MARKET SEGMENTATION(chapter 6)

(3rd semester)

MEANING OF MARKET SEGMENTATION

Market segmentation is one of the most interesting and useful tools in market segmentation.

Division of market onto several segments is called market segmentation. The concept of market segmentation is based on the assumption that no two buyers are identical in all respect.

Market segmentation is the starting step in applying the marketing strategy. Once segmentation take place, the marketer targets the identified consumer group with proper marketing mix so as to position the product as perceived by the target segments.

OBJECTIVES OF MARKET SEGMENTATION

The main objective of market segmentation is to determine the differences among customers. The marketer can frame his marketing policies and strategies on the basis of these differences to provide maximum satisfaction to customers.

To identify the needs, tastes, priorities, buying-motives of the target consumers.

To determine marketing strategies, targets and goals of the firm.

To make the activities of the firm consumer-oriented.

To identify areas where the customers may be created and market area can be explained.ss

REASONS FOR THE DEVELOPMENT OF MARKET SEGMENTATION

It increases the understanding of real needs of the target consumers and results n maximization of their satisfaction. There are many reasons which increases the acceptability of market segmentation strategy by the manufacturers of consumer and industrial products such as;

Customer orientation Technological advancement Use of cost reducing techniques Increase in purchasing power Increase in competition

REQUIREMENTS/CRITERIA FOR EFFECTIVE SEGMENTATIONMarket segmentation has its own benefits and costs. The

strength of its lies in better understanding of consumers for making intelligent marketing decisions and their segmentation. For effective market segmentation the following requirements must be considered:

Identifiable Measurable Accessible Responsiveness Significant SubstantiableToo small and too large segments are of no use for

marketing programmers and actions.

METHODS OF MARKET SEGMENTATION

As the nature and features of every person differ. The market therefore, can be divide in different segments on the basis of such differences, as under;

I. Each buyer a separate marketII. Framing broad groups of buyers

CONCEPT OF MARKET SEGMENTATION

Market segmentation gives several benefits to the marketing executives because it becomes easy for them to fulfilll the demand of a particular segment rather than to produce for all the consumers.

Philosophy of Marketing Segmentation can be illustrated in the following way:Approaches to Market

Segmentation

MassMarketing

Product Differentiation

Marketing

TargetMarketing

MarketSegmentation

Market Targeting

ProductPositioning

BASES OR CRITERIA FOR MARKET SEGMENTATION

The step towards developing a segmentation strategy is to locate the base or bases for segmenting the market. There are different bases which are used to segment the market. Prof. Cundiff and Still have given a very simple division of product market.

I. Consumer marketII. Industrial MarketThe market for industrial products can be segmented

on the bases of:(i) Type of business(ii) Usual purchasing procedure(iii) Size f users(iv) Geographical market segmentation

SEGMENTING THE CONSUMER MARKET

The most common and popular criteria, bases or factors for market segmentation which are used by marketing managers may be given as under:

Geographic Segmentation The marketer may design his marketing strategies taking into consideration the features of individual markets. Geographic segmentation helps the marketer to concentrate their efforts to the exact places. Some examples are as follows:

(i) Climate(ii) Urbanization

Demographic Segmentation Under demographic segmentation, a marketer tries to differentiate between groups of customers on the basis of demographic variables such as age, sex etc. Some commonly used demographic bases are as follows:

(i) Gender(ii) Income(iii) Occupation(iv) Family-life Cycle Psychographic Segmentation Psychographic is a

recent approach to market segmentation which has emerged as a major alternative to traditional approach. It describes the human characteristics of the consumers. It segment the market ob the bases that how people act.

Psychographic bases are difficult to measure but they provide a useful base for segmentation. Some examples of psychographic bases are as follows:

Personality Life Cycle Social Class Marketing bases Marketing conditions also from an

important bases or criteria for market segmentation. There are latest variables used by modern marketers. This include:

(i) Degree of Competition(ii) Channels of Distribution(iii) Buyers with price consciousnesss

Consumer-Behaviour Bases Consumer bahaviour may also form the basis of market segmentation. Consumer behaviour divide the market on three bases:

(i) Usage Rate(ii) Benefit Response(iii) Loyalty Response

SEGMENTING THE INDUSTRIAL MARKET

Like consumer market, industrial market can also be segmented. This segmentation is an appropriate for industrial products as for consumer products. Some important bases are as follows:

Type of business activities bases Geographical location bases Usual purchasing procedures bases Size of userIndustrial market can also be segmented on the

bases of: Demographic Bases Situational Variables

TARGET MARKETING STRATEGIES OR SEGMENTATION STRATEGIES

According to Philip Kotler, while evaluating different market segments, a company must consider the following three factors:

Segment size and growth Segment structural effectiveness Objectives and resources of the

companyThere are three market targeting strategies:(i) Undifferentiated Marketing strategies(ii) Differentiated Marketing strategy(iii) Concentrated Marketing Strategy

UNDIFFERENTIATED MARKETING STRATEGY

It is also known as market aggregation strategy. It is just opposite to segmentation. It is a market coverage strategy in which company treats the target market as one and does not consider that there are market segments that shows uncommon needs.

Features of Undifferentiated Marketing strategy Product is manufactured under single brand. Common needs of customers are given more

preferences. Product-oriented firms are usually adopt this strategy. One marketing mix is determined for the whole

market One type of advertising and one marketing

programme is exercised.

DIFFERENTIATED MARKETING STRATEGY

This is also known as market segmentation. Under this strategy grouping of customers is done on the basis of some common features. The whole market is divided into several segments.

Features of Differentiated marketing strategy It is customer-oriented strategy. Product line under this strategy is large/deeper. It attracts large number of customers from all

corners. It increases sales and profits of the company. Products are manufactured according to the

need of market segment.

CONCENTRATED MARKETING STRATEGY

Under this marketing strategy the marketer concentrates on one particular area/segment instead of several segments or the total market. The firm selects a market area where there are maximum customers with no strong competition and it can do best in that area.

Features of Concentrated marketing strategy It follows one product, one segment principle. It creates brand monopoly. It attracts large number of customers of the

target marketing. Product is manufactured, which is best suite to

the market needs.

SELECTION OF A MARKETING STRATEGY

Market segmentation is not only concerned with dividing the total market into some homogeneous segments. Following are points to consider while selecting marketing strategy.

Company Resources Product Homogeneity Stage of Product Life Cycle Market Homogeneity Competitor’s Marketing Strategy Government Policy

PRODUCT DIFFERENTIATION & MARKET SEGMENTATION

In product differentiating strategy, the manufacturer does not make any big physical alteration in the product rather he differentiates his products on the basis of many attributes.

Market segmentation, on the other hand, divides the total heterogeneous market into small homogeneous groups/segments and tries to produce the product that satisfies the needs of a particular segment.

‘Product Differentiation’ & ‘Market Segmentation’ are not one and the same, though they have the crude resemblance.

IMPORTANCE OF MARKET SEGMENTATION

Market Segmentation is the reality of the market situation. This benefits both the marketers and the consumers. Following advantages are receive from market segmentation:

Knowledge of marketing opportunities Adopting effective marketing programme Proper allocation of resources Better assessment of the competition Knowledge of customer’s needs Adjustment in products Effective advertising appeals Enhances marketing efficiency Increase in sales volume Benefits to customers

PRODUCT POSITIONING

Product positioning strategy is an effective technique for creating sound product image in the minds of customers. Product positioning strategy is concerned with the selecting the marketing mix, which is most appropriate to each market segment.

Steps in Product PositioningAccording to Philip Kotler, the positioning task

consists of three steps:1. Identifying possible competitive advantages2. Choosing the right competitive advantages3. Signaling he competitive advantages

FACTORS EFFECTING SUCCESSFUL PRODUCT POSITIONING

For successful product positioning following factors must be considered:

Designing creative product features Sizeable and profitable market segment Sensitive market segment Existence of competition Adequate information about consumers

behaviour

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