MARKET

SEGMENTATION
Uses and bases of
segmentation
 Introduction:
 The traditional way of doing business was Mass
Marketing which meant offering a standardized product
to all the consumers or the entire market. However, it
was increasingly realized that customers are varied and
unique, with different needs, wants and preferences.
Marketers understood that they cannot satisfy the entire
range of customers with the same product and service
offering. This led to Target marketing or STP i.e.,
Segmentation, Targeting and Positioning.
For example – In soft drinks, Pepsi is targeting the youth,
but on the other hand coke is targeting whole families
through defining values.
 Cont..
 STP involves dividing the potential market into
distinct sets and sub-sets of consumers and
then focusing on one or more segments that can
be reached with a marketing mix. The marketer
first identifies like-minded clusters of groups that
are homogenous within and heterogeneous with
other groups (segmentation); then, he selects
the most viable segment(s) (targeting); finally, a
distinctive image of the product/service offering
is created in the mind of the consumer that helps
the latter relate to the former (positioning)
 AGGREGATE MARKETING AND
MARKET SEGMENTATION:
 Aggregate Marketing (mass marketing and undifferentiated
marketing): Earlier the assumption was that customers have similar
needs and wants and can be satisfied with a standardized
product/service offering. Thus, a standardized product was
produced and distributed with a single marketing program or the
same marketing mix.
 Market Segmentation: The assumption underlying market
segmentation is that customers are unique. They have different
needs, wants and preferences. There do exist diverse customer
groups homogenous on certain bases within, but heterogeneous
among each other. So, instead of a single standardized product
offering, the product and service offerings need to be designed
according to the needs and wants of the segment so as to satisfy
them better.
 TARGET MARKETING:

 Market aggregation gave way to Target

marketing and finally Target marketing is
giving way to Customization. The benefits of
Target Marketing were understood by the
marketers as they realized that it is not possible
to cater to the needs, wants and preferences of
the entire market. So the marketer would target
a segment or a few segments, design the
marketing mix accordingly and serves the
segment(s) efficiently and effectively. In this way
he could meet customer needs in a better way.
 Target marketing or STP
STP involves a major exercise for a marketer to start with:

Segmentation involves Identifying distinct groups of buyers who are

homogenous within but heterogeneous between each other;

Targeting involves evaluating the viability of each segment, and then

selecting one or few market segment (s) to serve better and in a
superior way.

Positioning involves creating an image in the minds of the target

market about the product and service offering; this image should
relate to the need/want as well as portray uniqueness and/or
superiority than other competitive offerings.
STP
Positioning
STP…
 MARKET SEGMENTATION

 It 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.

 Criteria for effective STP
 Identifiable
 Sizeable
 Stable and Growing
 Reachable
 Congruent with the Marketer’s Objectives
and Resources
 USES OF SEGMENTATION
 Useful to the marketers
 Useful to the consumers
 Better matching of consumer needs
 Enhanced profits for business
 Better opportunities for growth
 Retain more customers
 Target marketing communication
 Gain share of market segment
 Reduction in expenses
 Improved cash flow
 Improved productivity
 Improved manufacturing quality
 USES OF SEGMENTATION

 Improved service delivery

 Improved employee working conditions
 Improvement in market share
 Satisfaction of social esteem
 Identifies untapped consumer markets
 Identifies untapped consumer needs
 BASES OF SEGMENTATION
 Demographics
Consumers can be grouped on the basis of characteristics
such as age or household composition. This is easy to do
and it is easy to reach such segments with media. But age
and other demographics are only loosely related to behaviour.

 Socioeconomic Characteristics
Similarly, characteristics such as income, occupation and
education can be used to derive segments that are easy to
reach. Such segments are indicators (although not perfect) of
behaviour such as lifestyle, price sensitivity, and brand
preference.
 Psychographics
Personality, attitudes, opinions, and life styles are often used a
segmentation bases. These characteristics have some relationship to
behaviour and provide insight into how to communicate with chosen
segments.

 Generation
Generation, or cohort, refers to people born in the same period of time.
For example, the Baby Boomer generation can be defined as those
people born between 1946 and 1955. Such cohorts share much in
common. Not only are they of a similar age, but they experienced similar
economic, cultural, and political influences in formative years. Thus
generation is probably a better segmentation basis than age and just as
easy to reach.
 Geography
There are two reasons why people who live in the same area may share
similar characteristics. First, some areas have more expensive properties
than others and so people with similar socioeconomic characteristics may
cluster together. Second, they have similar transport and shopping options.
It is easy to reach particular areas by using local newspapers, cinema,
outdoor, and selective direct mail but mass media is less effective.

 Geo demographic
There are several commercial geo demographic segmentation schemes
available, that combine demographics and geography as a segmentation
basis. This approach aims to identify groups of small geographic areas that
have similar demographic profiles. These tend to suffer from the fallacy of
averages. Some areas may be genuinely relatively homogenous but many
are not and this can be very misleading
 Product Usage
Potential to use the firm’s product is a behaviorally
based segmentation basis. Potential could be
determined by administering questions about disposition
to use (such as awareness, used in the past, would
consider using) in a survey and respondents grouped
accordingly. The problem is then how to reach the most
attractive segments. This is done either by using a
large-scale single source survey that asks consumers
about product disposition and media usage or by relating
product disposition to demographics.
 Benefits Sought
Some people are price sensitive, others seek quality or
service. Some people are brand loyal, while others
frequently switch brands. It is possible to group
consumers on the basis of these factors. Note that
price/quality sensitivity can vary by category. Some
people are very concerned about the quality of the food
they eat but will buy cheap laundry detergent. Others
will feed themselves any rubbish but are fastidious about
cleanliness. This is a very powerful basis for
segmentation.
 Psychological segmentation: need motivation- safety,
security, shelter etc, personality-extrovert, introvert etc

 Socio-cultural segmentation: cultures, religion

 Use-situation segmentation: morning, evening, work,

leisure etc
 Thanks