BASES FOR SEGMENTING CONSUMER MARKETS

AND
BUSINESS MARKETS
INTRODUCTION
It is important to highlight the concept of market segment and segment
marketing in the context of arriving at the basis for consumer
markets and business market segments.

What is a market segment?

A market segment consists of a group of consumers who share a similar
set of needs and requirements.

What is segment marketing?

This is the process of identifying a certain group of consumers having
common needs or wants and then to decide which one to target.
It is also significant to distinguish segment marketing and mass
marketing.
Segment marketing vs. mass
marketing

Segment marketing has distinct advantages over mass

marketing as shown below:
 Seller engages in mass production, mass
distribution and mass promotion of one product for
all buyers in mass marketing
 In segment marketing the seller can offer better design,
better price and flexible market offerings to all members of a
segment.
 Example:- Automobile companies may offer different versions
of the same model such as car with a/c, power windows and
power steering at additional cost.
Description of different
bases for consumer markets
Bases for segmenting consumer markets have to identify various
characteristics such as
 Geographic

 Demographic
 Psychographic
 Behavioral
In order to study the changing consumer lifestyles, it is important to
describe the above characteristics.
The following chart will describe the different bases for consumers
markets.
Geographic
region southern, western, eastern, northern
city class 1/class2/metro city/sub metro city
criteria population of 1 million and above

Rural and urban rural-villages with population of over 10,000

urban-towns with a pop. Of 50,000-200,000
DEMOGRAPHIC
Age Under 6 years,6-11 years,12-19years, 20-34 yr s
35-49 years, 50-60yrs, 60+ years
Family size Young, single , young married ,youngest married,
child under 6,older married, no children under 18 etc
Gender Male, female
Low(upto Rs.40,000p.a)lower middle(Rs.40,001-
Income 80,000p.a)Upper middle(Rs.80,001-120,000)And high above
160,000 p.a(per annum)
Unskilled worker,skilled worker, petty traders, shop
occupation
owners, bussinessman/industrialist,self-employed

Education Illiterate,school upto 4 yrs,school between 5 and 9

yrs,ssc,hsc, nongraduate,graduate/post
graduate(professional)
PSYCHOGRAPHIC
Socioeconomic classification(sec) A1,A2,B1,B2,C,D,E1,E2
Lifestyle Sports-oriented,culture-oriented,outdoor
oriented
Personality compulsive,gregarious, authoritan,ambitious

BEHAVIORAL
Regular,special
Ocassions
Quality, service,economy, speed
Benefits
User status Non-user,ex-user,potential –user first-time
user,regular user.

Usage rate Light, medium,heavy

Loyalty status None,medium,strong,absolute

Unaware,aware,informed,interested,desirous
Readiness stage
,intending to buy

Attitude toward Enthusiastic,positive,indirect,negative,hostile

product
Geographic Segmentation

It is important to divide the market into

Different geographic units such as
 Different states

 Different regions

 Different cities

 Different neighbourhoods
Urban vs rural regions
and divisions
This division is necessary due to the regional diversities between rural
and urban consumers
For example:-
Variations in consumer preferences
Variations in consumer’s buying habits
Variations in consumer’s income
Variations in their purchasing power
Availability of infrastructure such as electricity,telephone networks roads
social and cultural orientations.
People affecting the market potential need to segment the market
geographically becomes all the more important if we look at the
following illustrations
In India there are more than 5000 towns and 6,38,000 villages.
For many products penetration levels in the villages are
lower than in the urban areas and this indicates that
the potential for increasing consumption in rural areas
is there

Demographic segmentation:-
We divide the market into groups on the basis of the
following factors
 Age

 Family size

 Family lifecycle

 Gender and

 Income
Age and lifecycle

Consumer wants change with age

example: baby talc(jonsons and ghonsons are popular for infants and
children.

Family lifecycle:
Persons in the same part of the lifecycle may differ in their life
stage. Life stage may imply getting married, sending child to
the school, planning for retirement and so on. These life
stages present opportunities for new sellers who can help
people to fulfill their needs.
Gender

 Men and women have different

attitudes and behave differently due to
genetic makeup and socialization
problems
 Income:-

Income determines the ability of

consumers to parcipate in the market
Psychographic

Psychographic is a science of using

psychology to better understand
consumers.
In this segmentation, buyers are divided
into different groups on the bases of
 Personality traits
 Lifestyles
 values
 Values and lifestyles affect product
and brand of choice of customer
 Religion also has a important influence
on values and lifestyles
 For example large no. of consumers in
India are strictly vegetarian
 The main dimensions of the value and
lifestyles segmentation are consumer
motivation
 Consumers are inspired by three
motivations
1. Ideals-guided by knowledge
2. Achievement
3. Self-expression
 Consumer with high resources are
1. Innovators
2. Thinkers
3. Achievers
4. Experienced
Consumers with lower resources are:-
1. Believers-conservative/conventional
2. Strivers- Fun loving people
3. Makers-practical, down to earth and self
sufficient
4. Survivors-Elderly, passive people
concerned about change
Behavioral Segmentation
In this segmentation, marketers divide buyers into
groups on the basis of their knowledge of the
product, attitude towards the product or response
to a product.
Decision Roles:-
People play five types of roles in buying decision
a) As initiators
b) As influencer
c) As decider
d) As buyer
e) As user.
Study of the above mentioned roles is useful for the designing the
communication strategy. For example women play significant role
for influencing and deciding for kitchen appliances.
Factors for behavioral segmentation:
The following factors are important:-
 Occasions-greeting card brands such as Archies and Hallmark
make cards for different occasions such as
birthdays,weddings,Diwali, Newyear etc. Cadburys market gift
packs for festivals like Diwali and Christmas.
 User-status: every product has different users as
a) non-users
b) Ex-users
c) Potential-users
d) First-time users
e) Regular users
Blood bank cannot depend on regular donors, they have to approach
first time donors also
Usage Rate:-
Markets can be segmented into:-
Light product users
Medium product users
Heavy product users like usage of mobile phones
Buyer Readiness stage

 Some people are unaware, some people are aware of the

product,some are informed, some are interested and some intend
the product.
Loyalty status:
Marketers divide the buyers into four groups based on the brand loyalty
1. Hard core loyals-buying only one brand
2. Split-loyals-loyal to two or three brands
3. Shifting loyals-shifting loyality from brand to other
4. Switchers-Consumers who have no loyality.
Attitude:- Five attitudes about products are
Enthusiastic
Positive
Indifferent
Negative
Hostile
Bases for segmenting Business Markets.
Demographic
1.industry: Which industries should we serve?
2. Company size: what size companies should we serve?
3.Location: what geographical areas should we serve
Operating Variables
4. Technology: what customer technologies should we focus on
5.User or non-user status. Should we serve heavy users, medium users,
light users, or nonusers?
Purchasing Approaches
7.Purchasing –function organization. Should we serve companies with
highly centralized or decentralized purchasing organization
8.Power structure: should we serve companies that are engineering
dominated, finanancially dominated ,and so on?
9.Nature of existing relationship: should we serve companies with which
we have strong relationship or simply go after the most desirable
companies.
10.General purchasing policies: Should we serve companies that prefer
leasing? Servicing contract? Sealed bidding?
11.Purchasing criteria: should we serve companies that are seeking
quality? service? Price?
Situational Factors
12.Urgency: should we serve companies that need quick and sudden
delivery or service?
13. Specific application: should we focus on certain application of our
product rather than all applications?
14. Size or order. Should we focus on large or small orders?
Personal characteristics
15.Buyer-seller similarity :should we serve companies whose people
and values are similar to ours?
16. Attitude toward risk: should we serve risk-taking or risk-avoiding
customers?
17.Loyality: Should we serve companies that show high loyalty to
their suppliers.
In segmenting business markets, the following factors are taken into
consideration.
 Demographic: demographic factors are the most important as the
marketers decide to determine which segments of customers to
serve. A tyre manufacturing company sells tyres to automobile
companies and aircrafts. Within a chosen target industry a
company can further segment it by determining which size of
company to sell.
 Further, the company might locate separate outlets in different areas
for selling to large and small buyers.
 Operating variables:- the company may determine what customer
technologies to focus, which type of customers to serve-heavy users,
medium and light users or non users etc.
 Purchasing approaches:- a company can segment further by
purchase criteria. For example govt. labs need low prices contract for
scientific contracts, university and college labs need equipments
requiring minimum service and industrial and pharmaceutical labs
need equipments that is highly reliable.
 Personal characteristics:-marketers identify segments by determining
personal characteristics of the buyers such as risk taking customers
or risk avoiding customers, loyal customers for example auto-
companies are giving loyalty bonus to regular customers.