MARKET

SEGMENTATION
Prepared By,
Sagar Gadekar
A market is a place which allows the purchaser
and the seller to invent and gather
informations and lets them carry out exchange
of various products and services.
In other words the Meaning of Market refers to
a place where the trading of goods takes place.
The place can be a market place or a street
market.
A market is thus by definition comprises people
or business with potential interest, purchasing
power and willingness to spend the money to
buy a product or service that satisfies need.

What is MARKET?
Example: Tatas have started producing a Mercedes
Benz car here in India. Many individuals have a need
for car but they may not need a luxury car like
Mercedes. They are happy with a santro or chev.
spark or Maruti.
Some might be interested in a luxury car, but may not
be interested in Mercedes as it may attract the
attention of tax authorities.
They may prefer luxury cars like Honda city, Ford
Fiesta, Octavia and so on. Some may be interested in
Mercedes but they are not able to afford a price of
Rs.32lakh.
Thus, the market for Mercedes is a very small portion
of luxury car markets, which is a small portion of the
total car markets.

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.
Example- Nike

Market Segmentation
Nike's segmenting market typically target's
athletes, both women and male generally
from the ages 15 to 35. Nike's targeting
market is active people who enjoy high
quality sporting goods, especially footwear.
To do so Nike focuses on creating premium
consumer experiences on product innovation,
brand leadership and elevated retail
presence. Nike is targeting further geographic
expansion and beyond marketing penetration
in all regions.
Example - Nike

Philip Kotler Market segmentation is sub
dividing of a market into homogenous sub sects
of customers where any sub sects may
conceivably be selected as a market target to be
reached with distinct marketing mix.

William J Stanston Market segmentation consist
of taking the total heterogeneous market for a
product and dividing it into several sub markets
or segments each of which tends to be a
homogenous in all significant steps.
Definition of Market
Segmentation

To locate market opportunities.
To find out varying and specific needs of different
types of customer.
To analyze, assess and interpret the motivations,
belief and attitudes, behavior and habits of each
indefinite sub groups in market.
To set selling objectives easily and realistically.
To identify new profitable segments which
deserve special attention and offer potential for
business.

Objectives (Need) of Market Segmentation
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.


Criteria for selecting Market Segments
Substantial (Considerable)
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).
Consumer and business markets cannot be
segmented on the bases of same variables
because of their inherent differences.

A market/ consumer population for a product can
be segmented using several relevant bases. The
major ones include:
Geographic
Demographics
Socio-cultural
Psychographic
Buying Behaviour
Geographic Segmentation
Segmentation of consumer based on factors
like climate zone, continents/ country,
region, state, district, and urban/rural
area, constitutes geographic segmentation.
Marketer, who operate globally, often
segment the market segments the market by
continents/country/region in the first instance,
and then go for segmentation on other bases.
National markets within a country like India,
often segment the market by region, state,
district and urban/rural area, in the first
instance, and then go for segmentation on
other bases.

Example:

Geographic decides the product consumption
pattern. People in coastal areas of Konkan and Goa
relish rice, a staple grain there and fish abundantly
available from sea. Southern are found of coffee
and north Indians like Tea.
People down south use talc excessively, and apply
it even on face, perhaps aspiring to fairer like their
counter part in the north. When we sale our product
to international market. Products are made
according to their need.
Rasna international gives instant syrup when
dissolves in glass of water, and does not contain a
lot of sugar. Complexion creams like fair and lovely
sells only in India.

Demographic segmentation

Segmentation of consumer based on
variables such as race, religion,
community, language, age, stage in
family cycle, gender, marital status,
family size, occupation, economic
position/income/purchasing capacity
level, and social status ,of the consumer
demographic segmentation.

Age: It is essentially a case of age based segmentation of a
market.
Example: Amul has segmented his product in different age
group
For kids: Amul kool, chocolate milk, Nutramul energy drink.
For Youth: Amul cool kafe.
For womens and older people: Amul calci+, Amul Shakti
energy drink
Gender: Gender is another key variable/base under demographic
segmentation. There is substantial evidence that men and women
differ in buying behavior and it their persuasive messages.
Women tend to be slower to make decisions and exhibit greater
uncertainty about their decisions. And, they are also more
persuadable.
Example: Adidas targets women in India
German shoe maker Adidas is trying to develop the women
segment in India for its products.


Emami segmented its product in gender
Womens: Naturally fair
Men: Fair and handsome
Purchasing capacity: In the segmentation context of
several elements of demographic, purchasing capacity is
perhaps the most significant one. Buyers preferred price
range is often related to purchasing capacity.
Example: Nokia
It deals with wild variety and wild range.
Nokia 2600 price Rs.2750
Nokia 5130 price Rs. 5300
Nokia N73 price Rs.12, 500
Nokia N95 price Rs 22,750

Budget car segment-
It is the largest segment in Indian market. Here the entry
level starts from Rs 1.5 to 3 lakh. Maruti 800 and Omni are
the dominant players in these segments. With the launch of
Tata Nano with a price range of 1lakh the outlook of this
segment has changed. This segment is sometimes referred
to as the small car segment. Competition in this segment is
extreme in Indian market.
Maruti 800 (Budget Car Segment)
Compact car segment-
It lies between budget car and family car. Preferred price
range is between Rs 3 to 4.5 lakh. Maruti Zen, Fiat Uno,
Tata Indica, Santro, Matiz is some of the dominant players
in this segment.
Cars of compact segment
Family car segment-
The purchasing capacity of buyers of this segment is somewhat higher than that
of the budget and compact car segment. Price ranges between Rs 4.5 to 6
lakhs. Maruti Swift,Chevorlet Spark, Beat and Hundai i20 belongs to this
segment. In India cars that are sold in India as Budget Car and Compact Car
do not meet their purpose, especially in term of space, that they turn to the
family car segment.
Premium car segment-
This segment represents the buyer who require true world class luxury car.
Price ranges between Rs 6 to 8 lakh. Ford Escort, Honda City, Mitsubishi
Lancer, Audi 1800, Opel Astra etc are some of the major cars in this segment.
Opel Astra (Premium car segment)
Super luxury saloon segment-
Buyer in this segment looks for a real super premium segment car. Mercedes
Benz E229, E-250, Rover Montego, Audi 6, BMW is the players in this
segment. Obviously, this is a tiny segment in the Indian context.
Audi 6 (Super Luxury saloon)

Socio-Cultural Factors
Culture and social class are the two main bases of segmentation
here.
Culture: Culture influence consumer behavior, deeply. A given
culture brings in its own unique pattern of social conduct. A
person usually acquires his cultural attributes right at his
childhood. Culture includes religion, caste, tradition, language,
pattern of social behavior etc.
Social Factor: Social group of varying types exert influenced on
the consumer. Social group include family, peer group, close
colleges. They adopt their common life style.
The influences of cultural and social factor are on consumer
behavior. So products are segmented on the basis of social and
cultural factor.
Example: Zee Televisions deals with variety of channels
regional channel, sports channel, movie channel.
McDonald has both veg and non veg burger. McDonald has veg
burger for vegetarian and nonveg burger for non vegetarian

Psychographic segmentation
Psychographic Segmentation groups customers
according to their life-style and buying psychology.
Many businesses offer products based on the
attitudes, beliefs and emotions of their target market.
The desire for status, enhanced appearance and
more money are examples of psychographic
variables. They are the factors that influence your
customers' purchasing decision.
In psychographic segmentation, elements like life
style, attitude, self-concept and value system, form
the base.

Life style: Just as purchasing capacity forms a major base under
demographic segmentation, life style forms a major base under
psychographics segmentation.
Example:
Caf Coffee Day
They choose lifestyle oriented, urban consumers as target with youth.
They make coffee an experience and provide a special experience to
chosen segment. CCD has estimated that presently 60% of the footfalls
in its 300 outlets belong to students between the ages of 15 to 24 years.
The CCD are targeting students and trying to establish a space in their
lives.
Psychographic segmentation helps in positioning/repositioning,
launch of new products and brand extension: Segmentation
consumer based on psychographic rest on identifying consumer state of
mind and hence helps in piecing together a more inclusive profile of
target consumer. It is therefore, particularly, useful in
positioning/repositioning of product and in new product launch and
brand extension.
Markets can be segmented on the basis of buyer
behavior as well. Since all Segmentation is in a way
related to buyer behavior, one might be tempted to
ask why buyer behavior-based segmentation should
be a separate method.
It is because there is some distinction between
buyers characteristics that are reflected by their
geographic, demographic and psychographic
profiles, and their buying behavior.
Marketers often find practical benefit in using buying
behavior as a separate segmentation base in
addition to bases like geographic, demographics, a
psychographics
Buying Behavior Segmentation
The primary idea in buyer behavior segmentation is that different
customer groups expect different benefits from the same product
and accordingly, they will be different in their motives in owing it and
their behavior in buying it. Variables of buyer behavior are:-
Benefit sought: - Quality / economy / service / look etc of the
product.
Example: Nestle has found a separate segment atta noodles as
distinct from the maida noodles.
Usage rate: - Heavy user / moderate user / light user of a product.
User status: - Regular / potential / first time user / irregular
/occasional.
Loyalty to brand: - Hard core loyal / split loyal / shifting / switches.
Occasion: - Holidays and occasion stimulate customer to purchase
products.
Attitude toward offering: - Enthusiastic / positive attitude /
negative attitude / indifferent / hostile.
Example: Shampoos, soap and all FMCG products buying
behavior segmentation is used.

The market for a product is nothing but the aggregate
of the consumer of that product. We also know that
consumer of a product vary in needs, motives,
characteristics, and buying behavior. It means that the
market for a product is essentially a heterogeneous
unit.
Markets break up the heterogeneous market for
product into several sub units, or sub markets, each
relatively more homogeneous within itself, compared
to market into a number of sub markets/ distinct sub
units of buyer , each with relatively more
homogeneous characteristics, is known as market
segmentation.
Markets are Heterogeneous; Segmentation
divides them into Homogeneous Sub-Units
Markets, sometime, speaks of product segments and price
segments and use these expressions as synonymous with
market segments. This can leads to a wrong understanding of
what market segments, or for that matter, the process of
market segmentation as a whole.
We have to be clear that in market segmentation, it is the
consumers who are segmented, not the product, nor price.
Market is about people who consume the product, not about
the product thats gets consumed.
For example, in segmentation of the passenger car market, it
is not the passenger cars (product) that are segmented, but it
is the consumer/buyer of car that is segmented. Similar is the
position about the price segments.

It is the Consumer who are Segmented, Not Product,
nor Price
Taking the passenger car instance again, it is not the cars
that are segmented with price as the base, but it is the
buyer of cars that are segmented, with their price
preference for car as the base. We do speak about price
slots in segmentation.
But it does not mean that the price slots constitute the
segments. What it signifies is that different offers are
made available matching the differing price preference of
the consumer segments involved. Price slots and specific
products offers thereof are just a derivative of segments
of consumers. It is the consumer, who invariably defines
the segments, not product, nor price slots.
Example:
Titan Watches
Arrives in three broad Segments
The Rich
The Middle
The Lower
Titan Brings out a Wide Range of Offer to
Serve the Different Value Segments
For the Gold lovers:
Titan offered to this segment an all gold
watch- the Aurum and Royal lines.

For the More than One Segments:
Titan made those who wanted more than one watches into a
separate segment ad tempted them by offering a wide range
of models. It offered them matched ones dress and
occasions.
For the youth /the outdoor lovers:
Titan viewed them as a lifestyle segment and offered them the
fast track.
For Designer Segment:
Titan also adopted the designer segment and offered them all
designer and hand assembled watches, the Euro collection,
designed by European designers.
For the Children
Titan adopted children those between 6 to 14 years as o
separate segment ( Dash for Kids)
For Women Seeking Fashion within the Middle-income Group:
Titan offered the Raga Range for this segment which was
meant exclusively for women.

In contrast to consumers, industrial customers tend
to be fewer in number and purchase larger
quantities. They evaluate offerings in more detail,
and the decision process usually involves more
than one person. These characteristics apply to
organizations such as manufacturers and service
providers, as well as resellers, governments, and
institutions.
Many of the consumer market segmentation
variables can be applied to industrial markets.
Industrial markets might be segmented on
characteristics such as:
Location
Company type
Behavioral characteristics

Bases for Segmentation in Industrial
Markets
Location
In industrial markets, customer location may be
important in some cases. Shipping costs may be a
purchase factor for vendor selection for products
having a high bulk to value ratio, so distance from the
vendor may be critical. In some industries firms tend
to cluster together geographically and therefore may
have similar needs within a region.
Company Type
Business customers can be classified according to
type as follows:
Company size
Industry
Decision making unit
Purchase Criteria

Behavioral Characteristics
In industrial markets, patterns of purchase
behavior can be a basis for segmentation.
Such behavioral characteristics may
include:
Usage rate
Buying status: potential, first-time, regular,
etc.
Purchase procedure: sealed bids (auction
Pricing), negotiations, etc.
ADVANTAGES OF MARKET SEGMENTATION
Various advantages of market segmentation are:-
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 markets and conquer them.
Helps crystallize the needs of the target buyers
and elicit more predictable responses from them;
helps develop marketing programmers on a
more predictable base; helps develop market
offer that are most suited to each group.
Helps achieve the specialization required in product;
distribution, promotion, and pricing for matching the
customer group and develop marketing offers and appeal
that match the need of each group. Makes the marketing
effort more efficient and economic.
Helps concentrate efforts on the most productive and
profitable segment, instead of frittering them over irrelevant,
or unproductive, or unprofitable segment.
Helps spot the less satisfied segments and succeed by
satisfying such segments.
Brings benefits not only to the marketer but also to the
customer as well.

Mass Marketing
Segment Marketing
Niche Marketing
Micro Marketing
Local marketing
Individual Marketing

Levels of Market Segmentation
Step 1. Market
Segmentation
Levels of Market Segmentation
Mass Marketing
Same product to all consumers
(no segmentation)
Segment Marketing
Different products to one or more segments
(some segmentation)
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)
Niche Marketing
Different products to subgroups within segments
(more segmentation)
Local Marketing
Tailoring brands/ promotions
to local customer groups
Individual Marketing
Tailoring products/ programs
to individual customers
Mass marketing is to produce the same
product for all the customers. In this
segments producer act for:
(no segmentation)
Mass production
Mass distribution
Mass Promotion

Mass Marketing
This segment recognizes that buyers vary in their needs,
behavior, perception. The process of isolation broad segment,
which make a market and can bitterly understand the wants
and needs of customers.
A market segments consist of a group of customer who
share a similar set of needs and wants. Rather than creating
the segments, the marketers task is to identify them and
decide which ones to target. Segment marketing offers key
benefits over mass marketing. The company can often better
design, prize, disclose, and deliver the product and services
and also can fine tune the marketing programme and
activities to better reflects competitors marketing.
Segment Marketing
Niche is more narrowly defined customer group seeking
distinct mix of benefits. Marketers usually identify niches by
dividing a segments into sub segments.
Large groups in the market, which is identifiable, it defines
as a segment more precisely, by dividing a segment into sub
segments. Niche gives a good opportunity to small
companies, and they can allocate their resource by serving
niches, which are overlooked by large companies. Niche
offers smaller companies an opportunity to compete by
focusing their limited resources on serving niches that may
be unimportant or may overlooked by larger competitors.

Niche Marketing - Different products to subgroups
within segments (more segmentation)
Micro-marketing adopt products and marketing programs to match
the taste of specific localities and individuals. Micro Marketing can be
divide in to Local Marketing and Individual Marketing.
Local Marketing
Adopting brand and promotion to the wants and needs of local
customers like cities, specific stores. But it has some drawbacks. It
increases manufacturing and marketing cost by reducing economies of
scale.
Individual Marketing
Adopting products and marketing programs to the needs of
individual customers. Through mass communication prevalence
individual marketing was locally ignored, but new technologies powerful
computers, all have combined to foster mass customization.
Micro Marketing
Name of possible broad product market.
List of Potential customer Needs.
Divide or break the Broad Market into sub market or
homogeneous market.
Identify the determining dimensions of needs.
Name the possible product markets.
Subsequently, further probing to find what else
determines the market attributes characteristics and
to determine how these markets behave.
Make a rough estimate of the size of each product
market segment.
Procedure of Segmenting Consumer
Market
Total
population
llpp[[poput
Felt need Interested Money to
Buy
Willingness
to spend
Market
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.
Mass marketing refers to treatment of the market as a
homogenous group and offering the same marketing mix to
all customers. Mass marketing allows economies of scale
to be realized through mass production, mass distribution,
and mass communication.
The drawback of mass marketing is that customer needs
and preferences differ and the same offering is unlikely to
be viewed as optimal by all customers. If firms ignored the
differing customer needs, another firm likely would enter
the market with a product that serves a specific group,
and the incumbent firms would lose those customers.
The Need for Market Segmentation

The drawback of mass marketing is that customer
needs and preferences differ and the same offering is
unlikely to be viewed as optimal by all customers. If
firms ignored the differing customer needs, another
firm likely would enter the market with a product that
serves a specific group, and the incumbent firms
would lose those customers.

Target marketing on the other hand recognizes the
diversity of customers and does not try to please all of
them with the same offering. The first step in target
marketing is to identify different market segments
and their needs.
Facilitates Right Choice of Target Market
Segmentation helps the marketer to pick up his target market
properly. It does this by enabling him to distinguish one customer
group from another within market and by showing him, which
segments of the market match his situation and should, hence,
form his target market.
Facilitates Effective Tapping of the Chosen Market
Segmentation enables the markets to crystallize the needs of
each of the chosen segments and make offer that match them.
When buyers are handled after segmentation, the response from
each segment will be more homogeneous. This in turn, will help
the marketer develop marketing offers/programmers that are
most suited to each segments.
They can adapt the offers to the target segments the, achieves
the specialization required in product, distribution, promotion and
pricing for matching the particular customer group, and can
develop marketing offers and appeal, that match the group.

Why segment the market?
Makes the Marketing Effort More Efficient and
Economic
Segmentation also makes the marketing more
efficient and economic. It ensures that the marketing
effort is concentrated on selected and well-defined
segments. After all, for most firms, the resources
would benefits if its efforts were concentrated on
selected segments- the ones that match the firms
resources and are most productive and profitable.
Helps Identify Less Satisfied Segments and
Concentrate on Them
Segmentation also helps the marketer to asses to
what extent existing offers in the market matches the
needs of different customer segments and which are
the less satisfied segments.

Is it sizeable: -
Size-wise, the popular segment is a bigger compared
to the premium segment. In term of tonnage, of the
total market of around 6, 00,000 tones, the popular
segment account for 80 percent and the premium
segment for the remaining 20 percent.
If the firm wants a very large volume, it has to think of
the popular segment. At the same time, it has to note
that the premium segment too is sizeable, as it
account for over 120,000 tones.
In term of value, the premium segment is even more
sizeable, formerly nearly 30 percent of the total
market. Clearly, the segment cannot be ruled out as
lacking in size
EVALUATION OF THE SEGMENTS
Is it growing: -
Growth rate and likely future position of the segment
will be the next consideration in the evaluation process?
Usually, business firms seek out the high growth
segments.
Analysis will readily indicate to the firm that in bath
soaps, the premium segment happens to be the high
growth segment. Whereas the popular segment has
been growing at 10 percent per annum, the premium
segment has been growing at over 20 percent annum.
When this fact is taken into consideration, the firms
choice may tilt toward the premium segment. The tilt
will be particularly pronounced if the firms natural
disposition is to strive for a position in the high growth
segment of the business.

Is it profitable: -
Next consideration will be the extend of profitability. In the present
example, the firms quickly sense that the premium segment is
more profitable one. Even a relatively lower volume in the
segment may bring in good returns.
On the contrary, in the popular segment, a much larger volume
will be necessary for the business to be viable, since prices and
margins in the segment are low. Another point is that costs of
marketing, distribution and promotion in the business are quite
high and are constantly on the rise.
Costs of launching a new brand are particularly high. The market
is very competitive, aggressive promotional support through
expensive media like TV becomes essential. In this background,
the firm may come to the conclusion that it may be worthwhile to
gamble in the premium segment rather than the popular segment
Is it accessible: -
The firm has to now consider whether the segments
are accessible to it. This may need further analysis.
The market realities will have to be taken into
consideration. The popular segment will be
accessible only to the firm with a cost advantage,
since price is a major determinant in this segment.
Premium segment will be accessible only to firms,
which enjoy a differentiation advantage, and which
are also marketing savvy. Liril of Hindustan Lever has
a commanding position in this segment. At the upper
end of the segment, HLLs Pears and Dove are well
entrenched. Several other brands of different
companies are competing in the segment.
The firm has to take due note of this reality. At the same time,
analysis also reveals that new brands do keep entering the
segment every now and then, and some of them do manage to
stay. So, the firm has no reason to believe that the premium
segment is not accessible to it, unless it is convinced that it is very
weak in marketing.
Is it compatible with the firms resources and capabilities: - Having
reached the conclusion that the premium segment is sizeable,
growth oriented, profitable and accessible, the firm has to now find
out if the segment matches its resources? For some firms, the
popular segment may be the natural choice and for others, the
premium segment.
And, for some other choosing both. The premium segment is a
highly competitive segment. Only firms endowed with strong
resources and an aggressive marketing strategy/culture can fight
and survive in the market. The firm therefore has to assess
whether the particular segments are compatible with its resources
and capabilities.


Different Types of Market