SESSION 10 MARKET SEGMENTATION

OPENING THOUGHT
Zara is one of the world’s most successful fashion retail brands – if not the most successful
one. With its dramatic introduction of the concept of “fast fashion” retail since it was
founded in 1975 in Spain, Zara aspires to create responsible passion for fashion amongst a
broad spectrum of consumers, spread across different cultures and age groups. There are
many factors that have contributed to the success of Zara but one of its key strengths,
which have played a strong role in it becoming a global fashion powerhouse as it is today,
is its ability to put customers first. Zara is obsessed with its customers, and they have
defined the company and the brand’s culture right from the very beginning.

The Zara brand offers men and women’s clothing, children’s clothing (Zara Kids), shoes
and accessories. The sub-brand Zara TRF offers trendier and sometimes edgier items to
younger women and teenagers.

The secret to Zara’s success has largely being driven by its ability to keep up with rapidly
changing fashion trends and showcase it in its collections with very little delay. From the
very beginning, Zara found a significant gap in the market that few clothing brands had
effectively addressed. This was to keep pace with latest fashion trends, but offer clothing
collections that are a combination of high quality and yet, are affordable. The brand keeps
a close watch on how fashion is changing and evolving every day across the world. Based
on latest styles and trends, it creates new designs and puts them into stores in a week or
two. In stark comparison, most other fashion brands would take close to six months to get
new designs and collections into the market. (Roll, 2016)

Most companies, like Zara, have moved away from mass marketing and toward target
marketing—identifying market segments, selecting one or more of them, and developing
products and marketing programs tailored to each.

There are three major steps in designing a marketing strategy.

Step - I: Segmentation: It involves dividing a market into smaller groups of buyers with
distinct needs, characteristics, or behaviours that might require separate marketing strategies
or mixes. The company identifies different ways to segment the market and develops profiles of
the resulting market segments.

Step II: Targeting: This step consists of evaluating each market segment’s attractiveness and
selecting one or more market segments to enter. The selection of marketing mix is based on the
evaluation of targeted segment.

Step III: Positioning: In the final steps, the company decides on a value proposition—on how it
will create value for target customers. Point of Differentiation (POD) involves actually
differentiating the firm’s market offering to create superior customer
value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target consumers. With their

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efforts Zara is able to stand out clearly in the minds of its target customers. In other words, they
positioned themselves as a trendy, exclusive and fashionable brand in the minds of consumers.

In this session, we will discuss market segmentation in detail.

MARKET SEGMENTATION
Study of consumer markets indicates there are different consumer need different products.
Market segmentation helps companies divide large, heterogeneous markets into smaller
segments based on similar needs. The objective is to reach them more efficiently and effectively
with products and services that match their unique needs. Two broad groups of variables to
segment consumer markets:

DESCRIPTIVE CHARACTERISTICS —geographic, demographic, and psychographic—ask

whether these segments exhibit different needs or product responses

BEHAVIOURAL CONSIDERATIONS , such as consumer responses to benefits, usage occasions, or

brands – see whether different characteristics are associated with each consumer-response
segment. (Kotler, 2017, p. 266)

NEED FOR SEGMENTATION

 Mass marketing is not effective for all the products.

 At times for a company it is neither cost effective nor feasible to target consumers that
are too many in numbers.
 Markets are geographical scattered and difficult to reach.
 Consumers have different needs & wants.
 Consumer buying behaviour is different.

RUBIK'S CUBE METAPHOR

Consumer markets are like Rubik's cube. Each colour represents different
type of consumer. These consumers are identified as different from each
on the basis of homogeneous need sets.

The process of segmentation is like solving

the Rubik's puzzle. To solve the puzzle
each face of the cube must have the same
colour. In segmentation, consumers with same needs and
motivations are brought together for effective understanding.

The consumers may be different from one another on several

parameters. These parameters form bases for segmentation. The major variables that might be
used in segmenting consumer markets are geographic, demographic, psychographic and
behavioural. (Saxena, 2015)

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GEOGRAPHIC SEGMENTATION

For some products, the consumers’ needs are different across geographic boundaries. One
reason demographic variables such as age, family size, family life cycle, gender, income,
occupation, education, religion, race, generation, nationality, and social class are so popular
with marketers is that they’re often associated with consumer needs and wants. Another is that
they’re easy to measure.

For example, different countries, regions, states, counties, cities, or even neighbourhoods have
different needs. In India, woollens are sold more in northern region, PCs and laptops are sold in
urban markets whereas fertilizers and seeds are sold in rural markets.

Geographic segmentation can be a very effective marketing strategy. FMCG giants like HUL and
ITC have gained a strong market share because of their rural penetration. Domino's pizza has
gained a competitive edge by positioning on quick delivery. They are able to do so by branches
in every neighbourhood.

Geographic segmentation is important because, consumers from different region differs in

 consumption pattern
 taste and preferences
 climatic conditions
 infrastructure and power support

Delhi is the most “internet-ready” state in the country followed by Karnataka and
Maharashtra, an official study has revealed. While north-eastern states, excluding
Nagaland, have been ranked low in terms of overall internet readiness, Karnataka is the
state with highest number of digital start-ups followed by Delhi and Maharashtra.

“Delhi has emerged as the top ranked state in terms of overall internet readiness. The
capital city is followed by Karnataka, Maharashtra, Kerala and Tamil Nadu. Delhi gets this
rank primarily because of its fabulous e-infrastructure and e-participation,” Aruna
Sundararajan, Secretary, Ministry of Electronics and Information Technology said while
releasing the report.

“We are hopeful that India will leapfrog from the present 155th position to world’s top 5 in
connectivity, within the next 5-6 years. Things have improved multi-fold with state
governments of Chattisgarh, Andhra Pradesh and Telangana among others taking
proactive steps to improve connectivity and internet reach,” Sundararajan added.

Internet readiness index is a composite benchmark of four components – e-Infrastructure

index, e-Participation index, IT-Environment, and government e-services index The
purpose of the index is to give a sharper perspective for digital industries looking to
expand their business in Indian states. (PTI, 2017)

In a growing trend called Grassroots marketing, marketers concentrate on making such

activities as personally relevant to individual customers as possible. (Kotler, 2017, p. 266)

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DEMOGRAPHIC SEGMENTA TION

Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, generation, and
nationality.

Demographic factors are the most popular bases for segmenting customer groups. The
demographic segmentation can be useful in many product categories as consumer’s needs,
wants, usage rates, and product and brand preferences are often associated with demographic
variables.

AGE AND LIFE-CYCLE STAGE is offering different products or using different marketing
approaches for different age and life-cycle groups. HDFC standard life pension plans are for the
retirement planning for middle aged people.

GENDER segmentation can be bases for segmentation for many products and services. Personal
care companies like creams, shampoos, deodorants, and soaps have different range of products
for men and women. Some two-wheeler companies like Hero have Pleasure brand only for
females. Clothing brands like Louis Philip only target males. There are women only beauty
salons and spa and magazines separately for men and women.

Each Generation or cohort is profoundly influenced by the times in which they grow up – the
music, movies, politics and defining events of that period. Gen X refers to the people born
between 1964 and 1978. This generation believes in technology as an enabler and not barrier
and has seen more difficult times. Gen Y or millennial are the people born between 1977 and
1994. Also known as digital natives, millennial have been wired almost from birth – playing
computer games, navigating on internet, downloading music, and connecting via social
networking sites. Gen Z is today’s generation born after 1994 and before 2010. This generation
is more towards technology and mobile applications. (Kotler, 2017, pp. 272-273)

INCOME segmentation helps marketers clearly identify affordability factor for the given
product. In India, Society of Indian Automobile Manufacturers (SIAM) has identified
automobiles segments like A, B, C, D and SUV based on the prices. There are further sub
segments in each of the segment.

Titan has different range of watches for different income groups; Timex for price sensitive
markets and Raga and Nebula for luxury markets. Tours and travel companies also design
several range of packages (standard, deluxe and premium) to suit different income groups.

PSYCHOGRAPHIC SEGMENTATION

Psychographic segmentation divides buyers into different groups based on social class,
lifestyle, or personality characteristics.

LIFESTYLE is a person’s pattern of living as expressed in his or her psychographics. Measures a

consumer’s AIOs (activities, interests, and opinions) to capture information about a person’s
pattern of acting and interacting in the environment.

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One of the most popular commercially available classification

systems is SRI Consulting Business Intelligence’s VALS
framework.

The Value and Life Style framework (VALS) categories consumers

into two broad categories: people with high resources and people
with low resources. There are three motivational functions across
these resources; ideals, achievers and self-expression. The major
tendencies of the four groups with high resources are: innovators,
thinkers, achievers and experiencers. The major tendencies of the
four groups with lower resources are: believers, strivers, makers
and survivors. (US Framework and VALS™ Types, n.d.)

Marketers also use personality variables like innovativeness,

need for cognition and need for uniqueness to segment markets.

BEHAVIOURAL SEGMENTATION

Behavioural segmentation divides buyers into groups based on their knowledge, attitudes,
uses, or responses to a product. (Kotler, 2017, pp. 280-282)

NEEDS-BASED OR BENEFIT-BASED SEGMENTATION identifies distinct market segments with

clear marketing implications.
PEOPLE PLAY FIVE ROLES IN A BUYING DECISION: Initiator, Influencer, Decider, Buyer, and
User. Different people are playing different roles, but all are crucial in the decision process and
ultimate consumer satisfaction
USER AND USAGE-RELATED VARIABLES include occasions, user status, usage rate, buyer-
readiness stage, and loyalty status
FIVE CONSUMER ATTITUDES about products are enthusiastic, positive, indifferent, negative
and hostile

OCCASION SEGMENTATION is grouping buyers according to occasions when they get the idea
to buy, actually make their purchase, or use the purchased item. Many companies give festival
offers as many purchases are done during that time.

BENEFIT SEGMENTATION is grouping buyers according to the different benefits that they seek
from the product. For automobile products consumers may seek different benefits like mileage,
style and power.

USER STATUS is segmenting markets into nonusers, ex-users, potential users, first-time users,
and regular users of a product.

USAGE RATE is grouping markets into light, medium, and heavy product users.

LOYALTY STATUS is dividing buyers into groups according to their degree of loyalty. Loyalty
status can be of four types:
 Hard-core Loyals : Remain with one brand only.
 Split - Loyals: Loyal with two brands and buys from those two only.
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 Shifting Loyals: Their brand loyalty shifts from one brand to other.
 Switchers: No brand loyalty at all. (Kotler, 2017)

EFFECTIVE SEGMENTATION CRITERIA

To be useful, market segments must rate favourably on five key criteria:

MEASURABLE: The size, purchasing power, and characteristics of the segments can be
measured
SUBSTANTIAL: The segments are large and profitable enough to serve. A segment should be the
largest possible homogeneous group worth going after with a tailored marketing program.
ACCESSIBLE: The segments can be effectively reached and served.
DIFFERENTIABLE: The segments are conceptually distinguishable and respond differently to
different marketing-mix elements and programs.
ACTIONABLE: Effective programs can be formulated for attracting and serving the segments
(Kotler, 2017, pp. 284-285)

Q1.According to you what will be the appropriate basis for segmentation for
(a) Mobile Phones
(b) Soups
(c) Designer Sunglasses
(d) Coffee
(e) A toothpaste
(f) A daily moisturiser

Q2. Select a product and brand that you use frequently and list the benefits you receive from
using it. Without disclosing your list, ask a fellow student who uses a different brand in this
product category to make a similar list for his or her brand. Compare the two lists and identify
the implications for using benefit segmentation to market the two brands.

Q3. Does your lifestyle differ significantly from your parents’ lifestyle? If so, how are the two
lifestyles different? What factors cause these differences?

Q4. Identify the bases for segmentation in the following examples. Justify your answer.
(a) Consumer electronics maker Micromax announced its foray into the air cooler category with
products priced between Rs 5,990-16,990. Micromax will have a full-fledged range of room
air coolers including personal, tower, desert and window. The company entered the
consumer electronics category in 2012 with the launch of LED televisions and is also present
in the AC segment.

(b) Eveready Industries India (EIIL) has entered the Rs 9,000 crore plus confectionery market
through its brand 'Jollies'. According to a release issued by the company, Jollies will be
launched in the Rs 400 crore fruit chew segment during the first phase. It will be priced at Re
1. Eveready will look to leverage its deep distribution network across urban and rural India
even as it follows an asset light model and aims at quick profitability with entry into this
segment. (ET, 2018)

(c) Prestige Clean Home, a subsidiary of TTK Prestige, India’s largest kitchen appliances brand,
announced the launch of India’s first domestic electric mop and a new range of water

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purifiers. The electric mop, a completely new concept, designed with Indian needs in
particular, was conceptualized by Mr TT Jagannathan, Chairman of TTK Group. (Watch:
Prestige Launches electric MOP, 2017).

MARKETING INSIGHT: NO FEAR OF FAILURE: MARICO AGAIN SIGHTS

HEALTH & WELLNESS
Edible oil and personal care products maker Marico will soon return to the health and wellness food
market by launching more than half a dozen items as part of its wider strategy to expand its
portfolio with premium new age products. The company will roll out a range of food and beverages
products including green tea and coffee, high protein breakfast cereals, soups and protein shakes
under Saffola Fittify brand next quarter, with their distribution entirely focused on modern trade
and online channels, a top official said.

“This gives us an opportunity to try out new products even if we don’t succeed in every category,”
said Saugata Gupta, managing director at Marico. “These products are no longer niche and the
market is at an inflection point. We have internally created a division which will continue to
experiment with such products without any fear of failure,” he said. This is Marico’s second
attempt to enter the health and wellness food market. Over the past decade, the maker of Saffola
and Parachute brands had entered segments such as salt, snacks, rice and wheat flour for
diabetics, weight and cholesterol management, which were either completely withdrawn or
restricted to few markets. However, it succeeded in the ₹400-crore oats segment where Saffola
Oats has more than 30% market share now.

Marico’s business team for the new range of health and wellness food products, internally called
Engine 2, runs like a new entrepreneurial company to create and incubate new categories as it
targets a 70% increase in revenue to ₹10,000 crore by 2020, Gupta said. Marico’s latest bet comes
at a time when Hindustan Unilever made its most ambitious
foray into the health and wellness space by acquiring GSK
Consumer brands with plans to extend Horlicks into similar
nutritional product segments. Also, a host of consumer
startups have seen their pricier and gourmet products such as
Greek yoghurt brand Epigamia and Raw Pressery juice fly off
shelves as consumers switch to healthier food choices.

“Over the past few years, one of the disappointments

investors harboured for Marico was regarding the subdued
performance of its new launches. Except for Saffola Masala
oats, launched over six years ago, none of the new launches
have contributed significantly to the sales growth,” wrote
Krishnan Sambamoorthy and Vishal Punmiya, analysts at
Motilal Oswal, in a recent investors note. “However, over the
past 18 months, Marico has pulled up its socks and now has a
strong product pipeline with a few initial successes.” There has
been an evident stepup in the pace of new launches over the
past 18 months with Marico launching one new product every
month on an average, mostly in value added personal care

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space, in an effort to boost margins. Marico quit the traders lane on Masjid Bunder in Mumbai
more than 45 years ago with an ambition to make two highly commoditised products — edible and
coconut oil — national brands. Today, Parachute and Saffola are among the biggest oil brands in
the country, although their contribution to Marico’s overall sales is below half now. “Saffola is a
₹1,000-crore brand, contributing nearly 16% of our sales. However, we need to move away from
being just an edible oil brand,” Gupta said.

Within personal care, too, Marico has been introducing premium products — from basic coconut oil
to value-added ones and now expects innovations such as serum and creambased hair products to
drive the portfolio. A year ago, Marico bought a 45% stake in Zed Lifestyle, which owned and sold a
range of products under Beardo brand. (ET, 2018)

Q4: Analyse the Segmentation strategy of Marico.

BIBLIOGRAPHY
ET. (2018, Jan). Eveready forays into confectionery business with 'Jollies' . Retrieved from The Economic
Times: https://economictimes.indiatimes.com/industry/cons-products/food/eveready-forays-
into-confectionery-business-with-jollies/articleshow/62414859.cms

ET. (2018, December 24). No Fear of Failure. Retrieved from Economic Times:
https://epaper.timesgroup.com/olive/apa/timesofindia/#panel=document

Kotler, K. (2017). Identifying Market Segments and Targets. In K. Kotler, Marketing Managemebt 15e.
Pearson.

PTI. (2017, April). Delhi most ‘internet-ready’ state in India: Study. Retrieved from The Indian Express:
http://indianexpress.com/article/cities/delhi/delhi-most-internet-ready-state-in-india-study-
4621144/

Roll, M. (2016, Dec). The Secret of Zara’s Success: A Culture of Customer Co-creation. Retrieved from
Busines and Brand Leasdership: https://martinroll.com/resources/articles/strategy/the-
secret-of-zaras-success-a-culture-of-customer-co-creation/

Saxena, R. (2015, October). POM: Session10 Marketing Strategy - Segmentation. Retrieved from The
Awakener: http://richaprof.blogspot.in/2015/10/pom-session11a-marketing-strategy.html

US Framework and VALS™ Types. (n.d.). Retrieved from Strategic Business Insights:
http://www.strategicbusinessinsights.com/vals/ustypes.shtml

Watch: Prestige Launches electric MOP. (2017, Dec). Retrieved from The Economic Times:
https://economictimes.indiatimes.com/industry/cons-products/durables/watch-prestige-
launches-electric-mop/videoshow/61961731.cms

Principles of Marketing