Market SegmentationProject by Samara Colge

Introduction

Market refers to the total population that buys a specific product in general.

Market Segment is the portion of the market defined on the basis of the shared characteristics of the people it covers. Market segmentation is a concept in economics and marketing. It is the process of grouping buyers into different categories having common needs or desires.

A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts. These can broadly be viewed as 'positive' and 'negative' applications of the same idea, splitting up the market into smaller groups.

There may be theoretically 'ideal' market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create Product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage.

"Positive" market segmentation

Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries.

Consumer-based market segmentation can be performed on a product specific basis, to provide a close match between specific products and individuals. However, a number of generic market segment systems also exist, e.g. the system provides a broad segmentation of the population of the United States based on the statistical analysis of household and geodemographic data.

The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.

Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness.

Positioning

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Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market intended), the segment is then subject to positioning. Positioning involves ascertaining how a product or a company is perceived in the minds of consumers.

This part of the segmentation process consists of drawing up a perceptual map, which highlights rival goods within one's industry according to perceived quality and price. After the perceptual map has been devised, a firm would consider the marketing communications mix best suited to the product in question.

Price Discrimination

Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behavior is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned. Examples of this exist in the transport industry (a plane or train journey to a particular destination at a particular time is a practical monopoly) where business class customers who can afford to pay may be charged prices many times higher than economy class customers for essentially the same service.

The Need for Market Segmentation

Marketing calls for understanding Customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike.

Mass marketing refers to the treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution and mass communication. The drawback of mass marketing is that consumers needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. If firm ignored different customer needs, another firm is likely to enter the market with a product that serves a specific group and the incumbent firms would loose their customers.

Target marketing on the other hand recognises the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segments and their needs.

Benefits of Target Marketing

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Increase in Sales Volume- Segmentation recognises the existence of multiple

demand curves in a market and tailors products for each one. If the market is properly segmented, the buyer’s respective preferences are accurately defined and all segments are properly served.

Specialized Marketing- Another advantage of market segmentation is that the market can be more specialized and promotional activities can be better suited to the characteristics of the buyers. More specialized and efficient media can be used.

Sound Marketing Programs- On the basis of market segmentation, the manufacturer can prepare and follow a sound marketing program by fully understanding the customer needs. It also leads to efficiency and more success in selling.

Increase in Marketing Opportunities- Through segmentation, a manufacturer comes closer to a particular group of customers. Hence he becomes more responsive to the changes in the market.

Better Utilization of Market Resources- Market segmentation provides the opportunities of better utilization of various marketing resources. Once the target market is clearly defined, the limited resources of a company can be utilized for best research. Then there is a perfect match between market opportunities (demand) and company resources (supply).

Competitor’s Strength- Segmentation helps in effective assessment of the strengths and weaknesses of the competitors. A marketer can avoid fierce competition. If it appears that a competitor’s product is deeply entrenched in the market, then it is hardly any point in wasting precious resources of the company. On the other hand, if a competitor fails in a particular target market, then the management can take full advantage of the same market segment.

Other Advantages- Segmentation provides various types of information which are useful in market research, product development, evaluation of marketing activities, evaluation of marketing facilities and distribution etc.

Qualities of a good segment

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Philip Kotler mentioned five criteria for an effective segmentation which states that Segmentation should be-

Identifiable and Measurable- It should be possible to determine the values of the variable used for the segmentation.

Relevant- It should justify the expected profits and the growth potential. Accessible- The target customers must be reachable and servable for the

organization. Distinguishable- The target audiences must be diverse and able to show

different reactions to different marketing mix. Feasible/Substantial- The firm must have an ability to draw an effective

marketing program for its customers. Stability- Marketing strategies are long range projects. Hence, segments that

keep appearing and disappearing do not create good marketing opportunities. Dynamic- Marketers must monitor the market constantly to detect changes

so as adapt strategise accordingly.

Advantages/Merits of Market Segmentation

Helps in better understanding of the customers’ needs and wants. Better targeting and position of the product. Encourages two-way communication among the potential buyer and the

organization. Maintaining effective relationship with the customers. Retaining the existing customers and attracting new ones. Improving service delivery standards. Reducing cost / expenses on various marketing activities and increases

market share; resulting in higher profits.

Disadvantages/Demerits of Market Segmentation

If all the sub markets are not served, the total market population will be less (demand)

It will be difficult to sell highly specialized products outside their own market segment.

A large variety of goods means more designs and more taste; this means that you will need a great number of marketing tools and more complicated programs.

Bases for Market Segmentation

The bases for segmenting consumer markets include:

Demographical bases (age, family size, life cycle, occupation) Geographical bases (states, regions, countries) Behaviour bases (product knowledge, usage, attitudes, responses) Psychographic bases (lifestyle, values, personality)

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Market Segmentation strategies

Every market can be segmented to some extent as the buyers are never all alike. However, a firm may or may not wish to shape its marketing policies around these differences. In planning its marketing mix for a product or a service , a company can choose either to confront the differences among the consumers or to ignore them. Accordingly, a marketer is faced with three alternative market targeting strategies:

Undifferentiated Marketing Strategy (Market Aggregation) Differentiated Marketing Strategy (Market Segregation) Concentrated Marketing Strategy (Niche Marketing)

Market Aggregation

Market aggregation (mass marketing or undifferentiated marketing), is simply marketing a product to the largest audience possible this leads to heavy exposure of the brand and product. This also leads to reduced cost in marketing the product. Usually undifferentiated marketed products are simple and seen as neccessities such as toothpaste or toilet paper. The key disadvantage to mass marketed products is that it leaves opportunities for competitiors to set up business and market a product to a individual segmented market, meaning it is more difficult to satisfy the needs and wants of customers in the total market. the key advantage is it operates in a larger market and hence more opportunities. Example toothpaste for sensitive teeth would be segmentation whereas toothpaste for the entire market would be using market aggregation theory.

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Market Segregation

Differentiated marketing (also called multisegment marketing or market segregation). Market coverage strategy whereby a company attempts to appeal to two or more clearly defined market segments with a specific product and unique marketing strategy tailored to each separate segment. Typically differentiated marketing creates more total sales than undifferentiated marketing, but it also increases the costs of doing business. This strategy is sales oriented.

Niche Marketing

Marketing strategy whereby marketers devote 100% of their efforts toward a small segment of a market instead of the whole market. Niche marketing generally appeals to smaller companies with limited resources. Typically, the small market segment, or niche, has been overlooked or only casually served by other larger competitors but is still large enough to be profitable. There are several different niche marketing strategies: end user strategy, serving only one type of end user customer; vertical level strategy, specializing in one level of the production-distribution cycle; customer size strategy, selling products designed for only one size customer, such as petite or extra large clothes; service strategy, offering a service not available from any other company; and geographic strategy, selling only in one geographic area.

10 steps in Marketing Segmentation

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Chosen Company for Segmentation - Sunsilk

Sunsilk is a hair care brand, primarily aimed at women, produced by the Unilever group, which is now considered the world's leading company in hair conditioning and the second largest in shampoo. Sunsilk is Unilever’s leading hair care brand, and ranks as one of the Anglo-Dutch conglomerate's “billion dollar brands". Sunsilk shampoos, conditioners and other hair care products are sold in 69 countries worldwide.

Sunsilk is sold under a variety of different names in markets around the world including Elidor, Seda and Sedal. The brand is strongest in Asia, Latin America and the Middle East and is the number one hair care brand in India, Brazil, Argentina, Bolivia, Bangladesh, Sri Lanka and Thailand.

History

By 1959 it was available in 18 different countries worldwide. At the time, Sunsilk had an advantage over other shampoos in the market as it only needed one application, and so meant washing less natural oils from the hair. Sunsilk cream shampoo for dry hair was launched in 1956.

In 1960, Sunsilk Tonic shampoo was launched, containing skin healing ingredient Allantoin – designed to help keep the scalp free from infection.

In 1962, Sunsilk was marketed as a range of shampoos for different hair types.Sunsilk significantly improved product formula and launched new variants in 1966: the first major shampoo to contain olive oil, which acted as conditioner to make hair soft and manageable; shampoo for dull hair, which restored hair’s natural shine; lemon shampoo for greasy hair with deep cleansing ingredients.

Sunsilk hair spray was first launched in 1964 to enter an expanding hair-spray market, but in 1966 a new product formula was developed which gave hold, even in damp weather whilst still caring for hair. The hair spray contained a French perfume and could easily be removed by brushing or shampooing it out.

Sunsilk conditioner was launched in 1971 with three variants for dry, normal and greasy hair. In 1973, Sunsilk launched an aerosol dispensed setting lotion. An economy size shampoo bottle was introduced for Sunsilk in 1974.

In 1985, Sunsilk styling mousse was launched and 2 years later a conditioning mousse followed.

In 2001, Sunsilk moved into the hair colourant market for Asian-type dark hair, offering a range of seven permanent colours from natural black to copper with purple, red and gold tints.

In 2003, Sunsilk launched a new range of shampoos and conditioners, which were developed to meet women’s hair needs and reflect the way women think about

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their hair. The fake institute (a trademark by Sedal) "Elida Hair Institute" developed the products in response to market research. Each product contained a unique formulation of ingredients, combining the best from natural and scientific worlds to help combat common hair problems.

First advertising

Sunsilk began advertising in 1955 with a campaign that focused on specific hair "issues". In the UK, the campaign focused on shiny hair. During the 1960s, a television commercial of Sunsilk featured a tune composed by John Barry, “The girl with the sun in her hair”, which proved so popular that it was subsequently released as a pop single.

Sunsilk radio commercials were aired in 1969 featuring Derek Nimmo to support the new Sunsilk Herb shampoo for problem hair called “Hairy Tales”. In the early 1970s, Sunsilk was advertised with the slogan “All you need is Sunsilk”.

Target market and Segmentation

Females in the age group 16 – 40 (mostly upper class and upper middle class)

Different shampoos for various segments. Target segment for Sunsilk being aspiring young women – most Sunsilk ads show young women getting their hair problems solved by using Sunsilk shampoo.

Products for different segments Yellow Sunsilk for normal hair Black Sunsilk for dull hair Green Sunsilk for thin and limp hair Pink Sunsilk for dry hair Orange Sunsilk for oily hair

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My product for segmentation - Shoes

For Ladies

Formal Shoes – used as office wear and for formal occasions.

Party Shoes – Used for parties and casual occasions

Sports Shoes - used while exercising, etc.

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For Men

Formal Wear– used as office wear and for formal occasions.

Casual shoes – used while going out

Sport shoes- used for various games, for exercising, etc.

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For children

School Shoes

Casual shoes – for everyday use.

Waterproof shoes

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For Old People

For specific occupations

Nurse’s shoes

Engineer’s shoes (safety Shoes)

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Glossary

rate fences - techniques for separating customers so that segments for whom the service offers high value are unable to take advantage of lower-priced offers

Geodemography includes the application of geodemographic classifications for business, social research and public policy but has a parallel history in academic research seeking to understand the processes by which settlements (notably, cities) evolve and neighborhoods are formed. It links the sciences of demography, the study of human population dynamics, geography, the study of the locational and spatial variation of both physical and human phenomena on Earth, and also sociology. In short, geodemography is the art and science of profiling people based on where they live. Geodemographic systems estimate the most probable characteristics of people based on the pooled profile of all people living in a small area near a particular address

Market coverage - method for evaluating the various segments of the marketplace and deciding which segments to cover in the marketing of a particular product.

Bibliography

www.Google.com www.wikipedia.com www.allbuisness.com www.wiki.servsig.com www.wiki.answers.com www.marketsegmentation.com Notes Provided by school

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