Content of the Lecture
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Definition of Market Segmentation
Purpose of segmentation
Types of segmentation
Segmentation process
Levels of segmentation
What really is a market?
A place where forces of demand
and supply operate
Essentials of Segmentation / Targeting
• What is the size of the market?
• What unique need does your GENRE of product/ services meet?
• How much are customers willing to pay for this product/ service (top/
bottom/average)?
• Is this a price sensitive/ commodity product or premium product?
• Who are the other key players?
• What is the gap un-serviced by current players?
• What is the REAL available market for you?
• How is your product different from competition?
• What is your playing field? (premium/ general/ price warrior)
• What share of this can you reasonably expect to get?
Definition
• A market segment is a subgroup of people or
organizations sharing one or more characteristics
that cause them to have similar product needs.
 it is distinct from other segments (heterogeneity across
segments)
 it is homogeneous within the segment (exhibits common
attributes)
 it responds similarly to a market stimuli
 it can be reached by a Communication Channel
Criteria for Segmentation
Measurable
Accessible
• Size, purchasing power, profiles
of segments can be measured
• Can be reached and served
Substantial
• Large and profitable enough to
serve
Differential
• Respond differently
Actionable
• Effective programs can be developed
Purpose
• Increase marketing
efficiency by focusing
marketing efforts to a
particular group
• Maximize scarce
marketing resources
• Find a market with
limited competition
• Select the most
profitable segment
Product Segementation by Industry
Segmentation Criteria
• Geographic variables
– region of the world or country: East, West, South,
North, Central, coastal, hilly, etc.
– size: Metropolitan Cities, small cities, towns.
– density of area: Urban, Semi-urban, Rural.
– climate: Hot, Cold, Humid, Rainy.
Segmentation Criteria
Geographic
Nations, states,
regions or cities
Demographic
Age, gender,
family size and life
cycle,
or income
Psychographic
Social class, lifestyle,
or personality
Behavioral
Occasions, benefits, uses, or
responses
Demographic Criteria
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Demographic variables
– age
– gender
– sexual orientation
– family size
– family life cycle
– education
– income
– occupation
– socioeconomic status
– religion
– nationality/race
– language
Psychographic Criteria
• Psychographic
variables
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personality
life style
value
attitude
Behavioral Criteria
• Behavioral variables
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benefit sought
product usage rate
brand loyalty
product end use
readiness-to-buy stage
decision making unit
profitability
income status
Heavy Users / Light Users
Segmenting Business Markets
• Demographic segmentation
– Industry, company size, location
• Operating variables
– Technology, usage status, customer capabilities
• Purchasing approaches
• Situational factors
– Urgency, specific application, size of order
• Personal characteristics
– Buyer-seller similarity, attitudes toward risk, loyalty
Segmenting International Markets
• Geographic segmentation
– Location or region
• Economic factors
– Population income or level of economic development
– Emerging Countries
• Political and legal factors
– Type / stability of government, monetary regulations, bureaucracy,
etc.
• Cultural factors
– Language, religion, values, attitudes, customs, behavioral patterns
Market Segmentation Process
1. Determine the characteristics of segments in the
target market & separate these segments in the
market based on these characteristics.
2. Verify the market segments size if adequate enough
to support the organization's product.
3. Develop a marketing strategy to target this market.
Market Segmentation Process
Example minor Entrepreneurship
Desktop Computers:
- Home Use
- Office Use
- Gaming
Market Segmentation Process
6. Develop Marketing
Mix for Each Target Segment
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
3. Develop Measures
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
1. Identify Bases
for Segmenting the Market
Market
Positioning
Market
Targeting
Market Segmentation
Levels of Segmentation
Mass Marketing
Same product to all consumers
(no segmentation)
Segment Marketing
Different products to one or more segments
(some segmentation)
Niche Marketing
Different products to subgroups within segments
( more segmentation)
Micromarketing
Products to suit the tastes of individuals or locations
(complete segmentation)
Target Marketing
Consists of a set of buyers who share common
needs or characteristics that the company decides
to serve
Target Marketing
• Evaluating Market Segments
– Segment size and growth
– Segment structural attractiveness
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Level of competition
Substitute products
Power of buyers
Powerful suppliers
– Company objectives and resources
Target Marketing
• Selecting Target Market Segments
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Undifferentiated (mass) marketing
Differentiated (segmented) marketing
Concentrated (niche) marketing
Micromarketing (local or individual)
Company
Company
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Shampoo
Shampoo for dry hair, long hair etc
Shampoo with natural ingredients
Shampoo for Hair salons
Company
Choosing a Target Marketing Strategy
• Considerations include:
– Company resources
– The degree of product variability
– Product’s life-cycle stage
– Market variability
– Competitors’ marketing strategies
– References, experience with the market
Positioning
– The term 'positioning' refers to the consumer's
perception of a product or service in relation to its
competitors.
– Positioning is all about 'perception'.
– Perception differs from person to person, market
to market
e.g what you perceive as quality, value for money,
etc, is different to my perception
Essentials of Segmentation / Targeting
• What is the size of your market?
• What unique need does your product/ services meet?
• How much are customers willing to pay for your product/ service (top/
bottom/average)?
• Is this a price sensitive/ commodity product or premium product?
• Who are the other key players?
• What is the gap un-serviced by current players?
• What is the REAL available market for you?
• How is your product different from competition?
• What is your playing field? (premium/ general/ price warrior)
• What share of this can you reasonably expect to get?