15th March 2010
ACOM321/121/172
A market is:
An aggregate/collective group of people who, as individuals or organizations, have needs for
products in a product class and who have the ability, willingness and authority to purchase
such products (conditions needed for an exchange).
Segment (part, slice, division, section etc).
Market segmentation is the process of dividing a total market into market groups
consisting of people who have relatively similar product needs, there are clusters of needs.
Marketing segmentation is the process of subdividing a market into distinct subsets of
customers that behave in the same way or have similar needs. Each subset may possibly be
chose as a market target to be reached with different marketing strategy.
SEGMENTING THE MARKETS
Advantages:
It forces the markets to focus more on the customers needs; target a particular
market segment more efficiently than spreading limited resources over a wide area.
Segmentation leads to the identification of excellent new marketing
opportunities/Identify new or highly profitable markets or new channels of
distribution.
It provides guidelines for the development of separate market offerings and
strategies for the various market segments/maintain sales but reduce expenditure
on promotion and advertising.
Disadvantages:
Generally there is an increase in costs with segmentation stemming from increased;
Market research (the
gathering, recording and analysing of facts about problems relating to the
transfer and sales of goods and services"). - the need to better understand the needs of
the various market segments.
Research and development - the need to produce different products for the
different market segments.
Production costs-the need for different products for different market segments.
Administrative costs-the need for separate marketing plans for the different
segments.
Distribution costs-the need for different distribution channels for different
market segments.
Advertising and sales costs-separate plans have to be developed and implemented
for each segment.
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
1
15th March 2010
ACOM321/121/172
Successful segmentation
Assuming you do decide on the latter, the question, now, is 'how are you going to do
it'? In answer to that it is important to realize that successful segmentation
requires three things, namely that the segments are;
Measurable.
It is important to be able to measure the segment, otherwise its potential
for sales cannot be estimated.
Sizeable.
Pursuing a market segment that is too small is not profitable. The segment
must be large enough to support the business. You have to recognize that
some segments are simply too small to;
Justify the cost of developing a product to serve their specific needs. (Don’t
spent a lot for less money-loss)
Produce sufficient revenue to permit the product to be advertised and
promoted. (Don’t run out of funds while still in the process of advertising
and promoting).
Reachable.
You must be able to penetrate the market without incurring excessive
advertising, promotion and distribution costs. Reach rural people if they can
not read a lot don’t listen to the radio. The segment has to be accessible and
servable for the organization. That means, for instance, that there are
target-group specific advertising media, as magazines or websites the target
audience likes to use.
Actionable
It must be possible to develop separate market offerings for different
market segments. Smaller enterprises are often unable to develop different
market offerings or marketing strategies, even if they realize that there
are distinct differences between various segments.
Differentiable
People in different segments must have different needs, demands and
desires.
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
2
15th March 2010
ACOM321/121/172
People in the same segment must have similar characteristics and needs.
The marketer should also be able to differentiate the segments from each
other without too much difficulty.
Ways in which markets can be segmented
As mentioned already, there are various ways in which markets can be segmented.
The most usual are;
Geographic segmentation.
Different regions often provide unique marketing opportunities because of
historic, climatic or physical conditions, while many products differ in their
per capital consumption by geographic area. Thus geographic segmentation
requires that marketing effort is concentrated in an area of high, or
potentially high, consumption.
Demographic segmentation.
This is very widely used in domestic markets. It involves classifying the
population according such demographic variables as age, sex, family size,
stage in the life-cycle, religion, socio-economic status, etc. Usually such
variables are easy to measure and readily available.
Psychographic segmentation.
This relates to the attitudes, perceptions and behaviour patterns of the
consumer, which are much more difficult to measure.
Behavioural segmentation.
This is based on the way the product is used and once again is difficult to
measure.
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
3
15th March 2010
ACOM321/121/172
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
4
15th March 2010
ACOM321/121/172
PEST analysis
Finally, it is important to appreciate that markets are not static - that they change
and over time they grow and contract. Ideally you want to be in a growth market or
a market that is set to grow. The way to consider what is likely to happen to any
market that you are thinking of entering is to conduct a PEST analysis. This requires
that you consider the;
Political,
Economic,
Sociological
Technological
factors that impact on your target market, and consider their likely impact in the
future. For example, it might be known that, if elected to government, a political
party might introduce a particular piece of legislation. You need to consider what
the impact of this might be on the market and the demand for your product.
Thus, you need to;
Identify your market and decide whether it is uniform or segmented.
Determine how and why it is segmented if it is.
Decide on whether you are going to adopt an undifferentiated or
segmentation approach.
Identify your target market(s).
Develop a separate marketing strategy for each of the market segments you
decide to target.
Generally the most appropriate strategy depends upon the stage of market
development. For;
New products an undifferentiated marketing strategy is often appropriate
since there are few competitors, production is limited and growth is likely to
be rapid.
Established products market segmentation is likely to be the most
appropriate strategy as there are likely to be many competitors, excess
production, price competition, relatively slow growth and unexploited market
segments.
Established market segments either get out of the market or adopt a
concentrated marketing strategy (undifferentiated marketing within
specific segments) since there are likely to be many competitors, excess
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
5
15th March 2010
ACOM321/121/172
production, slow growth, price competition and, importantly, further
segmentation is not possible.
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
6
15th March 2010
ACOM321/121/172
Consumer Markets
Industrial Markets / Business Markets
Geographic:

Industry

Intermediary or final consumer

Type of corporation (public or private sector)
Demographic:

Size of corporation
 Age, sex, marital status; young married with
children, older married couples with children, single,

Geographical location

Intensity of product use

Organization of purchasing function

Centralized or decentralized

Purchasing policies, rules and criteria




Land or region; Gauteng, Pinetown, North West
Density; rural or metropolitan area;
Climate; northern, southern, winter rainfall
Income, R10 000; R10 000-R20 000

occupation, students, farmers, supervisors

education, grade school, high school, college


Religion, Catholic, Protestant, Jewish
Nationality, American, Mosotho, Chinese,
Psychographic:

Social status; upper class, middle class,

Lifestyle-type; conservative, liberal

Personal type; gregarious, authoritarian, impulsive
Behavioral:

Purchase occasion; regular occasion, special occasion

Attitude towards product, positive, indifferent, hostile

User behaviors,
Since customer orientation of organizations is growing, segmentation as the basis for
establishing customer relationships and customer loyalty gains importance. In this context,
the elements of the loyalty ladder model could be used as segmentation variables:
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
7
15th March 2010
ACOM321/121/172
Target market
Target market is the market segment to which a particular good or service is marketed (the group of
market segment toward which all marketing activities will be directed.
Product Positioning
Product Positioning is the process where the customers perceive a product in terms of its
characteristics and advantages, and its competitive positioning. It involves the creation, in the minds of
the targeted buyers, of a distinctive position with regard to the organization’s product relative to the
products of competing organizations.
Department of Communication Science
Mr. M. R. D. Metso Lesotho
Office 606
Faculty of Arts Building
8