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UNIT-2

MARKET SEGMENTATION

Contents

 Meaning, Need and Bases for segmenting the market

 Factors involved in Market Segmentation

Questions:

1. State and explain the importance of market segmentation.

2. What is meant by market segmentation?
3. What criteria or basis is used for segmenting a market?

Q1: Define Market Segmentation.

Ans:
Market Segmentation is the strategy of ‘divide and conquer’ i.e. dividing
market to segments in order to conquer them. In short, market segmentation is
the division and sub-division of the market on the basis of common
characteristics such as taste, qualities, perceptions, habits, age, gender,
behaviour etc. of the customers. Market segmentation is a customer oriented
philosophy.

According to American Market Association, “market segmentation refers

to dividing the homogenous market into smaller customers division having
certain homogenous characteristics that can be satisfied by the firm. Thus
segmentation answers the following question-

1) To whom should the product be sold? and

2) What should be sold to them?
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Q2: Write down the basis or criteria for segmenting the market?

Ans: There are a number of bases or criteria that are used for segmenting a
market. The various bases can be broadly divided into three major groups-

A. CONSUMER BASED SEGMENTATION:

The market can be segmented on the basis of geographical,

demographical, psychological factors of the customers. They are explained
below:

1. Geographical location of customers:

This is generally the starting point for all market segment strategy. In the
geographic base, regional differences in terms of topography (plains, woods,
bridge), climate, population etc. to be considered as the base for market
segmentation.

On geographical basis, the market may also be segmented as rural and

urban market, metro and non-metro market, district market, (outside) market
and block market.

2. Demographic characteristics:

The next community used basic for market segmentation is the

demographic characteristics of the market. Factors like age, education, income,
occupation, sex, family size and marital status etc. are used to segment the
market.

The various demographic characteristics influencing market

segmentation are explained below-

a) Age: It is assumed that people in the same age group will behave in an
identical manner, based on this factor; you can have the following markets.

i. Infant market (up to 1 year)

ii. Child market (1-12 years)
iii. Teen’s market (13-19 years)
iv. Adolescence market (16-19 years)
v. Youth market (20-35 years)
vi. Middle aged market (36-50 years)
vii. Elders and senior market (50 years and above)
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b) Income: The next commonly used variable sector is income. It is believed

that as the consumer’s income increases or decreases, his/her consumption
behavior also changes. On the basis of income the market can be segmented
as-

i. Low income
ii. Low middle income
iii. Middle income
iv. Upper middle income
v. Higher income

c) Gender: The male market is differing from female market. Hence, gender is
used for segmenting the market for different products. E.g. a cosmetic firm will
have to take a decision whether it wants to manufacture. Cosmetic for men
only or women or for both.

d) Occupation: The occupation of the consumer is also an important variable

in segmenting the market. On the basis of occupation, the market may be
segmented as professional businessman, teachers, self employed, people,
student, housewife and the like.

e) Education: The education profile of the customer will also help his or her
preferences. Educated people become more aware of the environment and
different product. Bases on education, the Indian market can be segmented as
illiterate, literate, high school educated, secondary educated, university
educated persons etc.

f) Marital status: Another demographic basis used for segmentation is the

marital status of the customer. The behavior and consumption of single and
married people differs. E.g. unmarried people are more likely user of package
goods and fast food.

g) Family size and structure: Another important demographic variable is the

family size of structure. Today the marketer can segment his market into
families with 3 or less members, families with 4 members and families with 5
or more members.

3. Psychographic factors:

Market segmentation is also in psychographic factors. In psychographic

based the population difference in terms of personal dignity; lifestyle, self image
etc. are considered to differentiate the market. E.g. some customers are crazy
for products of new fashion, so as to increase their prestige in the society.
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B. PRODUCT BASED SEGMENTATION:

The marketers may even use product related product for segmenting the
market. One of the important basis is the product use situation. For e.g. Rasna
is being used in different way such as a drink in a party, the unexpected guest,
the drink in the end of long and tiring day etc.

Commonly used product related segmentation is the benefit

segmentation. E.g. the market for watches is segmented as a product just for
knowing the time, durability, as a gift, as a dress item.

The quantity consumed at any given point of time has also being the
basis for segmenting the market for many product like tea, coffee, citrate etc.
According the following market segments are visible.

i. Heavy users
ii. Moderate users
iii. Light users.

C. COMPETITON BASED SEGMENTATION:

Customer loyalty is an important index to determine the competitor

position of the firm. This is also used as a basis of segmenting the market.
Based on loyalty we can have the following segment-

i) Hard Core Loyals:

Hard core loyals are those customers who continue to buy the same
brand over and over again. Newspaper readers, cigarette smoker and tea
drinkers are some customers groups where such hard core loyalties are
commonly visible.

ii) Soft Core Loyals:

Those who are loyal to 2 or 3 brands in a product group are called soft
core loyals. E.g. a housewife who buys lux, lux, lux, cinthol, cinthol, cinthol,
pears, lux in her nine shopping expedition will be considered as a soft core
loyal. A marketer needs to watch such customer to motivate them to shift to
the hard core loyal segment.

iii) Switchers:

Switchers are those customers who never stick to a brand. These are the
customer for those brands switching is as easy as changing a chart. They may
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switch for a variety; this is a very sleeping market segment for the marketer.
The firm needs to examine why it is using its customers to competitor brands.
This can help it to strengthen competitive position in the market.

Q3. What are the different stages of market segmentation?

Ans: Market research agencies have been devoting a substantial part of their
time to identify and study behavior patterns of different market segments. The
procedure adopted by them as mentioned by Kotler and Turner may be divided
into 3 stages. They are explained below:

i) Survey stage: The market segmentation procedure begins with the survey
in the market to know the attitude, behavior and conditions of the market. The
research with the help of a questionnaire collects information on brand
awareness, customer attitudes towards the product priority ratings,
demographic, psychographic, and media habits of sample respondents.

ii) Analysis stage: After collecting the information, the marketer analysis
data to find distinct preferences of different customer groups. Cluster analysis
is now used to cluster customers into maximally different groups.

iii) Profiling stage: In this stage, each cluster is profile in terms of

demographic, psychographic, media habits, attitudes, behavior and
consumption habits. The marketers can give each segment a name based on a
dominant distinguishing characteristics.

Q4. Write down the importance benefits, advantages of market

segmentation?

Ans: Market segmentation reflects reality in marketing situation. It ensures

higher customers’ satisfaction improved effectiveness of the marketing
programme. In short, the market segmentation offers the following benefits:

1. Location of marketing opportunity: Under market segmentation

marketers are in a better position to locate for compare marketing
opportunities. Accordingly they formulate strategy to push the sales.

2. Effective utilization of resources: Segmentation leads to a more effective

utilization of resources. This is because all the marketing efforts can be focused
on a target group.
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3. Facing the competition effectively: Segmentation helps the marketer to

face competition of his rivals effectively. The markers can adopt different
strategies for different market taking into account the rival strategies.

4. Marketing programme: When consumer needs are fully understood,

marketers can effectively formulate and implement marketing programmes for
different segments.

5. Effective advertising appeals: Different advertising appeal can be

formulated and implemented in accordance with different market segments.

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