Segmentation & Segmental Analysis

Prof. Aparna Kanchan 1

 Learning Objectives
• Describe the characteristics of markets
and market segments.
• Explain the importance of market segmentation.
• Discuss criteria for successful market segmentation.
• Describe the bases commonly used to segment consumer
markets.
• Describe the bases for segmenting business markets.
• List the steps involved in segmenting markets.
• Discuss alternative strategies for selecting target markets.
• Explain how and why firms implement positioning
strategies and how product differentiation plays a role.
• Discuss global market segmentation and targeting issues.
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 Market Segmentation
People or organizations with
Market needs or wants and the ability and
willingness to buy

A subgroup of people or
Market organizations sharing one or more
Segment characteristics that cause them to
have similar product needs.

The process of dividing a market

Market
into meaningful, relatively similar,
Segmentation identifiable segments or groups.

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 A Market is...

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one of

these characteristics is not a market.
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 The Concept of Market Segmentation

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 The Importance of Market Segmentation

● Markets have a variety of product

needs and preferences

● Marketers can better define

customer needs

● Decision makers can define objectives

and allocate resources more accurately

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 Criteria for Segmentation
Segment must be large
Substantiality enough to warrant a special
marketing mix.

Identifiability Segments must be identifiable and their

Measurability size measurable.

Members of targeted segments must be

Accessibility
reachable with marketing mix.

Unless segment responds to a marketing

Responsiveness mix differently, no separate treatment is
needed.

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 Segmentation Bases

Characteristics of
individuals, groups,
or organizations used
to divide a total market
into segments.
(variables)

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 Bases for Segmentation

Geography

Demographics

Psychographics

Benefits Sought

Usage Rate

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 Geographic Segmentation

Segmenting markets by
region of the country or
world, market size, market
density, or climate.

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 Benefits of Regional Segmentation

• New ways to generate sales in

sluggish and competitive markets
• Scanner data allow assessment of best
selling brands in region
• Regional brands appeal to local
preferences
• React more quickly to competition

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 Demographic Segmentation
1 2 3 4 5 6

Segmenting markets
by age, gender, income,
education, Occupation,
Marital Status
and family size & structure

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 Bases for
Demographic Segmentation
• Age

– Infants Market ( newly born – 1 yr)

– Child Market (1-12 yrs)
– Teens Market ( 13-19 yrs)
– Adolescent Market ( 16-19 yrs)
– Youth Market ( 20-35 yrs)
– Middle- aged Market (36-50 yrs)
– Elders or Seniors Market ( 50 yrs & above)

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 Bases for
Demographic Segmentation
Child Pester Power
✓ Children in the age group of 0- 14 yrs account for a little
over 1/3rd of India’s population
✓ They are today a key influencer in consumer purchase
decision
✓ Key role in brand selection and where to buy from
✓ Influence not restricted to kids products….
✓ The trend is common to all SEC classes

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 Bases for
Demographic Segmentation
Youth Market
✓ The contemporary youth has grown up in far more
secure times and in far more educated families than his
counterparts in the 1970’s
✓ The young market is more experimentative and
daring… be it clothes, eating out or even career
choices!
✓ Tastes change faster with fads changing overnight
✓ Biggest challenge for marketers is staying relevant and
contemporary to the youth market
✓ Eg: Channel V Vs MTV

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 Bases for
Demographic Segmentation
Income
✓ Research indicates that as consumers income increases his
consumption behavior also changes
✓ Expenditures on food & other basic amenities as a % of total
expenditure declines & the customer starts buying other branded
products & the so-called luxuries – perfumes, holiday packages, air
travel etc….
✓ While considering income, the marketer may consider either the
customer’s income or his/her family income
✓ On the basis of income, the market can be segmented as being:
✓ Low Income
✓ Low Middle Income
✓ Middle Income
✓ Upper Middle Income
✓ Higher income
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 Bases for
Demographic Segmentation
Gender
✓ Male Market is different from the female market
✓ While some products, are exclusively made for each segment there are
others which are not exclusively made or marketed for one gender
✓ The Indian woman is changing radically – the individualism exhibited in
the 1980’s & 1990’s has almost completely disappeared
✓ She continues to be confident & assertive & is seeking a balance
between home & work – Her focus is now on the family
✓ She is traditional yet capable of taking on the modern world
✓ Further the profile if the Indian woman while remaining the same in
general terms, differs across SEC groups on parameters of modernity,
individualism & traditionalism & conservatism

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 Bases for
Demographic Segmentation
Occupation
✓ Whether a person is self- employed, works full time or part time , his/her
position in an enterprise affects the consumption behavior –
professionals, traders and shopkeepers, sales personnel, teachers,
students , housewives etc…

Education
✓ The education profile of the customer also affect his/her preferences &
the level of awareness
✓ As literacy increases & people get educated, they become more aware
about their environment & about different products..They also become
more aware about their rights
✓ Based on education the Indian market can be segmented as literates,
illiterates, high school educated, secondary & university educated
persons – graduates, post graduates, post doctorates

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 Family Life Cycle

Age

Marital Children
Status

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 Family Life Cycle

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 Psychographic Segmentation

Market segmentation on
the bases of personality,
motives, lifestyles, and
geodemographics.

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 Bases for
Psychographic Segmentation
Personality

Motives

Lifestyles
Psychographic
Segmentation
Geodemographics

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 Lifestyle Segmentation
• How time is spent
• Importance of things
around them
• Beliefs
• Socioeconomic
characteristics

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 Geodemographic Segmentation
Segmenting potential
customers into
neighborhood lifestyle
categories.

Combines geographic,
demographic, and lifestyle
segmentation.

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 Benefit Segmentation

The process of grouping

customers into market
segments according to
the benefits they seek
from the product.

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 Benefit Segmentation of the Snack-Food
Market

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 Usage-Rate Segmentation

Dividing a market by the

amount of product
bought or consumed.

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 The 80/20 Principle

A principle holding that

20 percent of all customers
generate 80 percent
of the demand.

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 Business Marketing Segmentation

Segmentation
Bases

Company Buying Customer

Characteristics Processes Relationship

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 Steps in Segmenting a Market

Select Choose Select Profile Select Design,

a bases descrip- and target imple-
market for tors analyze markets ment,
for segmen- segments maintain
study tation mkting
mix

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 Target Market
A group of people or
organizations for which an
organization designs,
implements, and maintains
a marketing mix intended to
meet the needs of that
group, resulting in mutually
satisfying exchanges.

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 Strategies for Selecting Target
Markets

Undifferentiated Concentrated Multisegment

Strategy Strategy Strategy
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 Undifferentiated Targeting Strategy

Marketing approach that

views the market as one big
market with no individual
segments and thus requires
a single marketing mix.

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 Undifferentiated Targeting Strategy

Advantages:
◆ Potential savings on
production and marketing
costs

Disadvantages:
◆ Unimaginative product
offerings
◆ Company more
susceptible to competition

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 Concentrated Targeting Strategy
A strategy used to select
one segment of a market for
targeting marketing efforts.

Niche
One segment of
a market.

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 Concentrated Targeting Strategy
Advantages:
◆ Concentration of resources
◆ Meets narrowly defined
segment
◆ Small firms can compete
◆ Strong positioning

Disadvantages:
◆ Segments too small, or
changing
◆ Large competitors may
market to niche segment
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 Multisegment Targeting Strategy

A strategy that chooses

two or more well-defined
market segments and
develops a distinct
marketing mix for each.

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 Multisegment Targeting Strategy

Advantages:
◆ Greater financial success
◆ Economies of scale

Disadvantages:
◆ High costs
◆ Cannibalization

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 Costs of Multisegment Targeting

$ Product design costs

$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
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 Cannibalization

Situation that occurs when

sales of a new product
cut into sales of a
firm’s existing products.

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THANK- YOU

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