CONSUMER BEHAVIOR

Market Segmentation
Topic : 2

Nazmul Karim Chowdhury

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Market Segmentation
Market Segmentation can be defined as the process of dividing a market into distinct subsets of consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix. Segmentation studies are designed to discover the needs and wants of specific groups of consumers, so that specified goods and services can be developed and promoted to satisfy each groups needs.

Before the widespread acceptance of market segmentation, the prevailing way of doing business with consumers was through MASS MARKETING. Mass Marketing that is offering the same product and marketing mix to all consumers.
In Mass Marketing, the seller engages in the mass production, mass distribution and mass promotion for one product for all the buyers.

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Mass (Undifferentiated) Marketing:

If all consumers were alike, if they all had the same needs, wants, and desires, and the same background, education, and experience, Mass (Undifferentiated) Marketing would be a logical strategy.
Primary advantage is that it costs less. Only one advertising campaign is needed, only one marketing strategy is developed and usually only one standardized product is offered. Some companies, primarily those that deal in agricultural products or very basic manufactured goods, successfully follow a mass marketing strategy. Other marketers, however, see major drawbacks in an undifferentiated marketing approach. This strategy often means that sell the same to everyonethis can lead to selling to no one.
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Both sides of the market place, consumer and the marketer benefit from market segmentation. Consumers receive products targeted to their specific needs. Marketers are able to offer differentiated products, increasing profits, market share, etc. Retailers, industrial manufacturers, and the media have all benefited from market segmentation.

Retailers benefit from market segmentation. One company, such as Gap, is able to deliver their goods through a diversity of stores, Gap, Super Gap, Gap Shoe, etc., depending on the segment and product line.
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Industrial, not-for-profit, and even the media also use market segmentation.

More and more businesses today are using database marketing programs to find out who their best customers are, and these firms will then divide their customer base into segments.

 Identifiable: To divide the market into separate segments on the basis of a series of common or shared needs or characteristics that is relevant to the product or service, a marketer must be able to identify these relevant characteristics. Sizeable: In order to be a viable market, as segment must consist of enough consumers to make targeting it profitable. A segment can be identifiable and stable but not be large enough to be profitable. To measure a segments size and profitability, marketers use secondary data (e.g. Census figures) and consumer surveys; such as data estimate a given group of buyers size, spending power and buying propensity. Stable: Most marketers prefer to target consumer segments that are relatively stable in terms of lifestyle and consumption patterns and avoid inconsistent segments that are unpredictable. For examples, teenagers are a sizeable and easily identifiable market segment, easy to buy, able to spend and easily reached.
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 Accessible: To be targeted, a segment must be accessible, which means marketers must be able to reach the market segments they want to target in an economical way. Congruent with the Companys Objectives and Resources: Not every company is interested or has the means to reach every market segment, even if that segment meets the four preceding criteria. Therefore company must match with their research objectives and the resources they have.

The first step in developing a segmentation strategy is to select the most appropriate bases on which to segment the market. Nine major categories of consumer characteristics provide the most popular bases for market segmentation. These categories are: Geographic Factors Demographic Factors Psychological Factors Psychographic (Lifestyle) Characteristics Socio-cultural Variables Use-related Characteristics Use-situation Factors Benefits Sought Hybrid Segmentation

1. Geographic Segmentation
In Geographic Segmentation, the market is divided by location. The theory behind this strategy is that people who live in the same area share some similar needs and wants and that these needs and wants differ from those of people living in other areas.
SEGMENTATION BASE
GEOGRAPHIC SEGMENTATION

SELECTED SEGMENTATION VARIABLES

Region City Size Density of Area

Southeast, Hill Tracks, North Bengal, Sundarbans Major Metropolitan Areas, Small Towns, Cities Urban, Suburban, Exurban, Rural

Climate

Temperate, Hot, Humid, Rainy

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2. Demographic Segmentation
Demographic segmentation is the process of segmenting the market based on demographic characteristics. Demography refers to the vital and measurable statistics of a population. Age, sex, marital status, income, occupation, and education, are most often used as the basis for demographic market segmentation. Demographics help to locate a target market. It is the most accessible and cost effective way to identify a target market. These characteristics are easy to measure. Demographic variables reveal trends, such as shifts in age, gender, and income distributions that signal business opportunities to alert marketers.
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2. Demographic Segmentation
SEGMENTATION BASE
DEMOGRAPHIC SEGMENTATION

SELECTED SEGMENTATION VARIABLES

Age Sex Marital Status Family Life Cycle Income

Under 12, 12-17, 18-34, 35-49, 50-64, 65+ Male, Female Single, Married, Divorced, Widowed Bachelorhood, honeymooners, parenthood, post-parenthood and dissolution Under Tk. 10,000, Tk 10,000- Tk. 25,000, Tk. 25,000Tk. 50,000, Tk. 50,000- Tk. 75,000, Tk. 75,000Tk.100,000, Tk. 100,000 and over Illiterate, Primary School, High School, College, University, Graduate Studies Professional, Blue-collar, White-collar, Agricultural, Military, Daily Laborers

Education
Occupation

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3. Psychological Segmentation
Psychological segmentation (characteristics) refers to the inner or intrinsic qualities of the individual consumer as a basis for segmentation.

Consumers can be segmented in terms of their needs and motivation, personality, perceptions, learning, level of involvement, and attitudes.
SEGMENTATION BASE
PSYCHOLOGICAL SEGMENTATION

SELECTED SEGMENTATION VARIABLES Shelter, Safety, Security, Affection, Sense of Self Worth Extroverts, Novelty (Innovation) Seekers, Aggressive, Low Dogmatic = Rigid, Inflexible Low-risk, Moderate-risk, High-risk Low-involvement, High-involvement

Needs-motivation Personality Perception Learning-involvement

Attitudes

Positive Attitude, Negative Attitude

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4. Psychographic Segmentation
Psychographic segmentation (segmenting based on personality and attitude measures) is closely aligned with psychological research, especially personality and attitude measurement. Commonly referred to as lifestyle analysis, psychographic segmentation has proven to be a valuable marketing tool to help identify promising consumer segments that are likely to be responsive to specific marketing messages. Psychographic profiles of consumer segments can be thought of as being composed of a composite of consumers measured activities, interests, and opinions (i.e., AIOs).
SEGMENTATION BASE
PSYCHOGRAPHIC

SELECTED SEGMENTATION VARIABLES Economy Minded, Couch Potatoes, Outdoors Enthusiasts, Status Seekers
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Lifestyle Segmentation

5. Socio-cultural Segmentation
Socio-cultural segmentation studies sociological and anthropological group characteristics, as opposed to individual characteristics.

Socio-cultural variables provide further bases for market segmentation.

Consumer markets have been subdivided into segments on the basis of stages in the family life cycle, social class, core cultural values, sub-cultural memberships, and cross-cultural affiliation. SEGMENTATION BASE
SOCIO-CULTURAL SEGMENTATION

SELECTED SEGMENTATION VARIABLES

Culture Religion Sub-cultures Social Class Family Life Cycle

Bangladeshi, Indian, African, European, Chinese, American Muslim, Hindu, Christianity, Buddhist, Jews Tribal, Chakma, Marma, Garo Lower, Middle, Upper Bachelors, Young Marrieds, Full Nesters, Empty Nesters
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6. Use-Related Segmentation
Use-related segmentation categorizes consumers in terms of productservice, or brand usage characteristics such as usage rate, awareness status, and degree of brand loyalty. Rate of usage segmentation differentiates among heavy users, medium users, light users, and nonusers of a specific product, service, or brand. Brand loyalty identifies those customers who continually purchase the same brands, as opposed to those consumers who continually switch brands. Awareness status encompasses the notion of buyer readiness, consumer awareness, or interest level. Marketers need to determine whether potential customers are aware of the product, interested in the product, or need to be informed about the product.

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6. Use-Related Segmentation
SEGMENTATION BASE
USE-RELATED SEGMENTATION

SELECTED SEGMENTATION VARIABLES Heavy users, Medium Users, Light Users, Nonusers

Usage Rate

Awareness Status
Brand Loyalty

Unaware, Aware, Interested, Enthusiastic

Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers

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7. Usage Situation Segmentation

The occasion or usage situation often determines what consumers will purchase or consume. Some marketers try to install the idea of suitability for a particular occasion. Many products are promoted for special usage occasions.
SEGMENTATION BASE
USE-SITUATION SEGMENTATION

SELECTED SEGMENTATION VARIABLES Leisure, Work, Rush, Morning, Night Personal, Gift, Snack, Fun, Achievement Home, Work, Friends Home, In-store Self, Family Members, Friends, Boss, Peers
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Time Objective Location Person

8. Benefit Segmentation
Marketers and advertisers seek to isolate one particular benefit that they should communicate to the consumer. Examples of benefits that are commonly used include: financial security (Prudential Financial), reduced calories (Amstel Light), comfort (Bausch & Lomb disposable contact lenses), good health (Egg Beaters egg substitute), proper fit (Wrangler womens jeans), and backache relief (Advil). Changes in lifestyle play a major role in determining the key product benefits to promote.

Benefit segmentation can be used to position various brands within the same product line.
SEGMENTATION BASE
Benefit Segmentation

SELECTED SEGMENTATION VARIABLES

Convenience, Social Acceptance, Long Lasting, Economy, Value-for-the-money
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9. Hybrid Segmentation Approaches

Marketers commonly segment markets by combining many segmentation bases, rather than relying on a single base. This is called hybrid segmentation. Hybrid bases include psychographic/demographic profiles, Geodemographic, VALS, and Yankelovichs Mindbase Segmentation. There are 2 main types of hybrid segmentation are:

Psycho graphic Demographic Segmentation: Psycho graphic and Demographic profiles are highly complementary approaches that work best when used together. Geodemographic Segmentation: This type of hybrid segmentation scheme is based on the notion that people who live close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits.
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Once an organization has identified its most promising market segment, it must then decide whether to target several segments or just one. The premise behind market segmentation is that each targeted segment receives a specially designed marketing mix. Differentiated Marketing is when the marketer targets several segments using individual marketing mixes. This strategy is highly appropriate for financially strong companies that are well established in a product category and competitive with other firms that are also strong in the category. Concentrated Marketing is when the marketer targets only one segment with a unique marketing mix. This strategy is better for small firms or firms new to the field.

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A UNDIFFERENTIATED MARKETING

Company Marketing Mix

Market

B DIFFERENTIATED MARKETING

Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3

Segment 1 Segment 2 Segment 3

C CONCENTRATED MARKETING

Company Marketing Mix

Segment 1 Segment 2 Segment 3

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END

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