The market for any product is normally made up of several segments. A market after all is the aggregate of consumers of a given product. And, consumers, who make a market, are seldom one homogenous lot. They vary in their characteristics & buying behavior. It is thus natural that many differing segments occur within a market. Markets usually divide the heterogeneous market for any product into segments, with relatively more homogenous characteristics, since this helps in tapping it\. And, this process of disaggregating a market into # of sub-markets/ segments is known as market segmentation.
Market segmentation rests on the recognition that:
a) Any market is made up of several sub-markets, or sub-groups of consumers, distinguished from one another by their varying needs & buying behavior AND b) It is feasible to disaggregate the consumers into segments in such a manner that in needs, characteristics & buying behavior, the members would vary significantly among/ across segments, but would be homogenous within each segment.
Why segment the market?
Facilitates Proper Choice of Target Market In the first place, segmentation helps the marketer to distinguish one customer group from another within a given market & thereby enables him to decide which segment should form his target market. Facilitates Tapping of the market, adapting the Offer to the Target Segmentation also enables the marketer to crystallize the needs of the
target buyers. It also helps him generate an accurate prediction of the
likely response from each segment of the target buyers. Moreover, when buyers are handled after careful segmentation, the responses from each segment will be homogenous. This, in turn, will help the marketer develop marketing offers, programs that are most suited to each group. 1
The Ford Strategy Through segmentation, car manufacturers have gained useful insights on the product features/ benefits to be provided to different segments of car buyers. It will also be clear that within a given segment, the Indian requirement is often unique, giving rise to an India-specific sub-segment within any segment. Product offerings have to be tailored to suit Indian conditions, especially Indian roads. Firms do appreciate this reality & they provide specific offers/models suiting the Indian target segment. The undermentioned explains how Ford has gained useful insights
through segmentation & adapted its offer to suit the Indian target segment:
Adapting Offer to Suit Target Segment
Ford modifies its models for India Ford modified its models for the Indian target segment as shown below: Higher ground clearance to make the car more compatible to the rougher road surface in India. Stiffer rear springs to enable negotiating the omnipresent potholes on Indian roads. Changes in cooling requirement, with greater airflow to the rear. Higher resistance to dust. Compatibility of engine with the quality of fuel available in India. Location of horn buttons on the steering wheel. As the Indian motorist uses the horn far more frequently, for cars sold in India, the horn buttons are kept on the steering wheel & not on a lever on the side as in the models sold in Europe.
Helps Divide the Markets & Conquer Them Through segmentation, the marketer can look at the differences among the customer groups & decide on appropriate strategies/offers for each group. This is precisely why some marketing experts have described segmentation as strategy of dividing the markets for conquering them.
Makes the Marketing Effort more Efficient/Economic
Segmentation also makes the marketing effort more efficient & economic. It ensures that the marketing effort is concentrated on welldefined & carefully chosen segments. After all, the resources of any firm are limited & no firm can normally afford to attack & tap the entire market without any delimitation whatsoever. It would benefit the firm if the efforts were concentrated on segments that are the most productive & profitable ones.
Helps Identify Less Satisfied Segments & Concentrate on Them
Segmentation also helps the marketer assess as to what extent existing offers from competitors match the needs of different customer segments. The marketer can thus identify the relatively less satisfied segments & succeed by satisfying such segments.
Benefits the Customer as well
Segmentation brings benefits not only to the marketer, but to the customer as well. When segmentation attains higher levels of sophistication & perfection, customers & companies can conveniently settle down with each other, as at such a stage, they can safely rely on each others discrimination. The firm can anticipate the wants of the customers & the customers can anticipate the capabilities of the firm.
Helps distinguish one customer group from another within a given
market. Facilitates proper choice of target market. Facilitates effective tapping of the market. Helps divide the market & conquer them. Helps crystallize the needs of the target buyers & elicit more predictable responses from them; helps develop marketing programs on a more predictable base; helps develop marketing offers that are most suited to each group. Helps achieve the specialization required in product, distribution, promotion & pricing for matching the customer group & develop marketing offers & appeals that match the needs of such group. Makes the marketing effort more efficient & economic. Helps concentrate efforts on the most productive & profitable segments, instead of frittering them over irrelevant or unproductive or unprofitable segments. Helps spot the less satisfied segments & succeed by satisfying such segments. Brings benefits not only to the marketer but also to the customers. When segmentation attains high sophistication, companies can choose each other & stay together.
Markets can be segmented using several relevant bases. For ex, demographic characteristics of consumers, such as age, sex, income/[purchasing capacity, education etc., form one base for segmentation. Geographic characteristics constitute another; and buying behavior of the consumers form yet another base. Geographic Segmentation: Segmentation of consumers based on geographic factors like climate, region, state, district, urban and rural areas etc., Demographic Segmentation: Segmentation of consumers based on demographic factors like age, sex, marital status, family size, race, religion, community, language, occupation, income/purchasing capacity, education, social status etc., Of the several elements of demographics, purchasing capacity forms one of the more significant bases of segmentation. It manifests through buyers preference in the matter of price. In segmentation, it is the consumers, who are classified, not products: Sometimes, marketers equate market segments with product segments & price segments (products segmented on the basis of price). This is the result of a mistaken understanding of the process of market segmentation. Actually, in market segmentation, it is the consumers who are classified, not products. Again, it is not the price of the product, but the consumer characteristic of purchasing capacity/price preference that is used as the base for the segmentation. Differentiated product offers in specific price slots is the response resulting from the segmentation of the consumers. Buyers of cars are segmented into groups, with price preference as the base. It is not a case of segmentation of cars with price as the base.
In psychographic segmentation, elements like personality traits, attitudes, and lifestyle & value system form the base. Psychographics consist of psychological, sociological & anthropological factors as well as self-concept & lifestyle. And psychographic segmentation implies segmenting a given market using these factors. Since differences among consumers extend to personality traits, lifestyle & attitude, psychographics often serve as a valuable base for segmenting & explaining markets. And, among the various elements of psychographics, lifestyle & attitude are the core ones from the segmentation angle.
Psychographic segmentation facilitates grouping of consumers in such a
manner that those included in a group react en masse in a particular way to a particular emotional appeal & share a common buying behavior pattern. In the case of certain products, buying behavior predominantly depends on lifestyle & attitude characteristics. Psychographics help in identifying customers state-of-mind & in piecing together a more useful profile of the target market. Hence, it is particularly useful in positioning/repositioning of products & in new product launch & brand extensions. Just as purchasing capacity/price preference forms a major base in demographic segmentation, lifestyle forms a major base in psychographic segmentation. Psychographic (lifestyle) segmentation is demonstrated using examples as: a) How passenger car firms in India came up with Station Wagons b) Titan creating a sub-brand Titan Fastrack. 6
Segmentation of car buyers based on lifestyle Throughout the 90s, India was an evolving market for different types of passenger cars. Naturally, carmakers were discovering newer segments among car buyers. One significant move has been the spotting of a segment based on lifestyle. By late 90s, many car buyers in India were showing a preference for a Station Wagon, with suitable features. It was essentially a lifestyle-based phenomenon. Passenger car firms in India, who were segmenting car buyers, using several relevant bases, including lifestyle, and came out with Station Wagons, as it suited the particular segment. Several new offers emerged in the market in response to the needs of this lifestyle-based segment. They included the following: Baleno GLX Estate from Maruti, Corsa Station Wagon from GM, Opel Swing from GM & Sienna Weekend from Fiat.
Segmentation based on Lifestyle Titan Watches
Titan felt there was an opportunity for a casual watch. Since Indian consumers do not believe in throwaways, the watch had to be fit for casual wear & yet serious. Fastrack fitted the bill. For the new watch, Titan went in for a new positioning Fastrack Cool Watches by Titan. It was a lifestyle-based positioning resulting from the lifestyle-based segmentation/targeting. Fastrack was targeted at the outdoor loving urban youth. To start with, 25 designs were offered. Later, titan added Fastrack digital for this segment when digital becoming the trend. Advertising, packaging & merchandising were all different for Fastrack young, vibrant & cool reflecting the lifestyle-based positioning. In fact, Fastrack was not the solitary attempt by Titan at segmentation with lifestyle as the base. The European Insignia & the professional Sports Instruments 2000 Range were other examples.