Market Segmentation

The development of the marketing concept provides a focus for a changing producer orientation from one of unthinking control and dominance of the producer consumer relationship to one of greater sophistication.

Market segmentation is generally regarded as the essence of the marketing concept. Products like GM Cars (e.g. the 3 stages of an automobiles life journey) need to be positioned in a product market positioning are closely aligned with segmentation.

The position of a product reflects how consumers perceive it. The perceived benefits of the product to the end user will be used as a key part of the promotional strategy.

This implies the marketer will first segment the market and identify to the preferred target. Attempting to position without segmentation will be pointless. Computers can be enhanced or are now advanced enough to enable marketers to generate lists of individuals in their target market segment and send them personalised communication based on their demographics information. This process is called the Segmentation of One this actually represents a return to the relationship between producer and consumer before the advent of mass production and mass marketing.

For a segmentation to work there must be a number of constitutions to consider:Identity - how identifiable and distinguishable from other consumers is a prospective segment and how easy is it to obtain the necessary information on such people?Access - how easy is it to reach people in this segment with the marketing communications?Size does the number of the people in the segment and their purchasing power justify the cost of marketing to them?Types of segmentationGeographic Segmentation - Operates that people living in a given location have similar needs, wants and preferences that differ from people living in another location.There are limits e.g. Everyone drinks coke and due to the internet and satellite communication geographic boundaries are now obsolete. Micromarketing Is whereby different regions have different tastes. E.g. Campbells soup in the US or spicer food in California.

Climatic variations will also be applicable to geographic segmentation. E.g. there is greater demand for swimming pools in Florida than in Glasgow. In the UK water is softer in Scotland than in England, this has implications for soap, shampoo, etc marketing water softness. From a consumer point of view most buying behaviour is local, e-commerce and mail order being the exceptions. Localised consumer behaviour is often expressed through the presence of significantly large cultures or sub cultural group that is different from the main stream e.g. the spicer nachos in California due to larger Hispanic people there. Sometimes a local culture maybe marketed more widely like Jewish bagel or Indian food from Birmingham.

Some locations just have oddities e.g. more sweets eaten per capita in Scotland than England, more Irn Bru etc. Obviously useful to know form a marketing point of view. Advertising to e.g. a geographic sector can be a more cost effective way of reaching a target market.Store specific marketing should also be considered, this takes place in stores.

Demographic segmentation deals with way of categorising statistically the people in the total national population e.g. age, sex, income, education, occupation, social class, family, size, race and religion. These are essentially the different ways of viewing the same consumer. Different aspects to our identity will be relevant at different times e.g. baby food.Trends that influence most of the industrialized world The aging population - the grey pound Baby boom generations are now middle aged The proportion of young people in the population 15-20 is declining Household sizes have declined 1 person household Women have fewer children and when they do they do it later life

Types of demographic segmentation

Age: People of the same age usually have the same needs, wants and interests, peoplehowever perceive themselves from being a different age than they are.Sex: Some barriers are changing here as society changes e.g. diy kits to girls. Womenstill the main buyers of baby products. Men may buy underwear for women onoccasion.Socio-economic status (SES): Made up of education, income and occupation. Incomeis usually considered to be the most important SES variable because it is so easilymeasured.Geo-demographic segmentation: Dividing up markets according to neighbourhoode.g. London, a different range of products will appeal to people in Millwall than St.Johns Wood.PRIZM in the US divides people or households in up to 40 categories. It establishes SESrating for each neighbourhood e.g. blue blood estate where the most affluentAmerican families live to Public Assistance inner City. Along the way rural and othersuburban.ACORN is another similar thing in the UK.Psychological Lifestyle segmentation(Consumer Profiles)Divides consumers into segments based on activities, interests, and opinions. TheAmerican market is divided into 10 categories. Creating broadly defined categories e.g.Thelma traditional church goer Eleanor socialite with associated habits andspending patterns.All life styles/psychological systems are open to criticism; mainly not everyone fallsinto ten categories.Needless to say studies can be good starts to segmentation- there could be tweakingon a per product basis. Lifestyle, psychographic, psychological, segmentation useconsumer profiles.Segmentation by usageThis form of segmentation is based on information about volume and frequency ofpurchase for a given product.B S Patil6 B S PatilIt uses Electronic Point of Sale (EPOS) systems to gather information. The market isdivided into users and non users e.g. McDonalds. The 80-20 rule is in effect for mostproducts. Time and timing is also an important factor e.g. students, offered incentivesto open bank accounts as the back knows they will need mortgages etc later down theline.Benefit segmentationBased on knowledge of the benefits that consumer seeks from a product. Customisinga product by a producer as far as possible is the ultimate aim of Benefit segmentation.Or customise belt buckles in London.SummaryMarket segmentation begins when producers realise they could no longer sell whateverthey produced but had to begin competing for business. The best market condition forsuccessful segmentation seems to be based on:IdentifabilityAccessibilitySizeFive forms of segmentation were identified:-----GeographicDemographicPsychologicalSegmentation as a benefitSegmentation by useB S Patil7 A lot of work has been done on psychological segmentation producing variousattempts at classifying consumers according to personality factors.There are constantly new products coming onto the market the exact number isunquantifiable. Estimated failure rates of these new products is also large 80% - 90%.How new products and innovations are marketed and how consumers respond to them.Developing New ProductsThere are more failures than success (+75%) and even the biggest and most successfulcompanies have them. For example Sony Betamax, Ford Edsel, these companies werelarge enough and had enough profitable lines in existence to absorb losses, but manysmaller companies would go bankrupt.Pressures that lead companies to the development of new productsDeclining birth rate in the industrialised world new products have to be sold moreand more therefore to existing customers.Technological Innovation in all areas of goods and services that companies have tobe aware and adapt to them.Pressure of organisation - changes is renewal innovation isnt a luxury its universalnecessity.Total product conceptB S Patil8