Topic 2-Marketing Segmentation

Market SegmentationTopic : 2

Nazmul Karim ChowdhuryNazmul Karim Chowdhury

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Market SegmentationMarket Segmentation

Market Segmentation can be defined as the process of dividing a market into distinct subsets of consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix. Segmentation studies are designed to discover the needs and wants of specific groups of consumers, so that specified goods and services can be developed and promoted to satisfy each group’s needs.

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Before the widespread acceptance of market segmentation, the prevailing way of doing business with consumers was through – MASS MARKETING.

Mass Marketing – that is offering the same product and marketing mix to all consumers.

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

250 ml Glass Bottle

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Mass (Undifferentiated) Marketing: If all consumers were alike, if they all had the same needs, wants, and desires, and the same background, education, and experience, Mass (Undifferentiated) MarketingMass (Undifferentiated) Marketing would be a logical strategy.

Primary advantage is that it costs less. Only one advertising campaign is needed, only one marketing strategy is developed and usually only one standardized product is offered.

Some companies, primarily those that deal in agricultural products or very basic manufactured goods, successfully follow a mass marketing strategy.

Other marketers, however, see major drawbacks in an undifferentiated marketing approach.

This strategy often means that sell the same to everyone—this can lead to selling to no one.

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Both sides of the market place, consumer and the marketer benefit from market segmentation.

Consumers receive products targeted to their specific needs.

Marketers are able to offer differentiated products, increasing profits, market share, etc.

Retailers, industrial manufacturers, and the media have all benefited from market segmentation.

Retailers benefit from market segmentation. One company, such as Gap, is able to deliver their goods through a diversity of stores, Gap, Super Gap, Gap Shoe, etc., depending on the segment and product line.

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Industrial, not-for-profit, and even the media also use market segmentation.

More and more businesses today are using database marketing programs to find out who their best customers are, and these firms will then divide their customer base into segments.

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Identifiable: Identifiable: To divide the market into separate segments on the basis of a series of common or shared needs or characteristics that is relevant to the product or service, a marketer must be able to identify these relevant characteristics.

Sizeable: Sizeable: In order to be a viable market, as segment must consist of enough consumers to make targeting it profitable. A segment can be identifiable and stable but not be large enough to be profitable. To measure a segment’s size and profitability, marketers use secondary data (e.g. Census figures) and consumer surveys; such as data estimate a given group of buyers’ size, spending power and buying propensity.

Stable: Stable: Most marketers prefer to target consumer segments that are relatively stable in terms of lifestyle and consumption patterns and avoid “inconsistent” segments that are unpredictable. For examples, teenagers are a sizeable and easily identifiable market segment, easy to buy, able to spend and easily reached.

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Accessible: Accessible: To be targeted, a segment must be accessible, which means marketers must be able to reach the market segments they want to target in an economical way.

Congruent with the Company’s Objectives and Resources: Congruent with the Company’s Objectives and Resources: Not every company is interested or has the means to reach every market segment, even if that segment meets the four preceding criteria. Therefore company must match with their research objectives and the resources they have.

The first step in developing a segmentation strategy is to select the most appropriate bases on which to segment the market. Nine major categories of consumer characteristics provide the most popular bases for market segmentation. These categories are:

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1. Geographic Segmentation

In Geographic Segmentation, the market is divided by location. The theory behind this strategy is that people who live in the same area share some similar needs and wants and that these needs and wants differ from those of people living in other areas.

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES

GEOGRAPHIC SEGMENTATION

Region Southeast, Hill Tracks, North Bengal, Sundarbans

City Size Major Metropolitan Areas, Small Towns, Cities

Density of Area Urban, Suburban, Exurban, Rural

Climate Temperate, Hot, Humid, Rainy

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2. Demographic Segmentation

Demographic segmentation is the process of segmenting the market based on demographic characteristics.

Demography refers to the vital and measurable statistics of a population. Age, sex, marital status, income, occupation, and education, are most often used as the basis for demographic market segmentation.

Demographics help to locate a target market. It is the most accessible and cost effective way to identify a target market. These characteristics are easy to measure.

Demographic variables reveal trends, such as shifts in age, gender, and income distributions that signal business opportunities to alert marketers.

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2. Demographic Segmentation


DEMOGRAPHIC SEGMENTATION

Age Under 12, 12-17, 18-34, 35-49, 50-64, 65+

Sex Male, Female

Marital Status Single, Married, Divorced, WidowedFamily Life Cycle Bachelorhood, honeymooners, parenthood, post-parenthood

and dissolutionIncome Under Tk. 10,000, Tk 10,000- Tk. 25,000, Tk. 25,000-

Tk. 50,000, Tk. 50,000- Tk. 75,000, Tk. 75,000- Tk.100,000, Tk. 100,000 and over

Education Illiterate, Primary School, High School, College, University, Graduate Studies

Occupation Professional, Blue-collar, White-collar, Agricultural, Military, Daily Laborers

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3. Psychological Segmentation

Psychological segmentation (characteristics) refers to the inner or intrinsic qualities of the individual consumer as a basis for segmentation.

Consumers can be segmented in terms of their needs and motivation, personality, perceptions, learning, level of involvement, and attitudes.

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLESPSYCHOLOGICAL SEGMENTATION

Needs-motivation Shelter, Safety, Security, Affection, Sense of Self WorthPersonality Extroverts, Novelty (Innovation) Seekers, Aggressive,

Low Dogmatic = Rigid, Inflexible

Perception Low-risk, Moderate-risk, High-risk

Learning-involvement Low-involvement, High-involvement

Attitudes Positive Attitude, Negative Attitude13

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4. Psychographic Segmentation Psychographic segmentation (segmenting based on personality and

attitude measures) is closely aligned with psychological research, especially personality and attitude measurement.

Commonly referred to as lifestyle analysis, psychographic segmentation has proven to be a valuable marketing tool to help identify promising consumer segments that are likely to be responsive to specific marketing messages.

Psychographic profiles of consumer segments can be thought of as being composed of a composite of consumers’ measured activities, interests, and opinions (i.e., AIOs).

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES PSYCHOGRAPHIC

Lifestyle Segmentation Economy Minded, Couch Potatoes, Outdoors Enthusiasts,Status Seekers

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5. Socio-cultural Segmentation Socio-cultural segmentation studies sociological and anthropological group

characteristics, as opposed to individual characteristics.

Socio-cultural variables provide further bases for market segmentation.

Consumer markets have been subdivided into segments on the basis of stages in the family life cycle, social class, core cultural values, sub-cultural memberships, and cross-cultural affiliation.


SOCIO-CULTURAL SEGMENTATION

Culture Bangladeshi, Indian, African, European, Chinese, AmericanReligion Muslim, Hindu, Christianity, Buddhist, JewsSub-cultures Tribal, Chakma, Marma, GaroSocial Class Lower, Middle, UpperFamily Life Cycle Bachelors, Young Marrieds, Full Nesters, Empty Nesters

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6. Use-Related Segmentation Use-related segmentation categorizes consumers in terms of product-

service, or brand usage characteristics such as usage rate, awareness status, and degree of brand loyalty.

Rate of usage segmentation differentiates among heavy users, medium users, light users, and nonusers of a specific product, service, or brand.

Brand loyalty identifies those customers who continually purchase the same brands, as opposed to those consumers who continually switch brands.

Awareness status encompasses the notion of buyer readiness, consumer awareness, or interest level.

Marketers need to determine whether potential customers are aware of the product, interested in the product, or need to be informed about the product.

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6. Use-Related Segmentation


USE-RELATED SEGMENTATION

Usage Rate Heavy users, Medium Users, Light Users, Nonusers

Awareness Status Unaware, Aware, Interested, Enthusiastic

Brand Loyalty Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers

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7. Usage Situation Segmentation

The occasion or usage situation often determines what consumers will purchase or consume.

Some marketers try to install the idea of suitability for a particular occasion.

Many products are promoted for special usage occasions.

USE-SITUATION SEGMENTATION

Time Leisure, Work, Rush, Morning, Night

Objective Personal, Gift, Snack, Fun, Achievement

Location Home, Work, Friend’s Home, In-store

Person Self, Family Members, Friends, Boss, Peers


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8. Benefit SegmentationMarketers and advertisers seek to isolate one particular benefit that

they should communicate to the consumer.

Examples of benefits that are commonly used include: financial security (Prudential Financial), reduced calories (Amstel Light), comfort (Bausch & Lomb disposable contact lenses), good health (Egg Beaters egg substitute), proper fit (Wrangler women’s jeans), and backache relief (Advil).

Changes in lifestyle play a major role in determining the key product benefits to promote.

Benefit segmentation can be used to position various brands within the same product line.

Benefit Segmentation Convenience, Social Acceptance, Long Lasting, Economy, Value-for-the-money


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9. Hybrid Segmentation Approaches

Marketers commonly segment markets by combining many segmentation bases, rather than relying on a single base. This is called hybrid segmentation.

Hybrid bases include psychographic/demographic profiles, Geodemographic, VALS, and Yankelovich’s Mindbase Segmentation. There are 2 main types of hybrid segmentation are:

Psycho graphic – Demographic Segmentation: Psycho graphic and Demographic profiles are highly complementary approaches that work best when used together.

Geodemographic Segmentation: This type of hybrid segmentation scheme is based on the notion that people who live close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits.

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Once an organization has identified its most promising market segment, it must then decide whether to target several segments or just one. The premise behind market segmentation is that each targeted segment receives a specially designed marketing mix.

Differentiated Marketing is when the marketer targets several segments using individual marketing mixes. This strategy is highly appropriate for financially strong companies that are well established in a product category and competitive with other firms that are also strong in the category.

Concentrated Marketing is when the marketer targets only one segment with a unique marketing mix. This strategy is better for small firms or firms new to the field.

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A UNDIFFERENTIATED

MARKETINGCompany Marketing Mix Market

B DIFFERENTIATED

MARKETING

Company Marketing Mix 1Company Marketing Mix 2Company Marketing Mix 3

Segment 1Segment 2Segment 3

C CONCENTRATED

MARKETINGCompany Marketing Mix

Segment 1Segment 2Segment 3

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Topic 2-Marketing Segmentation

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