CHAPTER 2

TOPICS:
MARKET SEGMENTATION
BASIS OF SEGMENTATON – CONSUMER MARKETS/ BUSINESS MARKETS
SELECTING TARGET MARKETS
Segmentation, targeting, and positioning (STP) is a marketing model that redefines whom you market your
products to, and how. It makes your marketing communications more focused, relevant, and personalised for
your customers.
In short, STP is a marketing approach where you segment your audience, target the best-fit audience
segments for your product, and position your product to capture your target segment effectively.
SEGMENT MARKETING
The three most basic
segments are transient
(individual travellers),
corporate (business
travellers), and group

•Envi-Conscious consumers.
•Pet owners.
 SEGMENT MARKETING
• A group of customers sharing same set
of needs and wants.
Benefits over mass marketing :
• Offer better design, Price, delivery
• Fine tune marketing programme to
better suit needs
• Competitive advantage.
• Eg: automobiles and there different
features in base and higher models ;
Airlines and its services (economy,
executive class). s
Niche Marketing
• A niche is a narrowly defined customer group seeking distinctive mix of benefits. It is basically a
subsegment of a segment.
• For ex, Ezzee detergent liquid for winter delicate clothes, Krack cream, Vicco Turmeric, plus size
western clothing
• Tv channels : Aastha, Star sports,
• Segment A: people who are looking at dairy-free alternatives for lifestyle purposes, typically high-
income groups.
• Segment B: lactose-intolerant people looking for other options

Features of Niche
• Customers with Distinct set of needs
• Willingness to pay premium for satisfaction
• Small but has size, profit and growth potential that is unlikely to attract other competitors.
• Economies through specialization.
Local Marketing
• Marketing Programs tailored to needs and wants of local customer
groups in trading areas, neighbourhoods etc. ie grassroot marketing.
• Eg: Banks for Corporate customers, Incity courier companies, movies
in local regional languages, Bharat matrimony.
• Buy local, vocal for local.
Individual Marketing
• Also called Customized marketing, segments of one or one-to one
marketing.
• Towards Customerisation (ie operationally driven mass customization
with customized marketing to empower customers to design their own
products.
Demerits:
• Raise cost of goods
• Customers don’t know what they want.
• Cant cancel order once they start.
• Product may be hard to repair and sell.
• Worked for: Asian paints, Nerolac, (facilitating mix and match of colors
to customers; Ruff n tuff jeans jeans with options of customisations.
BASIS OF SEGMENTATION
• CUSTOMER MARKETS
• INDUSTRIAL MARKETS
CONSUMER MARKETS
  customer’s social status is often related directly to the
types of products and services that your audiences are
looking for. 
It has an effect on the price points they look at, the
industries they look at, the types of products they
want, and even the specific brands that they want to
engage with.

Lifestyle refers to the major ways in which groups of people live their lives. 
That can include specifics like athletics, traveling, green living,
minimalists, and other types of activities and behaviors that define a large
part of a person’s life and decisions.
The personality of your customers is key to being able to
effectively psychographically segment your contacts. 
Examples of typical personalities can include those who
are creative, emotional, introverted, extroverted,
opinionated, friendly, closed-off, and organized.
The Personality Example
A wine and alcoholic beverage brand has recently discovered that the majority of their
customers have outgoing personalities and like to enjoy their products in the company
of others. 
After segmenting out this group, the brand changed its messaging from being a
delicious accompaniment for a meal to a great product for parties and gatherings.

2. The Lifestyle Example

A health bar brand learned through examining the lifestyles of their customers that there
is a psychographic segment that enjoys hiking and other outdoor activities. 
They changed their marketing for that specific segment from focusing on health benefits
to how their product is a great recovery snack that travels well outside.

3. The Social Status Example

A clothing brand has recently discovered that there is a psychographic segment of their
customer base that is of a lower social status than they had thought. 
They then change their marketing strategy for that group from talking up the high-end
quality of the product to talking about how long-lasting the product is for the cost.
MAJOR TYPES OF BEHAVIOURIAL
SEGMENTATION
1. Segmentation based on purchase and usage behavior

• disentangles the varying trends and behavior patterns that customers have when making a
purchase decision.
• insight into the buying stage that your customer might be in, their role in the purchasing
process, the obstacles they are facing, the incentives they’re most likely to respond to and
much more.
• customers who prefer to undertake research will often turn to search engines or reviews to
be assured they are making the right decision purchasing from you, whilst customers that
are particularly thrifty may only interact with your brand or product when on sale. 
• For example, customers who are in the research phase and are likely to leave to compare
prices could be retargeted with a “best price” or “price match” guarantee. Alternatively, a
shopper that is keen on social proof and buys in accordance with popularity trends could
be targeted with a message suggesting that the item is in high demand, and moving fast.
2. Occasion or timing-based segmentation

• Occasion-based segmentation categorizes customers who are most

likely to interact with your brand or purchase from your website on
either specific occasions or set times.
• happy hour round of drinks after work and a caffeinated morning drink
are all types of occasion-based purchases as they are only bought at
precise times.
• Ex- black Friday sale, big billion days
3. Benefits sought segmentation

• Segmenting by benefits sought refers to dividing your audience based on the unique

value proposition your customer is looking to gain from your product or service.
•D
• ivide data by these benefit categories when using this form of behavioral segmentation:
• Quality: What makes your product better than your competitors?
• Usage: How will it benefit your customer when they use it?
• Customer Feedback: Are your customers happy with the product or service, or are
there areas for improvement?  
• USPs: What makes your product unique from other already existing products?
• Additional Benefits: Are there other advantages a customer could receive from
purchasing your products or services?
4. Segmentation based on customer loyalty

• Loyalty-based segmentation measures the level of loyalty a customer

has with your brand, either through a rewards program, number of
purchases, or general engagement with your marketing efforts.
The most common examples of customer loyalty segmentation can be
reflected in the travel industry which regularly promotes frequent flier
programs and the finance industry who offer rewards for big-spending
platinum credit card members.
• 4 groups of loyalty status:
• Hard core loyals, split loyals, shifting loyals, switchers.
Other segmentation
• User status: (non users, potential users, ex users, first time users, and
regular users) Eg. Blood banks (existing and new customers, Mothers-
to-be)
• Usage rate: Light, medium or heavy users.For ex mobile phone
market, (eg cell phone markets and services.
• Benefits: heavy users of mobiles account fr significant portion of revenue.
• Drawbacks: Heavy users are either loyal to one brand or not loyal to any and looking for cheapest price.
Buyer Readiness Stage
For ex: Umblical Cord Stem cell banking by Life cell corporation
used multi-pronged strategy
- Ads in family magazines, mass marketing like hoardings,
- awareness among medical fraternity, seminars , workshops and a
- Among parents to be
Psychographic segmentation focuses on the “why” behind customer decisions. 
Behavioral segmentation, on the other hand, looks to answer the “how” of your customer
decision-making process

customers who are in the research phase and are likely to leave to compare prices could be retargeted
with a “best price” or “price match” guarantee. Alternatively, a shopper that is keen on social proof
 and buys in accordance with popularity trends could be targeted with a message suggesting that the
item is in high demand, and moving fast.
Segmentation- Business markets
 5 Bases of Business Market Segmentation
Demographics
ndustry What geographical areas should we focus on?
Company Size What size companies should we focus on?
ocation Which industries that buy this product should we focus on?
Operating Characteristics
Technology What customer technologies should we focus on?
User/nonuser status Should we focus on heavy, medium, or light users or nonusers?
Customer capabilities Should we focus on customers needing many services or few services?
Purchasing Approaches
Purchasing function Should we focus on companies with highly centralized or decentralized purchasing organizations?

Power structure Should we focus on companies that are engineering dominated, financially dominated, or marketing dominated?

Nature of existing Should we focus on companies with which we already have strong relationships or go after the most desirable companies?

General purchase policies Should we focus on companies that prefer leasing? Service contracts? Systems purchases? Sealed biding?

Purchasing criteria Should we focus on companies that are seeking quality? Service? Price?
Situational Factors
Urgency Should we focus on companies that need quick delivery or service?
pecific application Should we focus on certain applications of our product rather than all applications?
ize of order Should we focus on large or small orders?
Personal Characteristics
Buyer-seller similarity Should we focus on companies whose people and values are similar to ours?
Attitudes toward risk Should we focus on risk-taking or risk-avoiding customers?
For example, a recent study of the customers of Signode Corporation’s industrial packaging division revealed the
following four segments, each seeking a different mix of price and service benefits :
•Programmed Buyers: The buyers view Signode’s products as not very important to their operations. They buy
the products as a routine purchase, usually pay full price, and accept below-average service. This is a highly
profitable segment for Signode.
•Relationship Buyers: These buyers regard Signode’s packaging products as moderately important and are
knowledgeable about competitors’ offerings. They prefer to buy from Signode as long as its price is reasonably
competitive. They receive a small discount and a modest amount of service. This segment is Signode’s second
most profitable.
•Transaction Buyers: These buyers see Signode’s products as important to their operations. They are price and
service sensitive. They receive about a 10 percent discount and above ­average service. They are knowledgeable
about competitors’ offerings and ready to switch for a better price, even if it means losing some service.
•Bargain Hunters: These buyers see Signode’s products as very important and demand the deepest discount and
the highest service. They know the alternative suppliers’ bargain hard and are ready to switch at the slightest
dissatisfaction. Signode needs these buyers for volume purposes, but they are not very profitable.
This segmentation scheme has helped Signode to do a better job of designing marketing strategies that take into
account each segment’s unique retains to varying levels of price and service.