MARKET SEGMENTATION
(chapter 6)
(3rd semester)
MEANING OF MARKET SEGMENTATION
Market segmentation is one of the most interesting
and useful tools in market segmentation.
Division of market onto several segments is called
market segmentation. The concept of market
segmentation is based on the assumption that no
two buyers are identical in all respect.
Market segmentation is the starting step in
applying the marketing strategy. Once
segmentation take place, the marketer targets
the identified consumer group with proper
marketing mix so as to position the product as
perceived by the target segments.
OBJECTIVES OF MARKET SEGMENTATION
The main objective of market segmentation is to
determine the differences among customers. The
marketer can frame his marketing policies and
strategies on the basis of these differences to
provide maximum satisfaction to customers.
 To identify the needs, tastes, priorities, buyingmotives of the target consumers.
 To determine marketing strategies, targets and
goals of the firm.
 To make the activities of the firm consumeroriented.
 To identify areas where the customers may be
created and market area can be explained.ss
REASONS FOR THE DEVELOPMENT OF
MARKET SEGMENTATION
It increases the understanding of real needs of the
target consumers and results n maximization of
their satisfaction. There are many reasons which
increases the acceptability of market
segmentation strategy by the manufacturers of
consumer and industrial products such as;
 Customer orientation
 Technological advancement
 Use of cost reducing techniques
 Increase in purchasing power
 Increase in competition
REQUIREMENTS/CRITERIA FOR EFFECTIVE
SEGMENTATION
Market segmentation has its own benefits and costs. The
strength of its lies in better understanding of consumers for
making intelligent marketing decisions and their
segmentation. For effective market segmentation the
following requirements must be considered:
 Identifiable
 Measurable
 Accessible
 Responsiveness
 Significant
 Substantiable
Too small and too large segments are of no use for marketing
programmers and actions.
METHODS OF MARKET SEGMENTATION
As the nature and features of every person differ.
The market therefore, can be divide in different
segments on the basis of such differences, as
under;
I.
Each buyer a separate market
II. Framing broad groups of buyers
CONCEPT OF MARKET SEGMENTATION
Market segmentation gives several benefits to the
marketing executives because it becomes easy for
them to fulfilll the demand of a particular
segment rather than to produce for all the
consumers.
Philosophy of Marketing Segmentation can be
illustrated in the following way:
Approaches to Market Segmentation
Mass
Marketing
Product Differentiation
Marketing
Market
Segmentation
Market
Targeting
Target
Marketing
Product
Positioning
BASES OR CRITERIA FOR MARKET
SEGMENTATION
The step towards developing a segmentation strategy is
to locate the base or bases for segmenting the market.
There are different bases which are used to segment
the market. Prof. Cundiff and Still have given a very
simple division of product market.
I.
Consumer market
II.
Industrial Market
The market for industrial products can be segmented on
the bases of:
(i)
Type of business
(ii)
Usual purchasing procedure
(iii) Size f users
(iv) Geographical market segmentation
SEGMENTING THE CONSUMER MARKET
The most common and popular criteria, bases or
factors for market segmentation which are used
by marketing managers may be given as under:
 Geographic Segmentation The marketer may
design his marketing strategies taking into
consideration the features of individual markets.
Geographic segmentation helps the marketer to
concentrate their efforts to the exact places.
Some examples are as follows:
(i)
Climate
(ii) Urbanization
Demographic Segmentation Under demographic
segmentation, a marketer tries to differentiate between
groups of customers on the basis of demographic
variables such as age, sex etc. Some commonly used
demographic bases are as follows:
(i)
Gender
(ii) Income
(iii) Occupation
(iv) Family-life Cycle

Psychographic Segmentation Psychographic is a recent
approach to market segmentation which has emerged
as a major alternative to traditional approach. It
describes the human characteristics of the consumers.
It segment the market ob the bases that how people
act.

Psychographic bases are difficult to measure but they
provide a useful base for segmentation. Some examples
of psychographic bases are as follows:
 Personality
 Life Cycle
 Social Class
 Marketing bases Marketing conditions also from an
important bases or criteria for market segmentation.
There are latest variables used by modern marketers.
This include:
(i)
Degree of Competition
(ii) Channels of Distribution
(iii) Buyers with price consciousnesss
Consumer-Behaviour Bases Consumer bahaviour may
also form the basis of market segmentation. Consumer
behaviour divide the market on three bases:
(i)
Usage Rate
(ii) Benefit Response
(iii) Loyalty Response

SEGMENTING THE INDUSTRIAL MARKET
Like consumer market, industrial market can also be
segmented. This segmentation is an appropriate for
industrial products as for consumer products. Some
important bases are as follows:
 Type of business activities bases
 Geographical location bases
 Usual purchasing procedures bases
 Size of user
Industrial market can also be segmented on the bases
of:
 Demographic Bases
 Situational Variables
TARGET MARKETING STRATEGIES OR
SEGMENTATION STRATEGIES
According to Philip Kotler, while evaluating
different market segments, a company must
consider the following three factors:
 Segment size and growth
 Segment structural effectiveness
 Objectives and resources of the company
There are three market targeting strategies:
(i)
Undifferentiated Marketing strategies
(ii) Differentiated Marketing strategy
(iii) Concentrated Marketing Strategy
UNDIFFERENTIATED MARKETING
STRATEGY
It is also known as market aggregation strategy. It is
just opposite to segmentation. It is a market coverage
strategy in which company treats the target market
as one and does not consider that there are market
segments that shows uncommon needs.
Features of Undifferentiated Marketing strategy
 Product is manufactured under single brand.
 Common needs of customers are given more
preferences.
 Product-oriented firms are usually adopt this
strategy.
 One marketing mix is determined for the whole
market
 One type of advertising and one marketing
programme is exercised.
DIFFERENTIATED MARKETING STRATEGY
This is also known as market segmentation. Under
this strategy grouping of customers is done on
the basis of some common features. The whole
market is divided into several segments.
Features of Differentiated marketing strategy
 It is customer-oriented strategy.
 Product line under this strategy is large/deeper.
 It attracts large number of customers from all
corners.
 It increases sales and profits of the company.
 Products are manufactured according to the need
of market segment.
CONCENTRATED MARKETING STRATEGY
Under this marketing strategy the marketer
concentrates on one particular area/segment instead
of several segments or the total market. The firm
selects a market area where there are maximum
customers with no strong competition and it can do
best in that area.
Features of Concentrated marketing strategy
 It follows one product, one segment principle.
 It creates brand monopoly.
 It attracts large number of customers of the target
marketing.
 Product is manufactured, which is best suite to the
market needs.
SELECTION OF A MARKETING STRATEGY
Market segmentation is not only concerned with
dividing the total market into some homogeneous
segments. Following are points to consider while
selecting marketing strategy.
 Company Resources
 Product Homogeneity
 Stage of Product Life Cycle
 Market Homogeneity
 Competitor’s Marketing Strategy
 Government Policy
PRODUCT DIFFERENTIATION & MARKET
SEGMENTATION
In product differentiating strategy, the
manufacturer does not make any big physical
alteration in the product rather he differentiates
his products on the basis of many attributes.
Market segmentation, on the other hand, divides
the total heterogeneous market into small
homogeneous groups/segments and tries to
produce the product that satisfies the needs of a
particular segment.
‘Product Differentiation’ & ‘Market Segmentation’
are not one and the same, though they have the
crude resemblance.
IMPORTANCE OF MARKET SEGMENTATION
Market Segmentation is the reality of the market situation.
This benefits both the marketers and the consumers.
Following advantages are receive from market
segmentation:
 Knowledge of marketing opportunities
 Adopting effective marketing programme
 Proper allocation of resources
 Better assessment of the competition
 Knowledge of customer’s needs
 Adjustment in products
 Effective advertising appeals
 Enhances marketing efficiency
 Increase in sales volume
 Benefits to customers
PRODUCT POSITIONING
Product positioning strategy is an effective
technique for creating sound product image in
the minds of customers. Product positioning
strategy is concerned with the selecting the
marketing mix, which is most appropriate to each
market segment.
Steps in Product Positioning
According to Philip Kotler, the positioning task
consists of three steps:
1.
Identifying possible competitive advantages
2.
Choosing the right competitive advantages
3.
Signaling he competitive advantages
FACTORS EFFECTING SUCCESSFUL PRODUCT
POSITIONING
For successful product positioning following factors
must be considered:
 Designing creative product features
 Sizeable and profitable market segment
 Sensitive market segment
 Existence of competition
 Adequate information about consumers
behaviour
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