Rural Management (5)

8/3/2019 Rural Management (5)

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Market Segmentation

How would you define the market as agribusiness

manager? What are the different dimensions of the market?

Process of Segmentation

Benefits of Segmentation

Thumb rules

Prof. Rushen Chahal


2/21

Market SegmentationA market can be viewed as a composite

of three basic components:

- physical attributes

- behavioral characteristics

- qualitative factors

One can define the market based onseries of dimensions within each ofthese three components

Prof. Rushen Chahal


3/21

Physical Attributes Components

Dimension 1: Size

- Number of units sold

- Rupees sales volume

- % market share

Dimension 2: Geographical location

- Physical boundaries

- Rupees sales by region, district, area

- Location attributes

Prof. Rushen Chahal


4/21

Physical Attributes Components Dimension 3: Demographic features

- Income

- Sex

- Age

- Education

- main occupation (farming, dairy)- Land holding status (small or large)

- Irrigation potential

Prof. Rushen Chahal


5/21

Physical Attributes Components Examples of each of the three

dimensional factor suggest a high

degree of quantification There is no role of subjective judgments

in describing these dimensions

Agribusiness managers feel mostcomfortable in viewing marketexclusively within this context

Prof. Rushen Chahal


6/21

Behavioral Characteristics Component

Dimension 1: When purchases are made?

- Month, Week, Season

Dimension 2: How purchases are made?

- Impulse

- Brand loyalty

- Direct request- Frequency of purchases

- Scale of each purchase

Prof. Rushen Chahal


7/21

Behavioral Characteristics

Component

Dimension 3: Purchasing Influences

- Who use product- Who buys product

- Who influences

- Buying decisions

Prof. Rushen Chahal


8/21

Behavioral Characteristics

Component

Dimension 4: Reasons for purchasing

- Utility value- Status

- Collective Compulsion

- Interlinking with other transactions- convenience

- ease of application

Prof. Rushen Chahal


9/21

Qualitative Factors Dimensions1. Risk takers or risk averters

2. Favorable versus unfavorable attitudetowards brand3. Firm versus indefinite intention to purchase

soon

These factors are largely based on subjectivemeasures and expressed in relative term These dimensions suggest attitudinal

characteristics of customers

Prof. Rushen Chahal


10/21

Market Segmentation - process

Segmentation involves identification ofgroups (segments) of buyers that differin their requirements, in terms ofsatisfying their needs

The members of each of the groups

have similar requirements, andtherefore, each segment ishomogenous.

Prof. Rushen Chahal


11/21


Assumptions and pre-requisite forsegmentation are:

- markets are not homogenous in termsof needs

- most company are not in a position tocater to all the needs of all the markets

Prof. Rushen Chahal


12/21


Steps involved in segmentation

- segments need to be described on thebasis of some dimensions which haveimpact on marketing strategy

- Potential size of each market segment

- How well these segments are beingserved by other companies andproducts?

Prof. Rushen Chahal


13/21


Segment should be large or profitableenough to consider differentiatedmarketing strategy to serve its need

It should be possible to reach themembers of the segment with available

means accessibility (information iseither available or can be collected onsegmenting characteristics)

Prof. Rushen Chahal


14/21

Varieties of market segmentation The first variety to emerge was that process

linked to geographic segmentation

Mainly by smaller agribusiness companieswith limited investment capital and were notcapable of supporting nationwide distributionchannel

Later to emerge was demographic

segmentation However, age, occupation, income have

become less valid as predictors of consumerbehavior in the 1980s.

Prof. Rushen Chahal


15/21

Varieties of market segmentation Later on a third variety of segmentation has

arisen as volume segmentation.

Basically heavy-half theory

In most agribusiness product categories onehalf of the customers account about 80percent of the consumption.

Concentrate on that segment of the totalmarket comprised of high-volume consumers

Prof. Rushen Chahal


16/21

Varieties of market segmentation Each of these three varieties of market

segmentation rests on ex-post facto

analysis of the kinds of prospectivecustomers

Each relies on descriptive factor ratherthan causal factors

They are no longer accurate forpredicting future buying behavior

Prof. Rushen Chahal


17/21

Varieties of market segmentation Recent attempt to segment the market is

based on the basic reason a person spends

money to buy a product, i.e., the benefits aperson expects to receive from the purchase

It is known as Benefit Segmentation

Benefits sought by farmers more fully

determine their behavior as consumer thando their physical attributes, theirdemographic characteristics or their volumeof consumption

Prof. Rushen Chahal


18/21

Varieties of market segmentation The benefit segmentation approach is based on some

ability to measure farmers value systems. Here multivariate attitude measuring techniques play

an important role It is the total configuration of the benefits sought

which differentiates the segment, one from the other,rather than the fact that one segment seeks onespecific benefits while another segment seeks a quite

different one. Relative importance farmers attach to benefits sought

become the effective lever in segmenting theagriculture input market.

Prof. Rushen Chahal


19/21

Varieties of market segmentation Product potency is high on list of desired

result

- emphasize the advertising program onchemical test results, guaranteed germinationrates

Reliability is to be a priority benefit

- sales campaign might focus onmaintenance-free service records,longstanding and stable yield performance

Prof. Rushen Chahal


20/21

Varieties of market segmentation Reduced surface soil erosion became the

desired benefit

- need for developing minimum-till seedingequipment

Ease of application was identified as a desiredbenefit

- water soluble means of fertilizer applicationvia sprinklers found a rapid acceptance.

Prof. Rushen Chahal


21/21

Segmentation Some Thumb Rules It is easier to take advantage of market segments that already

exist than to attempt to create new ones. No brand, label or logo will appeal to all potential customers. To

cover a market, one must understand the divergent benefitssought by all its occupants.

New and old products should, if possible, be designed andpromoted to fit the particular benefits hierarchy of some marketsegment.

Marketers who adopts a benefits segmentation approachstrategy have a measurable competitive edge over their

counterparts. An understanding of the benefits segments which exist in a

market can be used effectively in the design of a new productor the preparation of a sales program for an existing product.

Prof. Rushen Chahal

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Rural Management (5)