Market Segmentation

What is Segmentation ?

Segmentation refers to a process of bifurcating or dividing a large unit into various small
units which have more or less similar or related characteristics.

Market Segmentation

 Market segmentation is a marketing concept which divides the complete market set up
into smaller subsets comprising of consumers with a similar taste, demand and
preference.
 A market segment is a small unit within a large market comprising of like minded
individuals.
 One market segment is totally distinct from the other segment.
 A market segment comprises of individuals who think on the same lines and have similar
interests.
 The individuals from the same segment respond in a similar way to the fluctuations in the
market.

Basis of Market Segmentation

 Gender

The marketers divide the market into smaller segments based on gender. Both men and
women have different interests and preferences, and thus the need for segmentation.

Organizations need to have different marketing strategies for men which would obviously
not work in case of females.

A woman would not purchase a product meant for males and vice a versa.

The segmentation of the market as per the gender is important in many industries like
cosmetics, footwear, jewellery and apparel industries.

 Age Group

Division on the basis of age group of the target audience is also one of the ways of
market segmentation.

The products and marketing strategies for teenagers would obviously be different than
kids.

Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams

Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products, Magazines, apparels
and so on

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  Income

Marketers divide the consumers into small segments as per their income. Individuals are
classified into segments according to their monthly earnings.

The three categories are:

High income Group

Mid Income Group
Low Income Group

Stores catering to the higher income group would have different range of products and
strategies as compared to stores which target the lower income group.

Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to Vishal
Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to the lower
income segment.

 Marital Status

Market segmentation can also be as per the marital status of the individuals. Travel
agencies would not have similar holiday packages for bachelors and married couples.

 Occupation

Office goers would have different needs as compared to school / college students.

A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters
specifically to the professionals.

Types of Market Segmentation

 Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals. The individual’s
attitude, interest, value help the marketers to classify them into small groups.

 Behaviouralistic Segmentation

The loyalties of the customers towards a particular brand help the marketers to classify
them into smaller groups, each group comprising of individuals loyal towards a particular
brand.

 Geographic Segmentation

Geographic segmentation refers to the classification of market into various geographical

areas. A marketer can’t have similar strategies for individuals living at different places.

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 Nestle promotes Nescafe all through the year in cold states of the country as compared to
places which have well defined summer and winter season.

McDonald’s in India does not sell beef products as it is strictly against the religious
beliefs of the countrymen, whereas McDonald’s in US freely sells and promotes beef
products.

R&D IN MARKETING PRESPECTIVE

Marketing forms a crucial foundation for any business. You put in a lot of hard work to build a
team in order to develop your business. You also learn about your target audience, their personas
and the market competition around you.

But there is nothing much that you can do with all these efforts till you start marketing your
products. Marketing is the reason even small and medium enterprises are turning global these
days. Once you get a palpable picture of marketing, there comes an important factor of research
and development.

Research and development refer to the activities of investigation conducted by any organization
to either search or innovate new processes in their businesses.

The companies dealing with consumer goods spread across all sectors and industries utilize this
research and development to come up with innovative marketing styles and ways to experience
significant growth and improvements in their organization.

Research and development (R & D) also help in the significant amelioration of the marketing of
the products and services of a business.

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For example, consider 3M’s Scotch bright, which is an example that stressed on the hygiene
factor for marketing its product. Similarly, many businesses and firms have converted problems
into beneficial marketing opportunities because of their R&D efforts.

Research and development are entirely different from other operations in any organization that
might focus on an immediate cause and effect.

However, it forms an important and extensive set of activities that is typically not performed
with the goal or ambition of immediate profit of a business. Instead, R&D focuses on long-term
profitability and marketing success, when used for any business.

R & D has proven to be a valuable tool for the growth of your business. It begins with
researching your market and the needs of your target customers. And then forming strategies
based on the collected data for better marketing of products for the business.

Market research suggests that businesses that employ research and development in their
organization have a greater chance of achieving marketing success than those who don’t. It also
helps your business by increasing productivity and providing an edge over other market
competitors.

This competitive advantage can be on account of performing in some or the other way, such that
your competitors are not able to replicate.

So, if you are wondering about the role and implications of research and development for your
marketing department and strategies, keep reading because the following may open new arenas

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 and styles for your business in order to guarantee a complete marketing success:

Improved Marketing Efficiency

Talking about marketing refers to dealing with the return on investment for any product or
service. Businesses don’t often realize that they are throwing away money without much increase
in their return on investment.

Research and development can be used to back all your marketing efforts. As a result of this,
businesses would be spending money on marketing as per the requirement.

The key role of market research and development here is to maximize the benefit of each dollar
that you invest in marketing.

Unparalleled Innovation in Marketing

Innovation is the key differentiating factor of your business from other competitors in the
market. Your brand reputation is one of the most important things that come to play when you
decide to establish yourself as the leader in your market.

At this point, innovation turns out to be a major contributor in your brand reputation. With the
help of research and development to understand the vital needs of your market and its ongoing
trends, you can easily place your business in a position to cater to those vital needs of the market.

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 This practice also helps in projecting the image of your brand as an innovative business. R&D
thus, gives you the tools and tricks to gain exposure and increased authority in the market.

Realization of Internal Issues while Forming a Marketing Strategy

As an entrepreneur, there are chances that you might not be able to look at some important issues
related to your brand that might be slowly killing your marketing efforts.

Petty issues such as poor quality image, inconsistent voicing etc remain unnoticed for many
businesses. Market research and development can come to your rescue in a situation like this.

It provides you numerous objective ways to access your brand’s marketing characteristics and
other vital issues from an outsider’s point of view. This life-saving opportunity can help you
identify and fix problems before they become critical and start hampering your marketing efforts.

Great Help to Overcome the Competitors

Once an organization starts employing research and development for their business, there are
many other advantages they can gain apart from achieving their marketing success. R & D can
help you overcome your competitors in the market.
Once you get to know the market around you with the help of R & D, you can easily promote
your brand using the ongoing trends and tactics of the market and perform even better than your
competitors.

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In other words, you can use the existing market vocabulary to advertise your brand. You can
directly address and cater to their concerns or find innovative uses of the existing product and
services in the market as compared to your competitors.
Research and development ensure that your efforts earn you improved conversions and lead
generations along with making sure that your marketing is reaching the proper audience that your
business intends to target.

Market Segmentation | Bases for Market Segmentation

Market Segmentation

Market segmentation can be defined as the process of dividing a market into different
homogeneous groups of consumers.

Market consists of buyers and buyers vary from each other in different ways. Variation depends
upon different factors like wants, resources, buying attitude, locations, and buying practices.
By segmentation, large heterogeneous markets are divided into smaller segments that can be
managed more efficiently and effectively with products and services that match to their unique
needs. So, market segmentation is beneficial for the companies serving larger markets.

Criteria for selecting Market Segments

Measurable
A segment should be measurable. It means you should be able to tell how many potential
customers and how many businesses are out there in the segment.

Accessible
A segment should be accessible through channels of communication and distribution like: sales
force, transportation, distributors, telecom, or internet.

Durable
Segment should not have frequent changes attribute in it.

Substantial
Make sure that size of your segment is large enough to warrant as a segment and large enough to
be profitable

Unique Needs
Segments should be different in their response to different marketing efforts (Marketing Mix).

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 Consumer and business markets cannot be segmented on the bases of same variables because of
their inherent differences.

Bases for Consumer Market Segmentation

There are number of variables involved in consumer market segmentation, alone and in
combination. These variables are:

 Geographic variables
 Demographic variables
 Psychographic variables
 Behavioral variables

Geographic Segmentation

In geographical segmentation, market is divided into different geographical units like:

 Regions (by country, nation, state, neighborhood)

 Population Density (Urban, suburban, rural)
 City size (Size of area, population size and growth rate)
 Climate (Regions having similar climate pattern)

A company, either serving a few or all geographic segments, needs to put attention on variability
of geographic needs and wants. After segmenting consumer market on geographic bases,
companies localize their marketing efforts (product, advertising, promotion and sales efforts).

Demographic Segmentation

In demographic segmentation, market is divided into small segments based on demographic

variables like:

 Age
 Gender
 Income
 Occupation
 Education
 Social Class
 Generation
 Family size
 Family life cycle
 Home Ownership
 Religion
 Ethnic group/Race
 Nationality

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 Demographic factors are most important factors for segmenting the customers groups. Consumer
needs, wants, usage rate these all depend upon demographic variables. So, considering
demographic factors, while defining marketing strategy, is crucial.

Psychographic Segmentation

In Psychographic Segmentation, segments are defined on the basis of social class, lifestyle and
personality characteristics.
Psychographic variables include:

 Interests
 Opinions
 Personality
 Self Image
 Activities
 Values
 Attitudes

A segment having demographically grouped consumers may have different psychographic

characteristics.

Behavioral Segmentation

In this segmentation market is divided into segments based on consumer knowledge, attitude, use
or response to product.
Behavioral variables include:

 Usage Rate
 Product benefits
 Brand Loyalty
 Price Consciousness
 Occasions (holidays like mother’s day, New Year and Eid)
 User Status (First Time, Regular or Potential)

Behavioral segmentation is considered most favorable segmentation tool as it uses those

variables that are closely related to the product itself.

Bases for Business Market Segmentation

Business market can be segmented on the bases consumer market variables but because of
many inherent differences like

 Businesses are few but purchase in bulk

 Evaluate in depth

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 Joint decisions are made

Business market might be segmented on the bases of following variables:

 Company Size: what company sizes should we serve?

 Industry: Which industry to serve?
 Purchasing approaches: Purchasing-function organization, Nature of existing relationships,
purchase policies and criteria.
 Product usage
 Situational factors: seasonal trend, urgency: should serve companies needing quick order
deliver, Order: focus on large orders or small.
 Geographic: Regional industrial growth rate, Customer concentration, and international
macroeconomic factors.

Target Marketing - Meaning, Basis and its Need

It is not possible for a marketer to have similar strategies for product promotion amongst all
individuals. Kids do not get attracted towards products meant for adults and vice a versa. Every
segment has a different need, interest and perception. No two segments can have the same
ideologies or require a similar product.

Target Marketing refers to a concept in marketing which helps the marketers to divide the
market into small units comprising of like minded people. Such segmentation helps the
marketers to design specific strategies and techniques to promote a product amongst its target
market. A target market refers to a group of individuals who are inclined towards similar
products and respond to similar marketing techniques and promotional schemes.

Kellogg’s K Special mainly targets individuals who want to cut down on their calorie intake. The
target market in such a case would be individuals who are obese. The strategies designed to
promote K Special would not be the same in case of any other brand say Complan or Boost
which majorly cater to teenagers and kids to help them in their overall development. The target
market for Kellogg’s K Special would absolutely be different from Boost or Complan.

Jordan, a college student went to a nearby retail store to purchase a shirt for himself. The retailer
tried hard to sell a nice formal shirt to him, but somehow could not convince Jordan. Jordan left
the store sad and empty handed.

Where do you think is the problem ?

The problem is neither with Jordon nor the shirt. The retailer in this case failed to understand that
Jordan, being a college student, was not the target audience for the formal shirt. No amount of
convincing helped as the retailer was targeting the wrong audience. The target market for a
formal shirt would be office goers or professionals. Funky T shirts, casual shirts would have
worked better for Jordon.

The target market for Zodiac Clothing Company Limited or Louis Philippe would be the office
goers whereas the target market for Levi’s would be the school and college kids.

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The target market for Cat moss or Giny and Jony would be kids.

In simpler words, target market consists of like-minded individuals for whom an organization
can afford to have similar strategies, promotional schemes and advertisements to entice them and
prompt them to purchase the product. Once a company decides on its target audience, it
implements various promotional strategies to make a brand popular amongst them.

Basis of Target Marketing

 Age
 Gender
 Interests
 Geographic location
 Need
 Occupation

Why target marketing? (Need of Target Marketing)

 Organizations can use similar kind of strategies to promote their products within a target
market.
 They can adopt a more focussed approach in case of target marketing. They know their
customers well and thus can reach out to their target audience in the most effective way.

How to create Target Market

 The organization must first decide who all individuals would fit into a particular segment.
A male and a female can’t be kept in the same segment. The first and the foremost step is
to decide on the target market.
 The next step is to identify need and preference of the target market. It is essential to find
out what the target market expects from the product.
 Once the target market is decided, organizations can decide on the various strategies
helpful to promote their product.

Market positioning

This is the act of designing a company’s offering and image to occupy a distinctive place in the
target market’s mind. I.e. The act of creating a difference between a company’s offer from those
of competitors.

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Positioning is the process of establishing and maintaining a distinctive place in the market for the
organizations’ product or brands. Positioning starts with the product, but positioning is not what
you do to a product. Positioning is what you do to the mind of the customer. You should
concentrate on the perception of the customer and not the reality of the product. Positioning then
is how the product is perceived and evaluated by the target market, relative to competing
products. To the consumer perception is reality. That is why it is said that a marketing battle is
fought in the minds of consumers. Marketers who attain a superior position in customers’ minds
have won the marketing battle.

A difference is worth establishing to the extent that it satisfies the following criteria:

1. Important: The difference delivers a highly valued benefit to a sufficient number of buyers.

2. Distinctive: The difference is delivered in a distinctive way

3. Superior: The difference is superior to other ways of obtaining the benefit.

4. Pre-emptive: The difference cannot be easily copied by competitors.

5. Affordable: The buyer can afford to pay for the difference.

6. Profitable: The Company will find in profitable to introduce the difference.

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Positioning Strategies:
1. Attribute Positioning: A company positions itself on an attribute e.g. size, number of years in
existence.
2. Benefit Positioning: The product is positioned as the leader in a certain benefit.
3. Use or Application Positioning: Positioning a product as the best for some use or
application.
4. User Positioning: Positioning a product the best for some user group e.g. Bic pen, food
for consumption.
5. Competitor Positioning: The product claims to be better in some way then a named
competitor.
6. Product Category Positioning: The product is positioned as the leader in a certain
product category
7. Quality or Price Positioning: The product is positioned as offering the best value

As companies increase their number of claims for their brands, they risk disbelief and loss of
clear positioning. Companies must avoid four major positioning errors.

1. Under Positioning: When buyers have only a vague idea of the brand.

The brand is seen as just another entry in a crowded marketplace. E.g. When Pepsi introduced its
clear crystal Pepsi in 1993 (U.S.A.) customers were distinctively unimpressed. They didn’t see
‘clarity’ as an important benefit of a soft drink.

2. Over Positioning: Buyers may have too narrow a image of the brand. These buyers might
think that suits at Sir Henry’s start at 15000/= when in fact it offers affordable suits started at
3000/=

3. Confused Positioning: Buyers might have a confused image of the brand resulting from the
company making too many claims or changing the brands positioning too frequently e.g. Omo,
Zain

4. Doubtful Positioning: Buyers might find it hard to believe the brand claims in view of the
products features, price or manufacturers.

Product Life Cycle

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The product life cycle is an important concept in marketing. It describes the stages a product
goes through from when it was first thought of until it finally is removed from the market. Not
all products reach this final stage. Some continue to grow and others rise and fall.

The short video below provides an overview of the Product Life Cycle model and there are some
additional study notes below the video.
Product Life Cycle Explained

What are the main stages of the product life cycle?

The main stages of the product life cycle are:

1. Introduction – researching, developing and then launching the product

2. Growth – when sales are increasing at their fastest rate
3. Maturity – sales are near their highest, but the rate of growth is slowing down, e.g. new
competitors in market or saturation
4. Decline – final stage of the cycle, when sales begin to fall

Extending the Product Life Cycle

What can businesses do to extend the product life cycle?

1. Extension strategies extend the life of the product before it goes into decline. Again
businesses use marketing techniques to improve sales. Examples of the techniques are:
2. Advertising – try to gain a new audience or remind the current audience
3. Price reduction – more attractive to customers
4. Adding value – add new features to the current product, e.g. improving the specifications
on a smartphone
5. Explore new markets – selling the product into new geographical areas or creating a
version targeted at different segments
6. New packaging – brightening up old packaging or subtle changes

Product Development Process

Introduction to Product Development

In this fast-changing world we are experiencing change in our daily life and at marketplace
too. Customer needs, wants, and expectations are changing more rapidly. Customers are
increasingly demanding advance features, appealing designs, better quality, and reliability in
products. To meet the changing demands of customer, business organisations are investing
heavily in research and development (R&D). Business organisations are updating existing

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products and developing new products to satisfy changing customer needs, wants, and
expectations.

The development of competitive new products is a prerequisite for every business organisation to
be successful. Samsung has outperformed Nokia in the global mobile-phone market and become
the global leader. Samsung updates its existing mobile phones and brings new mobile phones
more frequently at competitive low price with advance features, appealing designs, better quality
and reliability. Nokia failed to satisfy changing customer needs, wants, and expectations, and lost
its market position.

Definition of Product Development

In general, the Product Development can be defined as "creating, innovating, or developing
entirely a new product , or presenting an existing product with enhanced utility, improved
features, more appealing design, better quality and reliability to satisfy the requirements of its
end-users."

Meaning of Product Development

Product means a good, service, idea or object created as a result of a process and offered to
serve a need or satisfy a want. Development means the act or process of growing, progressing,
or developing.

Product Development is a process of improving the existing product or to introduce a new

product in the market. It is also referred as New Product Development. The functions of product
development are as follows :-

1. Creation of an entirely new product or upgrading an existing product,

2. Innovation of a new or an existing product to deliver better and enhanced services,
3. Enhancing the utility and improving the features of an existing product,
4. Continuous improvement of a product to satisfy rapidly changing customer needs and wants.
Product Development Process

Product development process is a crucial process for the success and survival of any business.
Today, businesses are operating in a highly dynamic and competitive environment. Business
organisations have to continuously update their products to conform to current trends. The
product development process starts from idea generation and ends with product development and
commercialisation. Following are the steps in the process of product development.

1. Idea Generation - The first step of product development is Idea Generation that is
identification of new products required to be developed considering consumer needs and
demands. Idea generation is done through research of market sources like consumer liking,

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 disliking, and competitor policies. Various methods are available for idea generation like -
Brain Storming, Delphi Method, or Focus Group.
2. Idea Screening - The second step in the process of product development is Idea Screening
that is selecting the best idea among the ideas generated at the first step. As the resources are
limited, so all the ideas are not converted to products. Most promising idea is kept for the
next stage.
3. Concept Development - At this step the selected idea is moved into development process.
For the selected idea different product concepts are developed. Out of several product
concepts the most suitable concept is selected and introduced to a focus group of
customers to understand their reaction. For example - in auto expos different concept cars
are presented, these models are not the actual product, they are just to describe the concept
say electric, hybrid, sport, fuel efficient, environment friendly, etc.
4. Market Strategy Development - At this step the market strategies are developed to evaluate
market size, product demand, growth potential, and profit estimation for initial years. Further
it includes launch of product, selection of distribution channel, budgetary requirements, etc.
5. Business Analysis - At this step business analysis for the new product is done. Business
analysis includes - estimation of sales, frequency of purchases, nature of business, production
and distribution related costs and expenses, and estimation of profit.
6. Product Development - At this step the concept moves to production of finalised product.
Decisions are taken from operational point of view whether the product is technically and
commercially feasible to produce. Here the research and development department develop a
physical product.
7. Test Marketing - Now the product is ready to be launched in market with brand name,
packaging, and pricing. Initially the product is launched in a test market. Before full scale
launching the product is exposed to a carefully chosen sample of the population, called test
market. If the product is found acceptable in test market the product is ready to be launched
in target market.
8. Commertialisation - Here the product is launched across target market with a proper market
strategy and plan. This is called commercialisation phase of product development.

Service Marketing

Definition of Service Marketing:

Service marketing is marketing based on relationship and value. It may be used to market a
service or a product. With the increasing prominence of services in the global economy, service
marketing has become a subject that needs to be studied separately. Marketing services is
different from marketing goods because of the unique characteristics of services namely,
intangibility, heterogeneity, perishability and inseparability.

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In most countries, services add more economic value than agriculture, raw materials and manu-
facturing combined. In developed economies, employment is dominated by service jobs and
most new job growth comes from services.

ADVERTISEMENTS:

Jobs range from high-paid professionals and technicians to minimum-wage positions. Service
organizations can be of any size from huge global corporations to local small businesses. Most
activities by the government agencies and non-profit organizations involves services.

The American Marketing Association, defines services as activities, benefits, or satisfactions that
are offered for sale or provided with sale of goods to the customer, that is, pre-sale and after-
sales services. Berry states, ‘while a product is an object, devise or physical thing, a service is a
deed, performance, or an effort’.

Features of Services:
1. Intangibility:
A physical product is visible and concrete. Services are intangible. The service cannot be
touched or viewed, so it is difficult for clients to tell in advance what they will be getting. For
example, banks promote the sale of credit cards by emphasizing the conveniences and
advantages derived from possessing a credit card.

2. Inseparability:
Personal services cannot be separated from the individual. Services are created and consumed
simultaneously. The service is being produced at the same time that the client is receiving it; for
example, during an online search or a legal consultation. Dentist, musicians, dancers, etc. create
and offer services at the same time.

3. Heterogeneity (or variability):

ADVERTISEMENTS:

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Services involve people, and people are all different. There is a strong possibility that the same
enquiry would be answered slightly differently by different
people (or even by the same person at different times). It is important to minimize the differences
in performance (through training, standard setting and quality assurance). The quality of services
offered by firms can never be standardized.

4. Perishability:
Services have a high degree of perishability. Unused capacity cannot be stored for future use. If
services are not used today, it is lost forever. For example, spare seats in an aeroplane cannot be
transferred to the next flight. Similarly, empty rooms in five-star hotels and credits not utilized
are examples of services leading to economic losses. As services are activities performed for
simultaneous consumption, they perish unless consumed.

5. Changing demand:
The demand for services has wide fluctuations and may be seasonal. Demand for tourism is
seasonal, other services such as demand for public transport, cricket field and golf courses have
fluctuations in demand.

6. Pricing of services:
Quality of services cannot be standardized. The pricing of services are usually determined on the
basis of demand and competition. For example, room rents in tourist spots fluctuate as per
demand and season and many of the service providers give off-season discounts.

7. Direct channel:
Usually, services are directly provided to the customer. The customer goes directly to the service
provider to get services such as bank, hotel, doctor, and so on. A wider market is reached
through franchising such as McDonald’s and Monginis.

Problems in Marketing Services:

1. A service cannot be demonstrated.

2. Sale, production and consumption of services takes place simultaneously.

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3. A service cannot be stored. It cannot be produced in anticipation of demand.

4. Services cannot be protected through patents.

SERVICE GAP

The PZB Model was first developed by Parasurarman, Zeithaml and Berry (1985) to
attempt to define and model service quality at a time when there was little focus on the
construct. As part of their exploration they concluded that quality involves a comparison
of expectations with performance, and thus satisfaction with services is related to
fulfilling expectations. Through in-depth interviews with executives, a comprehensive
case study and an exploratory study consisting of interviews with an extended number of
executives, the researchers were able to reveal five ‘gaps’ regarding executives
perceptions of service quality delivery and the tasks associated with service delivery to
customers. The first four gaps are related to the firm itself and the fifth to consumers.

9. Gap I: Knowledge gap: The difference between consumer expectations and management
perceptions of consumer expectations.

10. Gap 2: Standard gap: The difference between management perceptions of consumer
expectations and service specifications.

11. Gap 3: Behaviour gap: The difference between service specifications and the service
actually delivered.

12. Gap 4: Communication gap: The difference between service delivered and what is
communicated about the service to stakeholders.

13. Gap 5: Gap between service and expectations: The discrepancy between consumers’
expectations of the service and perceptions of the actual service performance.

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