ABSTRACT

Segmentation is the process of dividing heterogeneous markets into homogeneous

subgroups which display similarities in needs, preferences, and/or behaviors.
Effectiveness of the segmentation process is evaluated on the basis of
measurability, accessibility, substantiality, and responsiveness of the segments
identified. Owing to resource constraints, firms are often unable to pursue all the
segments they identify and have to concentrate on selected segments. This is
known as targeting. The discussion here briefly outlines the bases commonly used
to segment consumer and business markets. Consumer segmentation based on
geographic, demographic, psychographic, and product‐related approaches is
discussed. Also the different levels of market segmentation are also discussed.
INTRODUCTION
What is market segmentation ?
Market segmentation is the process of dividing a broad consumer or business
market, normally consisting of existing and potential customers, into sub-groups of
consumers (known as segments) based on some type of shared characteristics.

Marketers have recognized that the target audience of a certain product are not all
alike. They differ in terms of demographics, attitudes, needs, location and social
affiliations. Most markets are made up of different individual customers, sub-
markets or segments.

Segmentation and targeting of customers allows the marketer to deliver a product

within the target audience needs and wants (Pickton and Broderick, 2005: 373). It
is a necessity to establish the needs and values of the target customers within each
segment, in order for companies to promote their products, brands or services
appropriately.

Market segmentation assumes that different market segments require different

marketing programs – that is, different offers, prices, promotion, distribution or
some combination of marketing variables. Market segmentation is not only
designed to identify the most profitable segments, but also to develop profiles of
key segments in order to better understand their needs and purchase motivations.
Insights from segmentation analysis are subsequently used to support marketing
strategy development and planning. Many marketers use the S-T-P
approach; Segmentation→ Targeting → Positioning to provide the framework for
marketing planning objectives. That is, a market is segmented, one or more
segments are selected for targeting, and products or services are positioned in a
way that resonates with the selected target market or markets.
DIFFERENCE BETWEEN MARKET SEGMENTATION AND
TARGET MARKET

 Market segmentation is a marketing term referring to the aggregating of

prospective buyers into groups, or segments, that have common needs and
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.
 A target market is the market a company wants to sell its products and
services to, and it includes a targeted set of customers for whom it directs its
marketing efforts. Identifying the target market is an essential step in the
development of a marketing plan. A target market can be separated from the
market as a whole by geography, buying power, demographics and
psychographics.
 Markets can be segmented in a number of ways: geographically by region or
area; demographically by age, gender, family size, income or life cycle;
psychographically by social class, life style or personality; or behaviorally
by benefit, uses or response. The objective is to enable the company to
differentiate its products or message according to the common dimensions of
the market segment.
 The target market often occurs in a phase before the product release. In this
phase, a company may use limited product rollouts and focus groups,
allowing the product managers to get a feel for which aspects of the product
are the strongest. Once a product is released, the company can continue to
monitor the demographics of its target market through sales tracking,
customer surveys and various other activities that allow the company to
understand what its customers demand.
 Market segmentation can be found in the products, marketing and
advertising that people use every day. Auto manufacturers thrive on their
ability to correctly identify market segments, and then create products and
advertising campaigns that appeal to those segments. Cereal producers
market actively to three or four market segments at a time, pushing their
traditional brands that appeal to older consumers and their healthy brands to
 health conscious consumers, while building brand loyalty among the
youngest consumers by tying their products to popular movie themes.
 The target market is a central focus within a marketing plan that determines
other essential factors for the product, such as distribution, price and
promotion efforts. The target market also determines significant factors
about the product itself. In fact, a company may tweak certain aspects of a
product, such as the amount of sugar in a soft drink, so that it is more likely
to be purchased by consumers with varying tastes.
REQUIREMENTS OF MARKET SEGMENTS
• Indefinable: The differentiating attributes of the segments must be
measurable so they can be identified.

• 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.

• Durable: The segments should be relatively stable to minimize the cost of

frequent changes.

• Measurability of segment: Before embarking on a sales strategy it is

important to know the size of existing sales in that segment. A firm also
needs to know how product sales are growing in the chosen segment. If you
cannot measure the growth rate, it will be difficult to assess whether your
chosen segment is profitable.

• Size and suitability of segment: Firms need to ensure that the segment is
suitable by ensuring that consumers making up the segment are likely to buy
the product and have the spending power to buy the product. There also
needs to be an opportunity to increase product sales within the chosen
segment. Segment suitability also includes the size of the segment. If the
segment is too small, potential for sales growth will be limited. If is too
large, it will be difficult to create marketing activities to suit all of the groups
included in the segment.
BASES FOR SEGMENTATION IN CONSUMER MARKETS
 Geographic segmentation
Geographic segmentation divides markets according to geographic criteria
The geo-cluster approach (also called geodemographic segmentation)
combines demographic data with geographic data to create richer, more
detailed profiles. Geo-cluster approaches are a consumer classification
system designed market segmentation and consumer profiling purposes.
They classify residential regions or postcodes on the basis of census and
lifestyle characteristics obtained from a wide range of sources. This allows
the segmentation of a population into smaller groups defined by individual
characteristics such as demographic, socio-economic or other shared socio-
demographic characteristics.
Geographic segmentation may be considered the first step in international
marketing, where marketers must decide whether to adapt their existing
products and marketing programs for the unique needs of distinct geographic
markets. Tourism Marketing Boards often segment international visitors
based on their country of origin.
A number of proprietary geo-demographic packages are available for
commercial use. Geographic segmentation is widely used in direct
marketing campaigns to identify areas which are potential candidates for
personal selling, letter-box distribution or direct mail. Geo-cluster
segmentation is widely used by Governments and public sector departments
such as urban planning, health authorities, police, criminal justice
departments, telecommunications and public utility organizations such as
water boards.

 Demographic segmentation
Segmentation according to demography is based on consumer- demographic
variables such as age, income, family size, socio-economic status, etc.
Demographic segmentation assumes that consumers with similar
demographic profiles will exhibit similar purchasing patterns, motivations,
interests and lifestyles and that these characteristics will translate into
similar product/brand preferences. In practice, demographic segmentation
can potentially employ any variable that is used by the nation's census
 collectors. Typical demographic variables and their descriptors are as
follows:
 Age: e.g. under 5, 5–8 years, 9–12 years, 13–17 years, 18–24, 25–29, 30–39,
40–49, 50–59, 60.
 Gender: Male, Female.
 Occupation: Professional, self-employed, semi-professional, clerical/ admin,
sales, trades, mining, primary producer, student, home duties, unemployed,
retired.
 Socio-economic: A, B, C, D, E, or I, II, III, IV or V (normally divided into
quintiles)
 Marital Status: Single, married, divorced, widowed.
 Family Life-stage: Young single; young married with no children; young
family with children under 5 years; older married with children; older
married with no children living at home, older living alone.
 Family size/ number of dependants: 0, 1–2, 3–4, 5+
 Income: Under $10,000; 10,000–20,000; 20,001–30,000; 30,001–40,000,
40,001–50,000 etc.
 Educational attainment: Primary school; some secondary, Completed
secondary, some university, degree; post graduate or higher degree.
 Home ownership: Renting, own home with mortgage, home owned outright
 Ethnicity: Asian, African, Aboriginal, Polynesian, Melanesian, Latin-
American, African-American, American Indian etc.
 Religion: Catholic, Protestant, Muslim, Jewish, Buddhist, Hindu, Other.

In practice, most demographic segmentation utilises a combination of

demographic variables. Visualisation of two approaches to demographic
segmentation using one and two variables. On the left, a single variable (age) is
used. On the right, two variables (income and occupation) are used to form the
segments. The use of multiple segmentation variables normally requires
analysis of databases using sophisticated statistical techniques such as cluster
analysis or principal components analysis. It should be noted that these types of
analysis require very large sample sizes. However, data-collection is expensive
for individual firms. For this reason, many companies purchase data from
commercial market research firms, many of whom develop proprietary software
to interrogate the data.

 Psychographic segmentation
Psychographic segmentation, which is sometimes called psychometric or
lifestyle segmentation, is measured by studying the activities, interests, and
opinions (AIOs) of customers. It considers how people spend their leisure,
and which external influences they are most responsive to and influenced by.
Psychographics is a very widely used basis for segmentation, because it
enables marketers to identify tightly defined market segments and better
understand consumer motivations for product or brand choice. While many
of these proprietary psychographic segmentation analyses are well-known,
the majority of studies based on psychographics are custom designed. That
is, the segments are developed for individual products at a specific time. One
common thread among psychographic segmentation studies is that they use
quirky names to describe the segments.
 Behavioral segmentation
Behavioral segmentation divides consumers into groups according to their
observed behaviors. Many marketers believe that behavioral variables are
superior to demographics and geographics for building market segments and
some analysts have suggested that behavioural segmentation is killing off
demographics. Typical behavioral variables and their descriptors include:
 Purchase/Usage Occasion: e.g. regular occasion, special occasion, festive
occasion, gift-giving.
 Benefit-Sought: e.g. economy, quality, service level, convenience, access
 User Status: e.g. first-time user, regular user, non-user.
 Usage Rate/Purchase Frequency: e.g. light user, heavy user, moderate user
 Loyalty Status: e.g. loyal, switcher, non-loyal, lapsed.
 Buyer Readiness: e.g. unaware, aware, intention to buy.
 Attitude to Product or Service: e.g. enthusiast, indifferent, hostile; Price
conscious, quality conscious.
 Adopter Status: e.g. early adopter, late adopter, laggard.
Note that these descriptors are merely commonly used examples. Marketers
customize the variable and descriptors for both local conditions and for
specific applications.
LEVELS OF MARKET SEGMENTATION
 Mass Marketing
In simple words seller offer same product for all the buyers with different
needs and seller engages in the mass production, mass distribution, and mass
promotion of one product for all buyers.

 Niche Marketing
A niche is a more closely defined group, it is dividing the segment in to sub
segment and it can be divided by identifying the distinct trait of consumer
which might need special combination of benefits this sub segments are
made for those consumers whose needs and wants are not satisfied.

 Local Marketing
Local marketing focus on brands and promotion to the needs and wants of
local consumer and design marketing program according to the need of local
consumer groups cities, neighborhoods and even specific stores.

 Individual Marketing
Individual marketing focus on satisfying the needs and wants of individual
customer it’s also known as one-to-one marketing and customized marketing
it’s the segmentation level where seller offer customized product to the
consumer in other words a product according to the needs and preference of
consumer.
ADVANTAGES OF MARKET SEGMENTATION
1. Determining market opportunities: Market segmentation enables to identify
market opportunities. The marketer can study the needs of each segment in the
light of current offerings by the competitors. From such study, the marketer can
find out the current satisfaction of customers. Segments with low level of
satisfaction from present offering may represent excellent market opportunities.
For example, customers may not be satisfied with the current offering of water
purifiers in terms of product or after-sale service. Such situation enables a marketer
to launch a new range of water purifiers and market them well.

2. Adjustments in marketing appeals: Sellers can make best possible

adjustments of their product and marketing appeals. Instead of one marketing
programme aimed to draw in all potential buyers, sellers can create separate
marketing programmes designed to satisfy the needs of different customers. Proper
advertising and sales promotional appeals can be made depending on the target
audience.

3. Developing marketing programmes: Companies can develop marketing

programmes and budgets based on a clearer idea of the response characteristics of
specific market segments. They can budget funds to different segments depending
on their buying response.

4. Designing a product: Market segmentation helps in designing products that

really match the demands of the target audience. Products with high market
potential can be designed and directed to meet the satisfaction of the target market.

5. Media selection: It helps in selection of advertising media more intelligently

and in allocating funds to various media. The funds are allocated to various media
depending on the target audience, impact of the media, competitor advertising, and
so on.

6. Timing of marketing efforts: It helps in setting the timings of the promotional

efforts so that more emphasis is placed during those periods when response is
likely to be at its peak. For instance, consumer goods can be heavily advertised to
Christians during Christmas season and to Hindus during Diwali time.
7. Efficient use of resources: By tailoring marketing programme to individual
market segments, management can do a better marketing job and make more
efficient use of the marketing resources. For example, a small firm can effectively
use its limited resources – money, sales force, etc. – in one or two segmented
markets rather than unsuccessfully aiming at a wider market.

8. Better service to customers: Market segmentation enables a company to

concentrate its marketing efforts in a particular market area, thereby, providing a
better service to the target customers. Proper marketing segmentation can facilitate
customer satisfaction.

9. Helps in fixing prices: The marketing segmentation also enables to fix prices of
the goods and services. Since different market segments have different price
perceptions, it is necessary to adopt different pricing strategies for the markets. For
instance, the prices for lower-income groups have to be lower and the product and
promotional efforts are adjusted accordingly.

10. Assist in distribution strategies: Segmentation also assists in adopting

suitable distribution strategies. Different market segments may require different
distribution mix. For example, if the product is of very high quality intended to
target the upper class, then it must be distributed at prestigious outlets located at
selective places.
CONCLUSION
1. Market segmentation reveals the market segment opportunities open to the firm.

2. It has now to evaluate the various segments and decide how many and which
one to serve.

3. In evaluating the segments, the firm should look at:-

i) The segment size and growth

ii) Segment structural attractiveness. This is determined by:-

 Threat of intense segment rivalry  Threat of new entrants.  Threat of substitute

produce.  Threat of growing bargaining power of buyers.  Threat of growing
bargaining power and suppliers

iii) Company objectives and resources.

Selecting the market segments. The company can go for

 Single segment concentration  Selective specialization – Selects a number of

segments  Product specialization – makes one product and sells to a variety of
customer groups.  Market specialization – firm concentrates on serving many
needs of a particular customer group.  Full market coverage – serves all customer
groups with all the products that it might need.
REFERENCES
 https://en.wikipedia.org/wiki/Market_segmentation.
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 http://smallbusiness.chron.com/discuss-difference-between-market-
segmentation-target-marketing-1480.html.
 https://www.managementstudyguide.com/marketing-segmentation-
targeting-positioni... .
 https://research-methodology.net/market-segmentation.
 https://www.marketing91.com/6-advantages-segmentation/.
 https://www.examples.com/business/marketing-segmentation-benefits.html.