Market Segmentation 111

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introduction

Market segmentation is the process of dividing the total market for a good or

service into several smaller, internally homogeneous groups. Members of each

group are similar with respect to the factors that influence demand. Therefore, to

stay focused rather than scattering their marketing resources, more marketers are

using market segmentation. In this approach, which falls midway between mass

marketing and individual marketing, each segments buyers are assumed to be

quite similar in wants and needs, yet no two buyers are really alike. To use this

technique, a company must understand both the levels and the patterns of market

segmentation.

REQUIREMENTS OF effective market SEGMENTATION

It is difficult to effectively cater for everybody in the market place, so businesses

will aim their products and services at specific parts of the market. After selecting

asegment(of the market), businesses should evaluate their choice carefully and

ensure they have made the right decision. If a business begins promoting products

(at market segments) without a full evaluation, it is risking wasting time and

money. A successful market segment will usually meet the following criteria:
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Clearly Defined and Distinguishable Segment

The chosen segments should be clearly defined to avoid doubt about which part of

the market, the firm's marketing activities are aimed at. Otherwise there is a risk

that market activities will "spill over" into different segments. If there is more than

one segment, each one should be made up of target markets which require specific

marketing, due to differences in buying behaviour. For example if married and

unmarried men behave similarly when purchasing shoes, there is little value in

placing them in different segments.

Measurability of Segment

Before embarking on a sales strategy it is important to know the size of existing

sales in that segment. A firm also needs to know how product sales are growing in

the chosen segment. If you can not measure the growth rate, it will be difficult to

assess whether your chosen segment is profitable. For example smart phone sales

are growing rapidly but which segments of the market are they growing in? and in

which segments is growth stagnant?


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Accessibility of segment

Accessibility is about communicating with your customers and being able to get

things to them. Communication is usually through the internet, TV, radio. However

if target customers do not use these things it will be difficult to communicate with

them. Post is also a challenge unless you can find out where people making up

your market segment live. If you cannot target your segment effectively through

marketing communication then it is not viable as you will be unable to tell them

about your product or firm.

The other aspect of accessibility is being able to distribute your product to your

chosen segment. For example a shop based in South London is unlikely to get a

large number of customers from North England. In this instance the shop will have

to reassess it's chosen segment or think about solutions to help accessibility such as

selling to customers through the internet and mailing out purchases.

Size and Suitability of Segment

Firms need to ensure that the segment is suitable. This means that the

characteristics of the people making up the segment, suggest the segment are likely

to buy the product and have the spending power to buy the product.


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There needs to be an opportunity to increase product sales within the chosen

segment. Using our smart phone example, if the chosen segment contains people

aged 20-30 and if we imagine 95% of this age group own a smart phone, the

chosen segment will probably need to be reconsidered. This is unless the company

feels that the segment would like to replace their existing smart phone and have the

money to purchase a replacement smart phone.

Segment suitability also includes the size of the segment. If the segment is too

small, potential for sales growth will be limited. If is is too large, it will be difficult

to create marketing activities to suit all of the groups included in the segment.

Actionability of Segment

Even if all of the criteria listed above are satisfied a segment is unsuitable unless

the business has the resources to cater for the needs of the segment. For example a

small business with a 45000 turnover would not accept a multi million pound

manufacturing contract.

Conclusion

An effective segment is defined, measurable, accessible, actionable and suitable for

the firm. These elements mean that a firm


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- has a clearly defined, distinguishable and profitable segment

- has the resources to cater for its segments and

- is able to access its segment,

so that it can profit from a segment with growing product sales. If any of these

elements is missing it will hinder the success of the firm and lead to wasted effort.


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The Importance of Market Segmentation


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Market segmentation is the process of identifying your target demographics

and then determining the best advertising mediums to reach that audience.

Developing a focused marketing approach can increase your revenue and

raise your marketing return on investment, according to the Center for

Business Planning website. When you understand the importance of market

segmentation, you begin to appreciate the value of precise marketing

campaigns.

Understand Customers

To sell to your customers, you first must understand why they would want to buyyour product. Market segmentation allows for the development of profiles of the

many different kinds of customer groups who buy your products. You can use this

information to create better marketing programs. It also can be used to develop

products for your target audience.

Maximize Product Potential

Segmenting your market helps you understand how your product is being used byvarious customer groups. During the course of your market segmentation, you may

come across an alternate use for your product that had not been previously

discussed. You may discover a new market for your product.


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Improve Distribution Network

Market segmentation assists companies in developing more efficient distribution

networks. By studying the buying behaviors of various target customer groups, you

can determine the way that customers prefer to buy your product. If customers

prefer to buy online, you will want to focus on your online presence and reduce the

resources you put into retail stores. Market segmentation also helps you identify

geographic areas where your products are popular.

Gain New Clients

A comprehensive market segmentation analysis includes reasons why consumersare not buying your products. By understanding why the various market segments

do not buy your products, you can alter your marketing or change your product

development to try to gain new customers. It is important to have a balance when

trying to gain new clients as you do not want to alienate and lose your existing

customer base.

Steps in Market Segmentation

1. Identify the target marketThe first and foremost step is to identify the target market. The marketers

must be very clear about who all should be included in a common segment.


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Make sure the individuals have something in common. A male and a female

cant be included in one segment as they have different needs and

expectations.

Burberry stocks separate merchandise for both men and women. The

management is very clear on the target market and has separate strategies for

product promotion amongst both the segments.

A Garnier mens deodorant would obviously not sell if the company uses a

female model to create awareness.

Segmentation helps the organizations decide on the marketing strategies and

promotional schemes.

Maruti Suzuki has adopted a focused approach and wisely created segments

within a large market to promote their cars.

Lower Income Group - Maruti 800, Alto

Middle Income Group - Wagon R, Swift, Swift Dzire, Ritz

High Income Group - Maruti Suzuki Kizashi, Suzuki Grand Vitara

Suzuki Grand Vitara would obviously have no takers amongst the lower

income group.


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The target market for Rado, Omega or Tag Heuer is the premium segment as

compared to Maxima or a Sonata watch.

2. Identify expectations of Target AudienceOnce the target market is decided, it is essential to find out the needs of the

target audience. The product must meet the expectations of the individuals.

The marketer must interact with the target audience to know more about

their interests and demands.

Kelloggs K special was launched specifically for the individuals who

wanted to cut down on their calorie intake.

Marketing professionals or individuals exposed to sun rays for a long

duration need something which would protect their skin from the harmful

effects of sun rays. Keeping this in mind, many organizations came with the

concept of sunscreen lotions and creams with a sun protection factor

especially for men.

3. Create SubgroupsThe organizations should ensure their target market is well defined. Create

subgroups within groups for effective results.

Cosmetics for females now come in various categories.


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Creams and Lotions for girls between 20-25 years would focusmore on fairness.

Creams and lotions for girls between 25 to 35 years promise to

reduce the signs of ageing.

4. Review the needs of the target audienceIt is essential for the marketer to review the needs and preferences of

individuals belonging to each segment and sub-segment. The consumers of a

particular segment must respond to similar fluctuations in the market and

similar marketing strategies.

5. Name your market SegmentGive an appropriate name to each segment. It makes implementation of

strategies easier.

A kids section can have various segments namely new born, infants, toddlers

and so on.

6. Marketing StrategiesDevise relevant strategies to promote brands amongst each segment.

Remember you cant afford to have same strategies for all the segments.

Make sure there is a connect between the product and the target audience.


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Advertisements promoting female toiletries cant afford to have a male

model, else the purpose gets nullified.

A model promoting a sunscreen lotion has to be shown roaming or working

in sun for the desired impact.

7. Review the behaviorReview the behavior of the target audience frequently. It is not necessary

individuals would have the same requirement (demand) all through the year.

Demands vary, perceptions change and interests differ. A detailed study of

the target audience is essential.

8. Size of the Target MarketIt is essential to know the target market size. Collect necessary data for the

same. It helps in sales planning and forecasting.


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Basis of Market Segmentation

Gender

The marketers divide the market into smaller segments based on gender.

Both men and women have different interests and preferences, and thus

the need for segmentation.

Organizations need to have different marketing strategies for men which

would obviously not work in case of females.

A woman would not purchase a product meant for males and vice a

versa.

The segmentation of the market as per the gender is important in many

industries like cosmetics, footwear, jewellery and apparel industries.

Age Group

Division on the basis of age group of the target audience is also one of

the ways of market segmentation.

The products and marketing strategies for teenagers would obviously be

different than kids.

Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams

Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags


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Age group (20 years and above) - Cosmetics, Anti-Ageing Products,

Magazines, apparels and so on

IncomeMarketers divide the consumers into small segments as per their income.

Individuals are classified into segments according to their monthly

earnings.

The three categories are:

High income Group

Mid Income Group

Low Income Group

Stores catering to the higher income group would have different range of

products and strategies as compared to stores which target the lower

income group.

Pantaloon, Carrefour, Shoppers stop target the high income group as

compared to Vishal Retail, Reliance Retail or Big bazaar who cater to the

individuals belonging to the lower income segment.

Marital Status


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Market segmentation can also be as per the marital status of the

individuals. Travel agencies would not have similar holiday packages for

bachelors and married couples.

Occupation

Office goers would have different needs as compared to school / college

students.

A beach house shirt or a funky T Shirt would have no takers in a Zodiac

Store as it caters specifically to the professionals.

Types of Market Segmentation

Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals. The

individuals attitude, interest, value help the marketers to classify them

into small groups.

Behaviouralistic Segmentation

The loyalties of the customers towards a particular brand help the

marketers to classify them into smaller groups, each group comprising of

individuals loyal towards a particular brand.

Geographic Segmentation


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Geographic segmentation refers to the classification of market into

various geographical areas. A marketer cant have similar strategies for

individuals living at different places.

Nestle promotes Nescafe all through the year in cold states of the country

as compared to places which have well defined summer and winter

season.

McDonalds in India does not sell beef products as it is strictly against

the religious beliefs of the countrymen, whereas McDonalds in US

freely sells and promotes beef products.

The Advantages of Marketing Segmentation

Stronger Positioning

In her Strategic Market Segmentation article "Four Benefits of MarketSegmentation," 30 year marketing and communications professional Linda

P. Morton, Ed.D., explains that market segmentation helps companies

achieve stronger positioning. Positioning is creating a distinct perception in

your customers' mind about what makes your products different and better.


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Having more narrowly defined segments makes it easier for marketers to

deliver effective messages that convey the benefits and value desired by that

distinct segment.

Improved Efficiency

Marketing efficiency is a major emphasis of market segmentation. Bybreaking customers into defined segments, companies can remove

prospects from consideration when selecting media for message delivery.

Advertisements are typically paid for based on the number of people

reached by a message. Messages delivered to people not in a given segment

have little business benefit and wastes money. Segmenting markets and

selectively distributing marketing messages improves the value of the

message.

Competitive Advantages

Morton points out that carefully and accurately defined market segmentsgives you a competitive advantage over competitors. Essentially, the

company that best understands what makes customers unique within a

segment, and different from one segment to the next, wins. By better

knowing your customer segments, you are most likely to deliver an effective

value proposition that entices the customer to your brand. When you know


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who you are trying to reach, you can perform more targeted research to

learn more about customers and deliver messages that best match your

brand strengths to their needs and wants.

Targeted Media

Selecting the best media class and vehicle to deliver your marketingmessages is crucial to efficient marketing. When you have well-defined

market segments and know who you are targeting, it is easier to find the

right medium to communicate. If you sell camping equipment, for instance,

presenting an add in an outdoor or adventure magazine might make sense

given likely interests of the market. In another article on "Market

Segmentation: Media," Morton notes that different generally defined

market segments are known for utilizing certain types of media more often.

Documents

Market Segmentation 111