socialization

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Four major segmentation variables

Major tendencies of 4 groups with lower resources:

1.Belivers: Conservative, Conventional traditional

loyal to established brands

2. Strivers: trendy & fun loving, resource constrains

stylish products to match rich people
3. Makers: practical down to earth.
Product with practical purpose
4. Survivors: Elderly, passive people who are concerned
about change
Loyal to their favorite brands

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 Criteria to evaluate possible
Marketing Segments.

Measurability- can you identify the segment?

Can you quantify its size?

Accessibility-can you reach the segment through

advertising, sales force of distributors,
transportation, or warehousing?

Substantiality-Is the segment large enough to

bother with? Is the segment shrinking, maturing, or
is it a growing segment?

Profitability- Are there enough potential profits to

make targeting it worthwhile?

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 Criteria to evaluate possible
Marketing Segments.

Compatibility with Competition-

Are your competitors interested in this
segment?
Are competitors currently investing it
or is it not worth their trouble?

Effectiveness-Does your company have

the capabilities to adequately service this
segment?

Defend ability- Can you defend yourself

against a competitor attack?

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 An example of Segmentation

• Even in markets that appear hopeless, there may be a segment that

others overlook.
• Xerox controlled 88% of copier market in the 1970s.
• The majority of its sales came from large and medium-sized units.
• But by 1985,Xerox had lost more than half of its market share.
• What happened? Xerox ignored the small-copier market.
Thousands of small companies with light copy needs had to run to
the local copy shop every time they had a copy job.
• Canon, sharp, and Ricoh seized this market by selling a smaller and
less expensive copier.
• With a foothold in small copiers, the Japanese competitors
proceeded to topple Xerox in the large-copier segment of the
market.

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