SegmentationInitial point is always mass marketing, where a firm gets the benefit of mass production, mass distribution and mass promotion.

Example : Model T of Henry Ford

Through mass marketing, we address larger markets with lower cost leading to lower prices or higher profit margins.

Next stage is micro marketing, which includes

SegmentationNichesLocal AreasIndividuals

Segment is a homogeneous subset of a market, where group of customers share similar set of needs and wants.

Segments are identified, not created.

Even within segments, some element of heterogeneity is present. Therefore, marketers offer a combination of naked solution + discretionary options.

Example : Basic model of a car + additional features with higher versions of the same model.Insurance plans with basic offer and many additional ridersAir travel with economy class and other classes

When we study a market for segmentation, we observe three patterns based on customer preferencesHomogeneous Preference throughout market No natural segmentsDiffused Preferences Brand positioning throughout market spaceClustered Preferences Natural Segments present

Second or next level of segmentation leads to carving out very well defined and almost homogeneous sub-sub-set of a market, generally smaller in size. This is called a niche.

Examples :Detergent market Liquid detergents Woolen garments Ezee by GodrejToothpaste Herbal Toothpaste Neem by Henkel, Vicco Vajradanti by Vicco Labs, Colgate Herbal or BaboolTV Channels Astha or Q- TVStar Sports Star CricketMagazines Photography, Interior decorationRevolution A company selling plus size garments

Local Marketing : Serving needs and wants of Local customers, better than competitorBanks NRI branches in KeralaIn city couriersSpiderman 3 launched in 5 Indian LanguagesBharat Matrimony in several regional languages

Individual Marketing : Generally takes shape of Mass customization. i.e. providing a technology platform, where customers can customize the product offeringPaint companies offering customized shadesArvind Mills Ruff & Tuff brand, customized stitching Galleria Credit card of United bank of Pakistan, which offers customized credit cards

Market Targeting

Five features of a good market segmentMeasurableSubstantialAccessibleDifferentiableActionableDecision of target segment (out of all available segments) depends on followingAttractiveness of segmentObjectives and resources of the company

Based on this, five patterns of targeting emergeSingle segmentMahindra Tractors only agricultureZodiac Shirts Only premium rangeSpecialty Hospital - only cardiac / orthopedicRisk : Market may shrink, Competitors may invade, Fixed cost goes upSelective SpecializationBajaj in automobile marketProduct Specialization : Titan in wrist watch marketMarket Specialization : Mom & me storeFull Market Coverage : HUL in FMCG

Having settled in one target segment, company may expand in other segments through segment by segment invasion plans.In addition to the above, please go through the Bases of segmentation as tabled in Kotlers book.