MARKET SEGMENTATION

The act of dividing the market into distinct groups of buyers who might require separate products and / or marketing mixes.

Why market segmentation?

Customers are too numerous, widely scattered and heterogeneous in their buying requirements Some competitors will be in a better position to serve particular segments

The firm instead of competing everywhere often against superior odds, should identify the most attractive parts of the market that it could serve effectively To bring customer into focus To identify the target market

Benefits of segmentation

To design product lines To spot the first signs of major trends To direct appropriate promotional tools To determine the effective appeals To select the advertising media and timing

Resources required for market segmentation

Product costs Production costs Promotion costs Inventory costs Marketing management costs

When to segment markets?

Bases for segmentation

Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation Volume segmentation

Geographic segmentation

Region City Density Climate Continent Country State

Demographic segmentation

Age , sex Family size, FLC Stage Ages of children Income , Education, Occupation Religion, Community, Language etc.

Psychographic segmentation

Personality Life style Social class

Behavioral segmentation

Use occasion Regular, Special Benefits sought Quality, Service, Economy, Prestige, Convenience User status Non user, Ex user, Potential user, First time user, Regular user Usage rate Light, Medium,Heavy

Loyalty status None, Medium, Strong, Absolute Readiness to buy unaware, aware, informed, interested, desirous Brand loyalty insistence, preference, recognition, non recognition, rejection Type of buying minimum effort, comparison buying, special effort Attitude enthusiastic, positive, negative, hostile

Volume segmentation

Bulk buyers Small scale buyers Medium scale buyers

80 / 20 Rule

Requirements for effective segmentation

Measurability Accessibility Substantiality Actionability

Steps in STB
1.
2. 3.

4.
5.

6.

Identify the bases for segmenting Develop profiles of the resulting segment Evaluate segment attractiveness Select the target segment (s) Develop positioning for each target segment Develop marketing mix for each segment

Market Targeting
The act of evaluating and selecting one or more of the market segments to enter

Criteria for selection

Size Expected growth Competitive position Cost of reaching the segment Compatibility with organization objectives and resources

Patterns of target market selection

Single segment concentration

P1

M1

M2

M3

P2

P3

Selective specialization
M1
P1

M2

M3

P2

P3

Product specialization
P1

M1

M2

M3

P2

P3

Market specialization
P1

M1

M2

M3

P2

P3

Full market coverage

P1

M1

M2

M3

P2

P3

Market coverage strategies

Undifferentiated marketing
Differentiated marketing Concentrated marketing

Choosing a strategy the Determinants

Company resources Product homogeneity Market homogeneity Product life cycle stage Market homogeneity Competitive marketing strategy