Market Segmentation
Market
Segmentatio
n
THE
BREAKING
DOWN
OR BUILDING
UP
OF
POTENTIAL BUYERS
INTO
GROUPS
CALLED
MARKET
SEGMENTS
What is Market
Segmentation?
Benefits of
Market
Segmentation
Identifies
opportunities
for
new
product
development
Helps
design marketing
programs
most effective
for
reaching
homogenous groups of
buyers
Improves
allocation of
marketing
resources
The
need
for
marketing
segmentation
The
marketing
concept
calls
for
understanding
customer and
satisfying
there
needs
better
than
the
competition.
Different customers
have
different needs,
and
its
rarely
possible
to
satisfy
all the customers by
treating
them
alike.
Diffe
r
en
c
e
betwee
n
a
mass
m
arket
and target market
Mass market refers
to
treatment of the market as
a
homogenous group
and
offering
the same
marketing
mix
to all
customers.
Diffe
r
en
c
e
betwee
n
a
mass
m
arket
and target market
Target market on the other
hand recognizes
the
diversity
of the
customers and does not try to please all of them
with
the same
offering.
Requir
e
me
n
ts
of
market
segm
e
nts
Indefinable:
the
differentiating
attributes of the segments
must
be
measurable
so they
can
be
identified.
Accessible:
the
segments
must
be reachable
through
communication
and
distribution
channels.
Requir
e
me
n
ts
of
market
segm
e
nts
Unique
needs:
to
justify
separate
offerings,
the segments
must
respond
differently
to
different marketing
mixes.
Substantial:
the
segments should
be
sufficiently
large
to
justify
the resources
required
to
target
them.
Requir
e
me
n
ts
of
market
segm
e
nts
Durable: the segments should be
relatively
stable to
minimize the cost
of
frequent
changes.
Bases for segmentation
in
consumer
markets
Geographic
Demographic
Psy
c
hographic
Behavioralistic
Geographic
segmentation
Geographic
segmentation tries
to
divide
markets
into different geographical
units:
Regions
Size of the
area
Population
density
Climate
Geographic
segmentation
Regions:
by
continent,
country, state
or
even
neighborhood
Size
of the area:
segmented
according
to size
of
population
Geographic
segmentation
Population density:
often
classified
as
urban,
suburban,
or
rural
Climate:
according to weather patterns
common
to certain geographic
regions
Demographic
segmentation
Demographic
segmentation consists
of
dividing
the market
into
groups based
on
variables such
as:
•
Age
•
Ge
n
der
•
Income
•
Social
class
•
Life
style
Age
: Marketers
design, package and
promote
products
differently
to
meet
the
wants of
different age
groups.
Good
examples
include
the
marketing of toothpaste
(contrast
the
branding
of
toothpaste
for children and
adults)
and
toys
(with
many
age-based
segments).
Demographic
segmentation
Gender:
Gender segmentation
is widely
used
in
consumer
marketing.
The
best
examples
include
clothing,
hairdressing,
magazines
and
toiletries
and
cosmetics.
Demographic
segmentation
Demographic
segmentation
Income
: Many companies target
affluent
consumers with
luxury
goods and
convenience
services.
Good
examples
include
Coutts
bank; Moet
& Chandon champagne
and
Elegant
Resorts - an up-market
travel
company.
Demographic
segmentation
Social class
:
Consumers "perceived"
social class
influences
their
preferences for
cars, clothes,
home
furnishings, leisure
activities
and
other
products
& services.
Demographic
segmentation
Lifestyle
: Marketers
are increasingly
interested
in
the
effect of consumer
"lifestyles"
on
demand.
Unfortunately, there
are
many
different
lifestyle
categorization
systems, many of them
designed by advertising and
marketing
agencies as
a
way
of
winning
new marketing
clients
and
campaigns.
Psychographic
segmentation
Psychographic
segmentation
groups customers according to
their
lifestyle.
Activities,
interest,
and
opinions
(AIO)
surveys
are one
tool
for
measuring
lifestyle.
Activities
Interest
Opinion
Values
Behavioralistic
segmentation
Behavioralistic
segmentation
is
based on actual customer behavior
towards
products. Some behavioralistic
variable include:
Opinions, interests
and
hobbies
Degree of
loyalty
Occasions
Benefits
sought
Usage
Opinions,
interests and hobbies
–
this
covers a huge
area
and
includes
consumers’
political
opinions,
views
on
the
environment,
sporting and
recreational
activities and arts and
cultural
issues.
Behavioralistic
segmentation
Degree of
loyalty
–
customers who buy one brand
either
all or
most
of the
time
are
valuable
to
firms.
Behavioralistic
segmentation
Occasions
–
this
segments on the
basis
of
when
a
product
is
purchased or
consumed.
Behavioralistic
segmentation
Benefits
sought
–
this
requires
marketers to
identify
and
understand the
main
benefits
consumers
look for
in
a
product.
Usage
–
some
markets
can
be
segmented into
light,
medium
and
heavy
user
groups.
Behavioralistic
segmentation
Target Market
26
Definition
:
T
arget
market is a business term meaning the market
segment to which a particular good or service is
marketed. It
is mainly defined by age,
gender,
geography,
socio-economic grouping, or any other combination of
demographics.
27
Target
market
is
defined
in
terms
of
:
o
Demographic
segmentation
o
Geographic
segmentation
o
Psychographic
segmentation
o
Behavioural
segmentation
28
Demographic
segmentation
:
T
he
demographic
segmentation
divides
customers
into
segments
based
on
demographic
values
such
as
age,
gender,
family
size,
family
life
cycle,
occupation,
education,
religion, generation,
social
class
and
nationality.
29
a.
Age
and
life-cycle segmentation
:
T
he consumer’s
needs
and
wants
change
with
age.
Therefore
some
companies use
age
and
life-
cycle
segmentation,
where
age
and
the
life-cycle
determine
the
marketing
approach.
30
b.
Gender
segmentation
:
G
ender
segmentation
is
used
to
differentiate
the
needs
and wants
between
men
and
women
due
to
the
fact that
men
and
women
have
different
attitudes
toward
a
product.
31
c.
Income
segmentation
:
I
ncome segmentation
divides
the
market
into
different
income
groups.
It
is
used
in
automobiles,
clothing,
cosmetics,
and
travel.
32
d.
Generation
segmentation
:
E
ach
generation
is
influenced
by
the
times in
which
they
grow
up
for
example
the
music,
the
movies,
politics
and
other
significant
events characteristic
of
that
period.
33
e.
Social
Class
segmentation
S
ocial
class
segmentation
divides
the
customers
according
to
their
preferences
in
cars,
clothing, home
furnishings, leisure
activities,
reading
habits.
34
Geographic
segmentation
T
he
geographic
segmentation
divides
customers
into
segments
based
on
geographical
areas
such
as
nations,
states,
regions,
countries,
cities.
35
Psychographic
segmentation
T
he
psychological
variables
derive from
two
principal types
of
customer:
personality profiles
and
lifestyle
profiles.
36
Behavioural
segmentation
B
ehavioural
segmentation
is
based
on
the
customers’
attitude
toward,
use
of,
or
response
to
a
product.
37
Technographic
Segmentation:
T
his
type of segmentation
differentiates
people
based
on
technology
they
use.
With
technology
becoming such
an
ingrained
part
of
our
lives,
technographic segmentation
becomes all
the
more
important.
38
De
c
ision
s
i
n
v
o
l
v
ed
i
n
ta
rg
etin
g
,
in
c
luding
st
r
a
t
e
g
y
:
which
segments
to
targeting.
how
many
products
to
offer.
which
products
to
offer
in
which
segments.
39
Targeting
strategy decisions
are
influenced
by:
Market
maturity.
Diversity
of
buyers'
needs
and
preferences.
Strength
of
the
competition.
The
volume
of
sales
required for
profitability.
40
1.
Concentrated strategy
(Single-segment
strategy).
One market
segment
(not the entire
market).
A
single-
segment
approach
often is
the
strategy of choice for
smaller companies
with
limited
resources.
41
Target
Market
Strategies
2.
Differentiated strategy
(Selective
specialization
or
multiple-segment
strategy) :
Different
marketing mixes
are
offered
to
different
segments.
The product it self
may
or
may
not be
different
- in
many
cases only the
promotional message
or distribution channels
vary.
42
Product specialization.
The
firm
specializes in a particular
product and tailors it to
different
market segments.
43
Exemples
Desert
Coolers
:
If
your
company
is
selling
desert
coolers,
it
is
obvious
that
the
target
market
will
be
extremely
in
hot
regions
of
the
world
and
not the
cold
ones.
44
Baby
Products
:
Marketers
selling
baby
products
have
to
segment
their
market
in
terms
of
age
group,
but
they
also
have
to
consider
pyschographic
segmentation,
because
sales
will
depend
on
the
lifestyle
of
the
parents.
If
the
parents
have a
lavish
lifestyle,
they
will
agree
to
spend
money
on
expensive
baby
products.
45
Cosmetics:
Cosmetics
are
gender-based,
exclusively for
men
or women,
thus,
segmentation
based
on
gender
will
have
to
be
done.
However,
just
dividing
the
market
on
the
basis
of
gender
is
not
enough.
Lifestyles
of
men
and
women
come
into
play,
because cosmetics
come
in
all
ranges
and
thus
depending
on
the
cost of
the
product,
it
will
require
psychographic
and
behavioral
segmentation.
46
o
Results
of
wrong
targeting
strategy
o
Ineffective
augmentation
and
targeting
led
to
wrong
product
offers,
o
inappropriate
marketing
appeals
wrong
pricing
No
firm
can
offer
single
product
to
satisfy all
the
segment.
47
48
Market segmentation involves breaking down potential buyers into groups to better understand their needs and behavior. By identifying market segments, businesses can tailor their products, services, and marketing strategies to target specific customer groups effectively. This approach helps in identifying opportunities for new product development, designing marketing programs to reach homogenous buyer groups, and optimizing the allocation of marketing resources. The concept of marketing segmentation emphasizes the importance of understanding and satisfying customer needs better than the competition, recognizing that different customers have unique preferences and requirements that cannot be addressed with a one-size-fits-all approach. The differences between mass and target markets lie in whether customers are treated as a homogenous group or recognized for their diversity and individual needs. To effectively segment a market, the segments must have measurable differentiating attributes, be accessible through communication and distribution channels, respond differently to marketing mixes, justify separate offerings, be large enough to justify resource allocation, and exhibit stability to minimize costs associated with frequent changes.
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Presentation Transcript
Market Segmentation
What is Market Segmentation? THE BREAKING DOWN OR BUILDING UPOF POTENTIAL BUYERS INTO GROUPSCALLED MARKET SEGMENTS
Benefits of Market Segmentation Identifies opportunities for new productdevelopment Helps design marketing programs most effectivefor reaching homogenous groups ofbuyers Improves allocation of marketingresources
The need for marketing segmentation The marketing concept calls for understanding customer and satisfying there needs better than thecompetition. Different customers have different needs, and itsrarely possible to satisfy all the customers by treating them alike.
Difference between a mass and target market market Mass market refers to treatment of the market as a homogenous group and offering the samemarketing mix to all customers.
Difference between a mass and target market market Target market on the other hand recognizes the diversity of the customers and does not try to please all of them with the same offering.
Requirements of market segments Indefinable: the differentiating attributes of the segments must be measurable so they can beidentified. Accessible: the segments must be reachablethrough communication and distributionchannels.
Requirements of market segments Unique needs: to justify separate offerings, the segments must respond differently to different marketingmixes. Substantial: the segments should be sufficiently largeto justify the resources required to target them.
Requirements of market segments Durable: the segments should be relatively stable to minimize the cost of frequent changes.
Bases for segmentationin consumer markets Geographic Demographic Psychographic Behavioralistic
Geographicsegmentation Geographic segmentation tries to divide markets into different geographicalunits: Regions Size of the area Population density Climate
Geographicsegmentation Regions: by continent, country, stateor even neighborhood Size of the area: segmentedaccording to size of population
Geographicsegmentation Population density: often classifiedas urban, suburban, or rural Climate: according to weather patterns common to certain geographicregions
Demographic segmentation Demographic segmentation consists of dividing the market into groups based on variables suchas: Age Gender Income Socialclass Life style
Demographic segmentation Age : Marketers design, package and promote products differently to meet the wants of different agegroups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-basedsegments).
Demographic segmentation Gender: Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries andcosmetics.
Demographic segmentation Income: Many companies target affluent consumers withluxury goods and convenience services. Good examples include Coutts bank; Moet & Chandon champagne and Elegant Resorts - an up-market travelcompany.
Demographic segmentation Social class: Consumers "perceived" social class influences their preferences for cars, clothes,home furnishings, leisure activities and other products & services.
Demographic segmentation Lifestyle: Marketers are increasingly interested in the effect of consumer "lifestyles" on demand. Unfortunately, there are many different lifestyle categorization systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients andcampaigns.
Psychographic segmentation Psychographic segmentation groups customers according to their lifestyle. Activities, interest, and opinions (AIO) surveys are one tool for measuringlifestyle. Activities Interest Opinion Values
Behavioralistic segmentation Behavioralistic segmentation is based on actual customer behavior towards products. Some behavioralistic variable include: Opinions, interests and hobbies Degree of loyalty Occasions Benefits sought Usage
Behavioralistic segmentation Opinions, interests and hobbies this covers a huge area and includes consumers political opinions, views on the environment, sporting and recreational activities and arts and cultural issues.
Behavioralistic segmentation Degree of loyalty customers who buy one brand either all or most of the time are valuable tofirms.
Behavioralistic segmentation Occasions this segments on the basis of when a product is purchased or consumed.
Behavioralistic segmentation Benefits sought this requires marketers to identify and understand the main benefits consumers look for in a product. Usage some markets can be segmented into light, medium and heavy usergroups.
Definition : Target market is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of demographics. 27
Target market is defined in terms of : o Demographic segmentation o Geographic segmentation o Psychographic segmentation o Behavioural segmentation 28
Demographic segmentation : The demographic segmentation divides customers into segments based on demographic values such as age, gender, family size, family life cycle, occupation, education,religion, generation, social class and nationality. 29
a. Age and life-cycle segmentation: The consumer s needs and wants change with age. Therefore some companies use age and life- cycle segmentation, where age and the life-cycledetermine the marketingapproach. 30
b. Gender segmentation: Gender segmentation is used to differentiatethe needs and wants between men and women due to the fact that men and women have different attitudes toward aproduct. 31
Income segmentation: c. Income segmentation divides the market into income groups. It is used in automobiles, clothing, cosmetics, and travel. different 32
d. Generation segmentation: Each generation is influenced by the times in which they grow up for example the music, the movies, politics and other significant events characteristic of that period. 33
e. Social Class segmentation Social class segmentation divides the customers according to their preferences in cars, clothing, home furnishings, leisure activities, reading habits. 34
Geographic segmentation The geographic segmentation divides customers into segments based ongeographical areas such as nations, states, regions, countries, cities. 35
Psychographic segmentation The psychological variables derive from two principal types of customer: personality profiles and lifestyleprofiles. 36
Behavioural segmentation Behavioural segmentation is based on the customers attitude toward, use of, orresponse to aproduct. 37
Technographic Segmentation: This type of segmentation differentiates people based on technology they use. With technology becoming such an ingrained part of our lives, technographic segmentation becomes all themore important. 38
Decisions involved in targeting, including strategy : which segments totargeting. how many products tooffer. which products to offer in whichsegments. 39
Targeting strategy decisions are influenced by: Market maturity. Diversity of buyers' needs and preferences. Strength of the competition. The volume of sales required forprofitability. 40
Target MarketStrategies 1. Concentrated strategy (Single-segment strategy). One market segment (not the entire market). Asingle- segment approach often is the strategy of choice for smaller companies with limited resources. 41
2. Differentiated strategy (Selective specialization or multiple-segment strategy) : Different marketing mixes are offered to different segments. The product it self may or may not be different - in many cases only the promotional message or distribution channels vary. 42
Product specialization. The firm specializes in a particular product and tailors it to different market segments. 43
Exemples Desert Coolers : If your company is sellingdesert coolers, it is obvious that the target market will be extremely in hot regions of the world and not the cold ones. 44
Baby Products: Marketers selling baby products have to segment their market in terms of age group, but they alsohave to consider pyschographic segmentation, because sales will depend on the lifestyle of the parents. If the parents have a lavish lifestyle, they will agree to spend money on expensive babyproducts. 45
Cosmetics: Cosmetics are gender-based, exclusively for menor women, thus, segmentation based on gender will have to be done. However, just dividing the market on the basis of gender is not enough. Lifestyles of men and women come into play, because cosmetics come in all ranges and thus depending on the cost of the product, it will require psychographic and behavioral segmentation. 46
o Results of wrong targeting strategy o Ineffective augmentation and targeting led to wrong productoffers, o inappropriate marketing appeals wrong pricing No firm can offer single productto satisfy all the segment. 47
