MARKET SEGMENTATION

INTRODUCTION
• Organisations that sell to both consumer
and business markets recognise,
• That they
---- cannot appeal to all buyers
---- or to all buyers in the same way
• buyers are
• --- too many in number
• --- too widely scattered
• --- too varied in their needs
• --- too varied in their buying practices
• Companies vary widely in their abilities to
serve different segments of the market

• Each company must identify the parts of

the market that it can serve best
• SEGMENTATION IS A COMPROMISE
BETWEEN MASS MARKETING
/EVERYONE CAN BE TREATED THE
SAME WAY/
• AND THE IDEA THAT EVERYONE
NEEDS A DEDICATED MARKETING
EFFORT.
• Many companies practice TARGET
MARKETING (Célpiaci marketing)

• IDENTIFYING MARKET SEGMENTS

• SELECTING ONE OR MORE OF THEM
• DEVELOPING PRODUCTS AND
MARKETING MIXES TAILORED TO
EACH
• This way sellers can develop the right
product for each target market,
• adjust their prices,
• distribution channels,
• advertising to reach the target market
efficiently.
 Definition
• Target marketing is :

• directing the company’s efforts towards

serving one or more groups of customers
sharing common needs or characteristics
 MARKET SEGMENTATION
MEANS
• DIVIDING A MARKET INTO DISTINCT
GROUPS OF BUYERS WITH
DIFFERENT
• NEEDS ,
• CHARACTERISTICS, OR
• BEHAVIOUR
• WHO MIGHT REQUIRE SEPARATE
PRODUCTS OR MARKETING
 Companies identify different ways to
segment the market

• MARKET TARGETING

• the process of evaluating each market

segment’s attractiveness
• and selecting one or more segments to
enter /CÉLPIACOK KIVÁLASZTÁSA/
 MARKET POSITIONING
• ARRANGING FOR A PRODUCT
to occupy a
• clear,
• distinctive and
• desirable place relative to competing
products in the minds of target customers,
creating a detailed marketing mix
 Levels of market segmentation
• Motto: Each buyer is potentially a separate
market.
• BUT: companies look for broader classes
of buyers
• The levels are:
• 1. Mass marketing
• 2. Segment marketing
• 3. Niche marketing
 Mass marketing

• Using almost the same product , promotion

and distribution for all consumers.
• The argument for mass marketing:
• It creates the largest potential market
which leads to lower costs
Result:
either lower prices
or higher margins
 Segment marketing

• Companies are turning to segment marketing:

adapting the company’s offers
• to match more closely the needs of one or
more segments
• Several benefits :
• the company can work more efficiently with
the customers it can serve best
• fine-tuning the products and prices to the
needs of carefully defined segments

company may face fewer competitors

 Niche marketing

• Adapting the company’s offers to match

more closely the needs of one or more
• sub-segments where there is often little
competition
• Several benefits: - marketers
understand their niches’ needs so well
that customers
pay a higher price ( e.g. Ferrari)
• not much competition
 In many markets niches are the norm

• Motto:
• THERE WILL BE NO MARKET FOR
PRODUCTS THAT EVERYBODY LIKES A
LITTLE,
• ONLY FOR PRODUCTS THAT
SOMEBODY LIKES A LOT
• TO NICHE OR TO BE NICHED
 SEMENTING CONSUMER
MARKETS

• There is no single way to segment a

market.
• A marketer has to try different
segmentation variables alone or
• in combination to find the best way to view
the market structure.
Market segmentation variables for
consumer markets

• Geographic variables
Dividing the market into different
geographical units such as

nations, states, regions, counties, cities,

villages etc.
 Demographic variables

• Dividing the market into groups based on demographic

variables such as
• age,
• sex,
• family size,
• family life cycle,
• income,
• occupation,
• education,
• religion and
• nationality.
• Age: needs and wants change with age.
(Life-cycle stage)
• Gender: important in clothing,
hairdressing, cosmetics , the car industry
has begun to use it
• Income: target luxury goods –top-income
segment,mass products – down-market
groups
 Psychographic variables
• -Divides the market into different groups
based on
• social class,
• lifestyle or
• personality characteristics
 Social class:

• Different classes have preferences in

• cars,
• clothes,
• home furnishing,
• leisure activities,
• reading habits etc.
 Lifestyle :
• The goods they buy express their lifestyle
• City life, country life
• Sporty life
• Comfort loving style
• Active lifestyle
• Healthy lifestyle
 Personality:
• marketers give their products personalities
that correspond to consumer personalities.

• Good for cosmetics,

• cigarettes,
• alcohol,
• motorbikes
 Behavioural variables

• Divide the market into groups

• based on consumer knowledge,
• attitude,
• use or
• satisfaction to a product
 Occasions:

• when buyers get the idea to buy

When they actually buy
• When they use the purchased product
• e.g. when do we drink orange juice?
• When do we eat poppy seed cake?
• When do we book a holiday?
• When do we buy flowers?
• What products do we need on special
occasions such as :
• wedding,
• death,
• childbirth…..
• Benefit sought : the buyers seek different
benefits from a product
• What are the main benefits the people
look for?
• What kind of people look for each benefit?
What brands do they need?
• The best example is the toothpaste
market. There are 4 benefit segments:
• Economic
• Medicinal
• Cosmetic
• Taste
 BENEFIT SEGMENTATION OF THE TOOTH PASTE MARKET

Benefit Demographics Behaviour Psychographics Brands

segments

Economy men
High autonomy cheap
Heavy users Value oriented
Low price

Medicinal Large Heavy users Hypochondriac Blend-a-med

families Complete
Decay conservative
Medic night
prevention
Cosmetic Teens smokers High sociability Whitening
Extra active brands
Bright teeth Young
adults
Taste/good children Spearmint Egoists Any good
lovers hedonists taste brand
 User status
• non-users,
• ex-users,
• potential users,
• first-time users,
• regular users
• market share leaders will focus on potential
users
• smaller firms will focus on taking users from
market leaders
 Usage rate
Light Medium Heavy users
• Heavy users are often small percentage of
the market
• but they buy the most of the products on
the market
 Example
• Product (%users) heavy –user half light-user half

• ------------------------------------------------------------------------------------------------------------
• Beer (41%) 75 % 25%
• Cola (67%) 83% 27%
• Bourbon (20%) 95% 5%
• Shampoo (94%) 79% 21%
• Dog food(30%) 81% 19%
• Paper towels(90%) 75% 25%
 Loyalty status

some consumers are completely loyal –they buy

one brand all the time (brandy)
some are loyal to two or three brands
some show no loyalty to any brand – they either
want something new each time (trendy)
• or buy a brand on sale
• companies try to build a relationship between
the buyer and the brand
• loyal customers are few and hard to find
 Buyer readiness stage
Some people do not know a product,
Some know the brandname only
Some know a little about a product
Some are interested in buying it
Some have already tried it
 Attitude towards a product
• People can be:
• Enthusiastic
• Positive
• Indifferent
• Negative or
• Hostile about a product
• it is hard to win hostile people
 With your marketing
communication
• You can thank enthusiastic customers and
remind them to buy the product again
• Should reinforce those who are positive
• Try to win those who are indifferent
• Spend little or no time trying to change the
attitudes of negative or hostile people
• Attitudes can be effective segmantation
variables
 The point in segmentation
• Dividing the
heterogenious market Homogeneous
segments
into homogeneous
segments Homogeneous Homogeneous
• The smallest possible segments segments
Heterogeneous
differences inside the market
segments
• The biggest possible Homogeneous Homogeneous
segments segments
differences between
each segment
 Requirements for effective
segmentation

• There are many ways to segment a

market but not all segmentations are
effective.
• For example buyers of table salt may be
divided into blond and brunette
customers
• but hair colour obviously does not affect
the purchase of salt.
 Furthermore,
• if all salt buyers bought the same amount
each month,
• believed that all salt is the same
• and wanted to pay the same price,
• the company would not benefit from
segmenting the market.
 To be useful, market segments must have
the following characteristics
• 1. measurability =the degree to which the size,
purchasing power and profits of a market
segment can be measured
• The size, buying power of the market segment
need measuring.
• Certain segmentation variables are difficult to
measure
• E.g. left-handed people are not measured by
statistics- though there are apprx.30 million left-
handed people in Europe.
 2. accessibility =the degree to which a
market segment can be reached and served
• Can segments be effectively reached and
served?
• There are many heavy drinkers, but their
imbibing is all they have in common.
• They come from all countries,covering all
ages,income groups and psychologies,and
both genders
• The members are difficult to target
 3.Stability=the length of time a
segment stays unchanged
segments should stay unchanged for a long
period
-social classes normally stay the same for a
long period
 4.substantiality :the degree to which a
segment is sufficiantly large or profitable
• the segments must be large enough worth
for a tailored marketing programme
• A segment should be the largest possible
homogeneous group worth persuing
• with a tailored marketing programme
• It would not pay, for example, for a car
manufacturerto develop cars for persons
whose height is less than 1.4m