Unit 2Principles of Marketing

Market Segmentation

Subhajit Sanyal

Outline - Segmenting the market

Why segment? How to segment a market - the Process Criteria for forming Segments Bases for segmentation Some examples of segmentation STP and strategic marketing

MARKET SEGMENTATIONMARKET SEGMENTATION

Market segmentation is the process by which customers in markets with some heterogeneity can be grouped into smaller, more similar or homogeneous segments.

Figure 7.A Definition of Marketing Segmentation

TargetingTargeting

The decision about which segment(s) a business decides to prioritise for its sales and marketing efforts.

Figure 7.B Definition of Targeting.

PositioningPositioning

The process of creating an image for a product in the mind of target customers.

Figure 7.C Definition of Positioning

TABLE 4.2 Socio-economic classification (JICNARS)TABLE 4.2 Socio-economic classification (JICNARS)Table 4.2 Socio-economic classification (JICNARS)

SOURCE: From Peter M. Chisnall, Marketing: A Behavioural Analysis (Berkshire, England: McGraw-Hill Publishing Co. Ltd, 1976), pp. 114-115. Reprinted by permission.

SOCIAL GRADE SOCIAL STATUS

HEAD OF HOUSEHOLD’S OCCUPATION

APPROXIMATE PERCENTAGE OF

FAMILIES

A Upper middle class

Middle class

Lower middle class

Skilled working class

Working class

Those at lowest levels of subsistence

Higher managerial, administrative or professional

Intermediate managerial, administrative or professional

Supervisory or clerical and junior managerial, administrative or professional

Skilled manual workers

Semi and unskilled manual workers

State pensioners or widows (no other earner), casual or lowest grade workers

3

B 10

C1 24

C2

D

30

25

E 8

Product

Price Distribution

Promotion

Segment I

Segment IITarget market

Segment III

Figure 7.1 Market Segmentation Approach

Types of segmentation approaches Mass (undifferentiated) Differentiated Multi-segment Niche Customised

Segmentation

• Consider variables for segmenting market.• Look at profile of emerging segments.• Validate segments emerging.

Positioning

• Understand consumer perceptions.• Position products in the mind of the consumer.• Design appropriate marketing mix.

Targeting

• Decide on targeting strategy.• Decide which and how many segments should be targeted.

Figure 7.4 Basic elements of segmentation

Segmentation Bases

Demographic Psychographic Geographic Need/End use Size of purchase Pattern of purchase Other

Criteria for Segmentation

Accessible Viable/sustainable Homogeneous within Heterogeneous without Communicable Fit with corporate and Marketing Objectives

The Process

Segment

Target

Position

Monitor

BASIC CUSTOMER CHARACTERISTICS

DEMOGRAPHICSSOCIO-ECONOMICSGEOGRAPHIC LOCATIONPERSONALITY, MOTIVES AND LIFESTYLE

PRODUCT RELATED BEHAVIOURAL CHARACTERISTICS

PURCHASE BEHAVIOURPURCHASE OCCASIONBENEFITS SOUGHTCONSUMPTION BEHAVIOUR AND USER STATUSATTITUDE TO PRODUCT

Variables for segmenting consumer markets

TABLE 7.3 Wells and Gubar life-cycle stagesTABLE 7.3 Wells and Gubar life-cycle stages

•Bachelor stage (young single people not living with parents)•Newly married couples without children•Full nest I (youngest child under 6)•Full nest II (youngest child 6 or over)•Full nest III (older married couple with dependent children)•Empty nest I (no children living at home, family head in work)•Empty nest II (family head retired)•Solitary survivor (in work)•Solitary survivor (retired)

SOURCE: From Consumer Market Research Handbook, 3rd ed., R. Worchester and J. Downham, eds. (ESOMAR) (England: McGraw-Hill Book Company (UK) Ltd, 1986), p. 394. Courtesy of the European Society for Opinion and Marketing Research, Amsterdam.

CATEGORIESCATEGORIES %POP.%POP. GROUPSGROUPS %POP.%POP.

A Thriving 19.8

1. Wealthy Achievers,Suburban Areas

2. Affluent Greys,Rural Communities.

3. Prosperous Pensioners,

Retirement Areas.

15.1

2.3

2.3

B Expanding

11.6

4. Affluent Executives,

Family Areas5. Well-off workers,

Family Areas

3.7

7.8

Table 7.5 The ACORN consumer targeting markets

SOURCE: CACI Limited, 1993 (Source: OPCS and GRO(S) Crown Copyright 1991). All rights reserved. ACORN is a registered trademark of CACI Limited.

CATEGORIESCATEGORIES %POP.%POP. GROUPSGROUPS %POP.%POP.

C Rising 7.5 6. Affluent Urbanites,Town & City Areas.

7. Prosperous Professionals,Metropolitan Areas.

8. Better-Off Executives,Inner City Areas.

2.2

2.1

3.2

D Settling 24.1 9. Comfortable Middle Agers,Mature Home Owning Areas.

10. Skilled Workers,Home Owning Areas.

13.4

10.7

Table 7.5 The ACORN consumer targeting markets

SOURCE: CACI Limited, 1993 (Source: OPCS and GRO(S) Crown Copyright 1991). All rights reserved. ACORN is a registered trademark of CACI Limited.

Table 7.5 The ACORN consumer targeting markets

CATEGORIESCATEGORIES %POP.%POP. GROUPSGROUPS %POP.%POP.

E Aspiring 13.7 11. New Home Owners,Mature Communities.

12. White Collar Workers,Better-Off Multi-Ethnic Areas

9.8

4.0

SOURCE: CACI Limited, 1993 (Source: OPCS and GRO(S) Crown Copyright 1991). All rights reserved. ACORN is a registered trademark of CACI Limited.

CATEGORIESCATEGORIES %POP.%POP. GROUPSGROUPS %POP.%POP.

F Striving 22.8 13. Older People,Less Prosperous Areas

14. Council Estate Residents,Better-Off Homes.

15. Council Estate Residents,High Unemployment.

16. Council Estate Residents,Greatest Hardship.

17. People in Multi-Ethnic,Low-Income Areas.

3.6

11.6

2.7

2.8

2.1

Unclassified 0.5 0.5

Table 7.5 The ACORN consumer targeting markets

SOURCE: CACI Limited, 1993 (Source: OPCS and GRO(S) Crown Copyright 1991). All rights reserved. ACORN is a registered trademark of CACI Limited.

Light user

Moderate user

Heavy user

Urban

Suburban

Rural

Less than£10,000

£10,000-£19,999

£20,000-£40,000

More than£40,000

Volum

e usa

geP

op

ula

tio

n d

ensi

tyFigure 7.9 Multivariable segmentation

Marketing mix I

Marketing mix II

Marketing mix III

Organisation

Product

Price

Promotion

Distribution

Product

Price

Promotion

Distribution

Product

Price

Promotion

Distribution

Segment I

Segment II

Segment III

Target markets

Figure 7.10 Multisegment strategy

Targetmarketstrategy

Needs/wants of end users

Product market size/structure

Company/brand market share

Resources/ capabilities of the company

Intensity of competition

Production/marketing scale economies

Figure 7.12 Factors affecting choice of target market strategy

SOURCE: Data from D.Cravens, Strategic Marketing (Homewood, III.:Irwin, 1982).