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Market segmentation is the identification of portions of the market that are different
from one another. Segmentation allows the firms to better satisfy the needs of its
potential customers.
The marketing concept 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.
A good market segmentation will result in segment members that are internally
homogenous and externally heterogeneous; that is, as similar as possible within the
segment, and as different as possible between the segments.
1. GEOGRAPHIC SEGMENTATION:-
The following are some examples of geographic variables often used in segmentation.
i. Region: by continent, country, state or even neighbourhood.
ii. Size of metropolitan area: segmented according to size of population.
iii. Population density: often classified as urban, suburban or rural.
iv. Climate: according to weather patterns common to certain geographic regions.
2. DEMOGRAPHIC SEGMENTATION:-
Some demographic segmentation variable include
i. Age
ii. Gender
iii. Family size
iv. Family lifecycle
v. Generation
vi. Income
vii. Occupation
viii. Education
ix. Ethnicity
x. Nationality
xi. Religion
xii. Social class
Many of these variables have standard categories for their values, for example, family
lifecycle often expressed as bachelor, married with no children (DINKS: Double
Income, No Kids), full nest, empty nest or solitary survivor. Some of these categories
have several stages. For example, full nest I, II or III depending of the age of the
children.
3. PSYCHOGRAPHIC SEGMENTATION:-
Psychographic segmentation groups customers according to their lifestyle, activities,
interests and opinions. (AIO) surveys are one tool for measuring lifestyle. Some
psychographic variables include:
i. Activities
ii. Interests
iii. Opinions
iv. Attitudes
v. Values
4. BEHAVIORALISTIC SEGMENTATION:-
Behavioralistic segmentation is based on actual customer behaviour toward products.
Some Behavioralistic variables are:
i. Benefits sought
ii. Usage rate
iii. Brand loyalty
iv. User status: potential, first time, regular etc
v. Readiness to buy
vi. Occasion: holidays and events that stimulate purchases
Behavioralistic segmentation has the advantage of using variables that are closely
related to the product itself. It is a fairly direct starting point for market segmentation.
BASES FOR SEGMENTATION IN INDUSTRIAL
MARKET
a. LOCATION
In industrial markets, customer location maybe important in some cases. Shipping
costs maybe a purchase factor for vendor selection for products having a high bulk to
value ratio, so distance from the vendor maybe critical. In some industries firms tend
to cluster together geographically and therefore may have similar needs within a
region.
b. COMPANY TYPE
Business customers can be classified according to type as follow:-
Company size
Industry
Decision making unit
Purchase criteria
2. BEHAVIORALISTIC CHARACTERISTICS
In industrial markets, patterns of purchase behaviour can be a basis for segmentation.
Such behavioural characteristics may include:
Usage rate
Buying status: potential, first time, regular etc
Purchase procedure: sealed bids, negotiations etc
Customer needs difference creating separate offers for each segment makes sense and
provides customers a much better solution.
ENHANCED PROFIT FOR BUSINESS
Customers have different disposable income. They are different in how sensitive they
are to price. By segmenting the markets, businesses can raise average prices and
enhance profits.
BETTER OPPORTUNITIES FOR GROWTH
Market segmentation can build sales, e.g. customers can be encouraged to “trade-up”
after being introduced to a particular product with an introductory lower priced
product.
RETAIN MORE CUSTOMERS
Customer circumstances change, for example they grow older, form families, change
jobs or get promoted, change their buying patterns. By marketing product that appeal
to customer at different stages of their life, a business can retain customer who might
otherwise switch to competing products and brands.
TARGET MARKET COMMUNICATION
By segmenting the markets, the target customer can be reached more often and at
lower cost.
GAIN SHARE OF THE MARKET SEGMENT