WHAT IS MARKET SEGMENTATION?

When trying to reach customers with a marketing message or ad campaign, targeting the right
market with the right message is essential , If you aim too broadly, your message might reach
a few people who end up becoming customers, but you’ll also reach a lot of people who
aren’t interested in your products or services. When your messaging isn’t optimized for your
audience, you’ll end up with a lot of wasted advertising money.
Market segmentation can help you to target just the people most likely to become
satisfied customers of your company or enthusiastic consumers of your content. To segment a
market, you split it up into groups that have similar characteristics. You can base a segment
on one or more qualities. Splitting up an audience in this way allows for more precisely
targeted marketing and personalized content. Market segmentation offers an opportunity to
pinpoint exactly what messaging will drive your customers to make a purchase.
The 4 basic types of market segmentation are:
1.Demographic
2.Psychographic
3.Geographic
4. Behavioural
1. Demographic segmentation: The who
Demographic segmentation might be the first thing people think of when they hear ‘market
segmentation’. This is perhaps the most straightforward way of defining customer groups, but
it remains powerful. Demographic segmentation looks at identifiable non-character traits
such as:
 Age
 Gender
 Ethnicity
 Income
 Level of education
 Religion
 Profession/role in a company
For example. demographic segmentation might target potential customers based on their
income, so your marketing budget isn’t wasted directing your messaging at people who likely
can’t afford your product. Eg: Mount Blanc; Louie Vuitton
2. Psychographic segmentation: The why
Psychographic segmentation is focused on your customers’ personalities and interests. Here
we might look at customers and define them by their:
 Personality traits
 Hobbies
 Life goals
  Lifestyles
 Values
 Beliefs
Compared to demographic segmentation, this can be a harder set to identify. Good research is
vital and, when done well, psychographic segmentation can allow for incredibly effective
marketing that consumers will feel speaks to them on a much more personal level.
Eg: Omni Hotels & Resort
3. Geographic segmentation: The where
By comparison, geographic segmentation is often one of the easiest to identify, grouping
customers with regards to their physical location. This can be defined in any number of ways:
 Country
 Region
 City
 Postal code
For example, it’s possible to group customers within a set radius of a certain location – an
excellent option for marketers of live events looking to reach local audiences. Being aware of
your customers’ location allows for all sorts of considerations when advertising to consumers.
Eg: Online shoe store could show different products depending on where the visiting
customer was based: wellington boots for someone in the countryside, pavement-friendly
trainers for a city-dweller, strappy sandals to resort visitors, and so on!
4. Behavioural segmentation: The how
Behavioural segmentation is possibly the most useful of all for e-commerce businesses. As
with psychographic segmentation, it requires a little data to be truly effective – but much of
this can be gathered via your website itself. Here we group customers with regards to their:
 Spending habits
 Purchasing habits
 Browsing habits
 Interactions with the brand
 Loyalty to brand
 Previous product feedback
All of these are datasets that can be harvested from a customer’s usage of your website.
Behavioural segmentation to deliver highly relevant and targeted campaigns based on a
number of behavioural patterns listed below
 Number of sessions to your website
 Number of pages visited
 Time spent on site
 URLs visited
 Page types visited
 Shopping cart value
  Campaign history
 Referral source
 Exit intent
 Inactivity, and more.
For example, we can distinguish between a first-time visitor and someone who’s already been
on your site multiple times but haven’t purchased. Based on this behavioural data, we can
tailor our messaging accordingly.
First time visitor: Hey, learn about our latest collection!
Returning visitor: Join our loyalty program and start saving!
PROCESS OF SEGMENTATION
 Identify the potential of the market
 Determine the differentiation
 Presence of competitors
 Profitability of the segment
BENEFITS OF MARKET SEGMENTATION
 More effective marketing
 More efficient spending
 Higher quality leads
 Identifying niche markets
 Improved customer retention
 Differentiating your brand
 More focus
MARKET TARGETING - Decide on which segment to serve.
Once the market segmentation has been completed, the company should be aware of the
needs and wants of its selected segments. It is in the interest of the business to identify any
untapped needs in the marketplace, as there could be customers who may not be adequately
served by competitors. It is then necessary to identify the most profitable segments and to
decide which segments will be served. There are three market coverage alternatives which
can be applied; undifferentiated marketing; differentiated marketing and concentrated
marketing.
1. UNDIFFERENTIATED STRATEGY- Whole market is one.
An undifferentiated marketing strategy ignores any differences in the market.
Therefore, this strategy involves approaching the customers with one market offer. In this day
and age, discerned customers are increasingly becoming more demanding. It will prove
difficult for the business to develop a product or a brand which will satisfy all consumers who
may have different needs, wants and expectations.
Advantages- EOS, Maximum utilisation of resources, cost effective and specialisation.
Disadvantages- Ignores consumer concerns.
2. DIFFERENTIATION STRATEGY- targets different segments differently.
A differentiated marketing strategy will usually involve targeting a number of segments. This
marketing coverage strategy entails developing an individual product or service offering, and
creating a marketing plan for each and every segment. Hence, the company should carry out a
thorough market research to learn about how it can satisfy its selected segments. This will
translate to more costs than an undifferentiated strategy. Therefore, it is extremely important
for the company to decide which services are of critical importance to its chosen segments.
The marketing managers should determine whether there will be significant margins when
opting for differentiated marketing. For example, the legacy airlines’ provision of additional
facilities, such as; separate check-in desks, airport lounge facilities, separate cabins with
comfortable seating for first class or business class passengers, as well as superior inflight
meals, will translate to greater costs for the airline.
Advantages- Varied coverage, Efficient use of resources, increased sale.
Disadvantages- Multiple marketing mix, increased cost.
3. NICHE/CONCENTRATED MARKETING- Here marketers target large share of one or
few segments (niche).
The companies with limited resources will usually target just one or a few sub-markets. If a
segment is successfully chosen, there is a possibility that the firm may earn a high rate of
return on its investment. However, this form of marketing could also involve a high-risk
factor. If the selected segment fails, the company can experience hefty losses.
In sum, the appropriate market coverage strategy may be determined by a number of factors:
• The company’s resources. If the resources are limited, concentrated marketing could be the
most logical choice;
• The type of service which is to be offered.
For example, airlines could offer chartered or scheduled service, low-cost or full-service,
long-haul or short-haul services, business or leisure services, and so on;
• Diversities within the market. The companies need to understand their customers’
requirements.
For example, independent business travellers may have different needs and wants than those
of the corporate business travellers who are sponsored by their employers;
• The competitors’ market coverage strategies.
For example, if competing airlines are successfully applying segmentation techniques;
probably, it would not make good business sense to employ an undifferentiated marketing
strategy.
Which segment should be selected?
Businesses should only consider those market segments that are profitable. Therefore, they
should target profitable customers within those segments and nurture a long-lasting
relationship with them.
Advantages- Useful for small firms, Specialisation, cost effective.
Disadvantages- Risk, Competition.
4. MICRO MARKETING- Products suited to specific needs of specific individuals or local
customer group.
a. Local marketing- Delhi Milk Scheme
b. Individual marketing- One to one marketing.
E.g- building villas, customised suit etc. Advantages- Higher customer satisfaction, efficiency
etc. Disadvantages- Costly and time consuming.

PROCESS OF TARGETING MARKET SEGMENTS

 Establish Criteria to measure market attractiveness.
 Evaluate Market attractiveness.
 Assess current position of each potential segment
 Project the future position
 Evaluate segment profitability
 Evaluate implications of possible future changes.
MARKET POSITIONING
The final stage in target marketing is product positioning. Firms formalise
“positioning statements” which specify the position they wish to occupy in their target
customers’ minds, relative to other competitors’ products or services. Customers
continuously compare products or services. Therefore, marketers must build their positioning
strategies to improve the customers’ (and prospects’) perceptions of their products. Effective
product positions have four important characteristics. Firstly, they are built around benefits
for prospective customers. Secondly, they differentiate the specific firms’ products or service
from those of key competitors. Thirdly, the respective firms need to possess relevant skills,
resources, and the credibility to deliver on their implied statements and promises. Finally, an
effective position is defensible, which means that an aggressive competitor cannot act quickly
to neutralise or pre-empt another positioning strategy.
For example, a full-service, national carrier could differentiate itself among other
competitors as the only airline offering a superior service in its 16 chosen markets.
The tourism businesses should stand out from their rivals whether they decide to position
themselves alongside competitors, or to position themselves in untapped niches. They may
position themselves for their high standards of service, additional amenities and so on.
Alternatively, low-cost carriers like Southwest Airlines could position themselves as a
punctual airline, as a no-frills airline, as a low-cost airline, as a safety-conscious airline, as a
friendly airline, and as the airline serving the western part of the U.S. Recently, they used TV
advertising to counter an unpleasant customer perception about the airline’s ‘free-for-all’
seating policy. The rationale behind this spot was to build an image in their consumers’
minds.
The way in which a firm’s product is perceived by the customers in relation
to competitor's product.
POSITIONING STRATEGY
1. On the basis of product characteristics- Shampoos claim smooth and silky
hair, Car company talks about economic aspect in fuel etc.
2. Basis of Price
3. Basis of Quality
4. Basis of User- Sachin- Boost, Aishwarya- L’Oreal etc.
5. Basis of Use- Thanda Matlab….........? Zindagi ke saath bhi Zindagi ke baad
bhi.......?
6. Basis of Product Class – Milano is premium product of Parle.
7.On the basis of symbols.

POSITIONING PROCESS
 Identification of Competitors.
 Identify how customers perceive competitors.
 Analysing competitors position
 Understanding customer requirements
 Selecting the position
 Monitoring the position

Relationship marketing Relationship marketing is the creation of customer loyalty.

Organisations use combinations of products, prices, distributions, promotions and services to
achieve this goal. According to Philip Kotler ‘Relationship marketing is the process of
building long-term trusting win-win relationship with customers, distributors, dealers and
suppliers. It promises and delivers high quality efficient services and fair prices to the other
party overtime. It results in strong economic, technical and social ties between the marketers
and the customers. According to the American Marketing Association, “relationship
marketing is marketing with the conscious aim to develop and manage long term and trusting
relationship with customers, distributors, suppliers or other parties in the marketing
environment.
There are three general levels of selling relationships with customers:
• Transaction selling: customers are sold to and not contacted again.
• Relationship selling: the seller contacts customers after the purchase to determine if they are
satisfied and have future needs.
• Partnering: the seller works continually to improve its customers’ operations sales and
profits.
Most organisations focus on single transaction with their customers. When we go to KFC and
buy a burger. They will never contact you unless you visit them for another purchase. (This is
an example of transaction selling.) Relationship marketing focuses on the transaction-making
the sale-along with follow up and service after the sale. The seller contacts the customer to
ensure satisfaction with the purchase. For eg.when you buy a car, the car company contacts
each buyer of new vehicle to determine the customer satisfaction with the car (an example of
relationship selling).
Organisations have started realising the need to identify their most important customers and
designate them for their partnering programmes. The familiar 80/20 principle states that 80%
of sales come from 20% of company’s loyal customers. The organisations best salespeople
are assigned to sell and service these customers.
Though partnering is not very popular in India but the concept of relationship marketing is
picking up.