Meaning, features and types of segmentation

What is Market?

What is Market Segmentation?

Why Market Segmentation?

Segmentation Overview

Process of Market Segmentation

Bases of Market Segmentation

• Geographic
• Demographic
• Psychographic
• Behavior
Criteria for Market Segmentation
 PEOPLE
BUT - not just any people, they are the potential customers
who share a particular need or want & who might be willing
and able to engage in an exchange to satisfy their need or
wants, i.e they have
• Willingness to buy
• Purchasing power (money)
• Authority to buy
 The division of a market into different groups of customers with
distinctly similar needs and product/service requirements.
 “It is the consumer who is segmented, not product, nor price”

Heterogeneous market Division of market in

homogenous groups
Market Segmentation is the sub-dividing of
customers into homogenous sub-set of
customers where any sub-set may
conceivably selected as market target to be
reached with distinct Marketing Mix – Philip
Kotler
 Segmentation is essentially the identification of
subsets of buyers within a market that share
similar needs and demonstrate similar buyer
behaviour. The world is made up of billions of
buyers with their own sets of needs and behaviour.
Segmentation aims to match groups of purchasers
with the same set of needs and buyer behaviour.
Such a group is known as a 'segment'.
 The process of defining and subdividing a large
homogenous market into clearly identifiable
segments having similar needs, wants, or demand
characteristics is called Segmentation. Its objective
is to design a marketing mix that precisely
matches the expectations of customers in the
targeted segment.
 Market Segmentation consists of taking the total
heterogeneous market for a product & dividing
into several sub-market of segments, each of
which tends to be homogenous in full significant
aspects – William Stanton
 Market Segmentation is the marketing process of
identifying and breaking up the total market into
groups of potential customers with similar
motivations, needs or characteristics, who are
likely to exhibit homogeneous purchase behaviour.
Undertaking this process allows marketing efforts
to be targeted at select groups.
Market segmentation involves the subdividing of a
market into distinct subgroups of customers,
where any subgroup can be selected as a target
market to be met with a distinct marketing mix. -
CIMA
 A marketing term referring to the aggregating of
prospective buyers into groups (segments) that
have common needs and will respond similarly to
a marketing action. Market segmentation enables
companies to target different categories of
consumers who perceive the full value of certain
products and services differently from one
another.
 Market Segmentation is the process of splitting
customers, or potential customers, in a market into
different groups, or segments, within which
customers share a similar level of interest in the
same or comparable set of needs satisfied by a
distinct marketing proposition.
Market segmentation is the process of dividing the
whole market of goods or services in groups of
people with similar needs. By making this division
there is a high chance that each group responds in
favour to a specific market strategy.
 Continuum of Market Segmentation Size

Product
Mass Target Niche Individual Customiza
Variety
Marketing Marketing Marketing Marketing tion
Marketing
 Easier analysis of potential and actual consumers.
 Assessment of demand potential becomes specific
& accurate .
 Better matching of customer needs.
 Easier Identification of competing products
 Specific Product positioning and easy identification
of opportunities
 Customer communication becomes focused &
easier.
 Specific allocation of resources.
 Market segmentation increases the resource
consumption.

 Narrow segmentation can impact brand

loyalty.

 Narrow segmentation may cause product

market fracturing & cannibalization.
 Measurable

Durable Accessible

Market
Segmentation

Substantial Different
In addition to having different needs, for
segments to be practical they should be
evaluated against the following criteria:

 Identifiable: the differentiating attributes of

the segments must be measurable so that
they can be identified.
 Accessible: the segments must be reachable
through communication and distribution
channels.
 Measurable: It has to be possible to
determine the values of the variables used for
segmentation with justifiable efforts. This is
important especially for demographic and
geographic variables. For an organization
with direct sales (without intermediaries), the
own customer database could deliver valuable
information on buying behavior (frequency,
volume, product groups, mode of payment
etc).
 Substantial: the segments should be
sufficiently large to justify the resources
required to target them.
 Unique needs: to justify separate offerings,
the segments must respond differently to the
different marketing mixes.
 Durable: the segments should be relatively
stable to minimize the cost of frequent
changes.
Selection of the base for segmentation

Selection of segment descriptors (variables)

Sample design(characteristics)

Data collection

Formation of the segments

Establishment of the profile of the segments using multiple statistical methods

 Geographic Demographic

Market
Segmentation

Psychographic Behavioral
 Geographic Demographic

Market
Segmentation

Psychographic Behavioral
The market is divided into different segments on
the basis of the neighbourhoods,
cities, states, regions, countries, or world regions
such as Europe or South East Asia etc.

high-humidity
natural terrain
areas/dry
areas
warm
areas/cold urban/rural

-
seacoasts/inte
rior north/south
Segmentation of Television Channels
according to Geography
Segments for different
countries
Geographic Segmentation
The salt worth its salt.
 Volkswagen India
German engineering, solidity, innovation, safety, state-of-the-art technology

Polo Vento
Volkswagen Germany
Sturdy, style
B
R
E
A
K
F
A
S
T

M
E
N
U
URBAN RURAL
 Geographic Segmentation

NORTH -SOUTH REGION

The preference of goods is effected by the

distance between places.

South Indians - use more talcum powder

VOLKSWAGEN
 Geographic Segmentation

Climate:
Winter equipment and recreation are effected by geographic location

you will sell more snow shovels in Northern Ontario than southern
Ontario , BUT, population in Northern Ontario is very small
clothing purchases are also effected by climate/geography
S
W
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L
A
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S
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Age
 Geographic Demographic

Market
Segmentation

Psychographic Behavioral
 Dividing consumer groups on the basis of
age, gender, income, occupation, education,
& stage in family life cycle.

Age & gender

Income Family Life Cycle

 Many firms identify market segments by age
 Design products to meet specific needs of
certain age groups e.g. baby food,
toothpaste, walking aids
Age Name of Age Merchandise bought Examples
Groups Group
0-5 Young Baby food, toys, nursery, Cerelac, Leotards,
children children’s wear Fischer price, Barbie,
Johnson n Johnson,
Lilliput
6 – 19 School Clothing, sports Lakme, elle13, elle18,
children equipment, school Levis, Nike, Reebok,
(including supplies, food, cosmetics, Adidas, Mobile phones
teenagers) used cars (n95,n97,c7)
20 – Young adults Cars, furniture, houses, Cars like Santro, Zen,
34 clothing, recreational, i10, i20, Fiat Punto,
equipment Alto, and Swift
35 – Younger Larger homes, better cars, Cars like BMW,
49 middle-aged second cars, new furniture, Mercedes, farm houses,
adults recreational equipment furniture from durian

50 – Older Recreational items, Life Insurance needs for

64 middle-aged presents for young married protection of future
Adults & infants needs, vacation
planning to Singapore,
Malaysia
65+ Senior adults Medical services, travel, Charity and social work
Medicines, purchases for Medicines for age
younger age groups related illness like
arthritis, failing eyesight
Examples

• Pampers divides its market into new baby (0-5 months),

baby (6-12 months), toddler (13-23 months) and pre-
schooler (24 months).

• Horlicks for women and children up to the age of 5(Junior

Horlicks)

• Amul has segmented his product in different age group. For

kids: Amul kool, chocolate milk, Nutramul energy drink. For
Youth: Amul cool kafe. For women and older people: Amul
calci plus, Amul Shakti energy drink

• Reebok-easy tone for women, wicked sweet for girls.

 Gender is another way to divide the market
into segments since so many products are
gender-specific. There is substantial evidence
that men and women differ in buying
behaviour.
Examples

• Emami’s Fair and handsome for men and naturally fair

for women.
• Lifebuoy apart from the regular soap has also launched
Lifebuoy clear skin for women.
• Titan offered the Raga Range for this segment which
was meant exclusively for women
• Nike-running shoes for men and women
Gender
Some products are marketed to consumers with different
income levels.
Example
 HUL’s Dove (high end), Lux (middle) and Hamam (low)

 Maruti Suzuki’s Maruti 800 (low) and Maruti Suzuki

Kizashi (higher)
 Airline service-first class, business class and economy
class.
 Professionals and technical compared to unemployed
or students would differ in their purchasing patterns.
Example
 Times of India’s Economic Times for Business,
Financial, Share Market and Economy
News(professionals) and Education times(students)
 Mango-formals and casuals.
 Education segmentation targets specific people
who specialize in a certain field.

 For example, a company looking to hire an

accountant will need to focus on the candidates
with accounting degrees.
 E.g. naukri.com launched firstnaukri.com for fresh
graduates offering them campus hiring.
 People in different stages of their life have
different needs

The stages are:

 Young singles
 Young married
 Couples who remain childless
 Single parenthood
 Parenthood (full nest)
 Post-parenthood (empty nest)
 Dissolution (separated, widowed, or divorced)
 Retirees with children still at home
 Able elderly
Example
• Young married-homes, furniture, crystal ware

• Single parents- cigarettes, alcoholic beverages,

baby food.
 Geographic Demographic

Market
Segmentation

Psychographic Behavioral
 Grouping customers together based on social
class, lifestyles and psychological
characteristics (attitudes, interests and
opinions)
 Eg Lifestyle:
Louis Vuitton: It draws on the opulent
tradition of the French aristocracy &
FASHION.
Raymond’s: The complete man.
 AIO=Activities, interests & opinion.
Characteristics of an individual used by
researchers to create a psychographic profile
of the individual.

 Combined with quantifiable characteristics

such as age, income, or education level, an
AIO profile provides great insight into an
individual's likes and dislikes as a consumer
 Cathy the contented housewife
 Cathy epitomises simplicity. She is devoted to her
family and faithfully serves them as mother
housewife and cook. She enjoys a relaxed pace and
avoids anything which might disturb her equilibrium.

 . Candice-the chic subarbanite

 Candice is an urban woman.She is well educated and
genteel. Socializing is an important part of her life.
She is a doer, interested in sports and the outdoors,
politics and current affairs. Her life is hectic and lived
at a fast clip. She is a voracious reader and there are
few magazines she does not read.
 Eleanor-the elegant socialite: Eleanor is a woman with style. She
lives in the city because that is where she want to be. She likes
the socio-economic aspects of the city in terms of her career and
leisure time activities. She is fashion conscious and dresses well.
She is financially secure and hence not a careful shopper. She
shops for status and style and not for price. She is a
cosmopolitan woman who has travelled abroad and wants to.

 Mildred-the militant motherMildred is a woman who got married

young and had children before she was ready to raise a family.
Now she is unhappy. She is frustrated and vents her frustration
by rebelling against the system. Television provides an ideal
medium for her to live out her fantasies

 Thelma-the old fashioned traditionalist: Thelma is a lady who

has lived a good life. She has been a devoted wife, a doting
mother and a conscientious housewife. Even now, when most of
her children have left home, her life is centred around the
kitchen. She lacks higher education and has little appreciation
for the arts or cultural activities. Her spare time is spent
watching TV.
 Ben-the self made businessman.
 Scott-the successful professional.
 Dale-the devoted family man
 Fred-the frustrated factory worker
 Herman the retiring homebody.
 Social Class: It is a mix of income earned and the
power /authority held by the person in the society.
It can be measured on the socio economic scale. Eg

Social grade Description of occupation Example

Company
A higher managerial, administrative or professional director

Middle
B intermediate managerial, administrative or professional manager

C1 supervisory, clerical, junior administrative or professional Bank clerk

C2 skilled manual workers Plumber

  Life style classification model: 4C (Cross cultural consumer
characterization)

Rigid, strict, authoritarian and chauvinist values,

oriented to the past and to Resigned roles. Brand
Retiree & choice stresses safety, familiarity and economy.
survivors (Older)
 Alienated, Struggler, disorganised - with few
resources apart from physical/mechanical skills (e.g.
car repair). Consumers of alcohol, junk food and
lotteries, also trainers. Brand choice involves impact
Struggler and sensation.
 Domestic, conformist, conventional, sentimental,
passive, habitual. Part of the mass, favouring big and
Mainstream well-known value for money 'family' brands. Almost
er invariably the largest 4Cs group.
 Materialistic, acquisitive, affiliative, oriented to extrinsics ...
image, appearance, charisma, persona and fashion. Attractive
Aspirer packaging more important. Style & looks matter.
 Strong goal orientation, confidence, work
ethic, organisation ... support status quo,
stability. Brand choice based on reward,
Succeeder prestige - the very best .
Innovators: Successful , Sophisticated
,take charge people with high self
esteem.
• Image is important as expression of
taste & independence.

Products
Innovators
Thinkers: Mature,Satisfied,
comfortable & reflective,they value
order, knowledge & responsibility.
•Motivated by ideals
•High income group.
•Well educated & informed.
• Conservative, practical consumers.
• Durability, functionality, and value in
products.

Products:
Believers
• Motivated by ideals.
• familiar products & established
brands purchase of the nation

Products
Achievers:
• Goal oriented life-style
• Career & Family oriented.
• Lives conventional life.
• favor established, prestige
products that show off success
to peers.
Products:
Strivers:
• Motivated by achievement.
• Trendy & fun loving.
• Impulsive & Stylish products buyer

Products:
Experiencers:
• Motivated by self expression.
• Young enthusiastic & impulsive
consumers.
•High income.
• Spending on fashion,
entertainment & socializing.

Products:
Click for advertisement
Makers:
• Practical, down to earth,self
sufficient.
•Basic, Practical & functional
purpose products.

Products:

Survivors are same as

resigned people.
Makers

Survivors
 Geographic Demographic

Market
Segmentation

Psychographic Behavioral
 Behavioral segmentation divides customers into groups based
on the way they respond to, use or know of a product.

Benefits User and

Sought Usage

Loyalty Buyer
Status Readiness
 Different customer groups expect different benefits
from the same product and accordingly, they will
be different in their motives in owing it and their
behavior in buying it

For eg: Maggie Noodles in variants

with different benefits
 Different Soaps Brands from HUL

Lux Dove Lifebuoy Liril 2000 Pears

Caters to the Cream bar soft
health and freshness and
beauty seeking on all skin For delicate skin
hygiene cleanliness
consumer types
 Pepsodent: Different benefits offered under a single brand

Pepsodent Pepsodent Pepsodent Pepsodent Pepsodent

Germicheck+ Whitening 2in1 Gum Care Sensitive
- For germ - For white - Oral health - Healthy gums - For sensitive
protection teeth care with teeth and
freshness therapeutic
benefits
Benefit Sought
 A company may segment a market on the
basis of how a customer uses its products or
services

 Aspects of usage:
◦ Occasions
◦ User Status
◦ Usage Rate
 Occasions based usage
distinguish buyers according to the occasions when they
develop a need, purchase a product, or use a product.

Cadbury Celebrations Dubai Shopping Festival

Lenovo ‘Graduation’
schemes campaign
 User Status
Groups individuals according to whether they are
non-users, potential users, first time users,
regular users, or ex-users of product.
 First
Potential
Time
Users
Potential Segment to Tata Nano attracted

Users
attract new first time Car Users
customers from MNP

Kingfisher Airlines High- Taj Group of Hotel’s

Frequent Flyer Regular Programme for
Programme
end Corporate Bookers
Users
Users
 Usage Rate
We can segment markets into light, medium and heavy
product users.

High Usage

Medium Usage

Light Usage

Market Segmentation by Airtel on the basis of Usage Rate

Usage status
 Individuals are grouped according to their level of loyalty to
the product.

 'Hard core loyal' always purchases the product / brand in

question.

 Whilst 'Soft core loyal' will sometimes purchase another

brand, and 'Switchers' will not specifically seek out a
particular brand, but rather purchase the brand available to
them at time of need, or that which was on sale.
Hard-core Loyals Split Loyals

Shifting Loyals Switchers

  This involves grouping according to their readiness to purchase the
product. This segmentation model is particularly useful in
formulating and monitoring the marketing communication strategies
employed to move consumers towards purchase of a product or
brand.

Occassional Regular Most Often

Aware Ever Tried Recent Trial
User User Used

For eg: Tanishq Daytimes - All day Diamonds

Awareness about everyday wear jewelry

For eg: EBay – minimizing time between

purchase decision and purchase
 Market Segments are large, identifiable groups within a
market

 The major segmentation variables for consumer

markets are geographic, demographic, psychographic
and behavioral. Marketers use them singly or in
combination.

 To be useful, market segments must be measurable,

substantial, accessible, differentiable and actionable.