The Basis for Market Segmentation

SEMENTATION ANALYSIS

Consumer Characteristics Consumer Response

PERSONAL PRODUCT

Geography Benefits

Usage
Demographic,
Social, Economic
Loyalty
Psychographic
Occasion

A. Consumer Characteristics Approach:

1. Geographic characteristics:

 It helps the marketers to concentrate their efforts to the exact places, organizational, promotional and
distributional efforts can be fruitfully utilized.
 Consumers do not stick to a particular locality or a region.
 Example: rural and urban, regional-north, south, east and west, national-states, divisions, districts,
talukas, cities and towns.

2. Demographic and socio-economic characteristics:

 Demographic is the study of human population in terms of its size, density and distribution.
 Socio-economic are- age group, sex, family size, income, occupation, level of education religion, ethnic
status, social class, etc.
 This tells the firm as to who is the most likely customer to buy the product or a service, it does not
disclose about the brand he or she likes.

3. Psychographic characteristics:

 This seeks to describe the human characters of consumers that have the unit which includes variables
like personality attitudes and lifestyles.
 Personality variables are-dominance, aggressiveness, objectivity, achievement, motivation and the likes
which influence the buyer behavior.
  Lifestyle-people’s activities, opinions and the sum total of their interests and values.

B. Consumer Response Approach

1. Benefit Response:

 The consumers are sub divided into specific groups in relation to the various benefits that the buyer is
seeking from a product in particular.
 Benefits are-the aspects of efficiency, prestige, durability, economy or resale value etc.

Benefits sought Major brands % of market share

1. Cosmetic Colgate, Close-up 65%
White teeth-stop bad breath.
2. Therapeutic Forhans, Cibaca, Signal 25%
Fight gum troubles.
3. Ayurvedic Vicco vajradanti, Neem 5%
Without side effects.
4. Others Smokers, Dentobac 5%
White teeth-virility.

2. Usage Response:

 The seller distinguishes the users as the Heavy, Medium, Light and Non-user of his product.
 Then they attempt to determine whether these groups differ in demographic and psychographic
factors.
 The classification is into primary groups as users, non-users and potential users.
 Actual user-heavy and light (concentrate more on heavy).
 Non-user group-non-potential user (who do not use this product) and potential user (who might use
product.
 The seller should give thought to all the volume groups because, they present different opportunities.

3. Loyalty Responses:

 It works on the fact that the consumers can differentiate between the products and they create a
product preference scale (i.e., the buyers are asked to compare the existing brands of products and rate
them as they perceive them based on liking).
 This helps the seller to develop an ideal brand to which sizeable group of customers is clustering into
sub-divided groups based on demographic or psychographic factors.
 However, it is very difficult to pin down correctly the loyalty because, it depends on the availability of
competing products.

4. Occasion Responses:
  Marketers use this response to determine which situations produce optimal consumption patterns for a
given product.
 This sense of occasion is of top significance when it comes to the question of designing the marketing-
mix.
 The experience has proved beyond doubt that it is possible to broaden the occasion response to
product and, therefore, its demand.

Requisites of Sound Marketing Segmentation Strategy:

The weakness of segmentation is evident from the inability of a marketer to take care of all segmentation bases
and countless variables. Therefore, the requisites of sound marketing segmentation strategy are spelled out
very succinctly by Professor Martin. L. Bell of Washington University U.S.A.

1. It is identifiable and measurable

2. It gives evidence of adequate market potential
3. It is economically accessible
4. It reacts uniquely to marketing efforts
5. It is relatively stable over a period of time
6. It is dynamic

Market Segments and Marketing Mix:

First possibility:
 The direction is from market segmentation to marketing mix.
 The company assumes certain things about a segment and then prepares a marketing mix based on
these assumptions.
Second possibility:
 The direction is from marketing mix to market segmentation to revised mix.
 It implies that the company already has the product in hand and that the market is crowded with similar
items.
 The company studies the market to see if there is any correlation between certain buyers and certain
brands of products.
Target Marketing

 It is the process of deciding and preparing the marketing program for market or markets.
 Segment profiling is a major and constructive step in this direction of market targeting for
understanding the size of segment, growth potential, segment’s structural attractiveness, company
objectives and resource.

The key factors are:

1. Segment’s attractiveness (focuses on its attention on profitability).

2. Keeping competitors at bay (to stay ahead).

3. Company objectives and its resources.

Alternative Market Targeting Strategies

1. Undifferentiated Marketing:

Often referred to as mass marketing, the undifferentiated strategy basically ignores the differences
between market segments and treats the entire market as a single target. Fundamentally, there is
essentially no targeting at all. Everyone is a potential customer.

Examples of industries that partake in undifferentiated marketing are:

 General hygiene products (toothpaste, soap, detergent)
 Gasoline and energy providers
 Dairy products
 Fruit juices
IKEA, the Swedish furniture and homeware retailer

2. Differentiated Marketing

Differentiated market targeting offers us a little more depth and clarity. It’s otherwise known as
‘segmented’ marketing and entails isolating a number of (generally two or more) primary target segments
that have the most potential value for the company.

What makes differentiated marketing successful is the ability to reach the people who are most likely to
purchase your product or service with messages unique to each segment.

You can easily see that differentiated marketing is a very powerful strategy and one of the targeting
strategies used most in marketing.
3. Concentrated Marketing

Concentrated marketing is often called ‘niche marketing’. If we’re keeping with the cake metaphor,
concentrated marketing doesn’t take the whole cake, half or even quarter-slices. It takes just one, small,
specific slice which has some kind of desired attribute on top.

This strategy is commonly used by businesses that have a strong unique selling proposition that attracts
a specific type of customer.

Niche market examples are:

 Baseball fans
 Kids
 Dog owners
 Sustainable fashion
Selecting a viable Marketing Strategy:

1. The company resources

2. The product homogeneity
3. The product-life cycle stage
4. The market homogeneity
5. The competitor’s marketing strategies
6. The policy of the government

Market Integration and Market Orchestration

Market Integration:
 It is the strategy of counter segmentation of reducing the over-segmentation.
 Example- high protein drink is found in case of teenagers, executives, active elders of various
professions. Instead of providing for each group a separate drink, a common drink for all with like needs
can be developed thus reducing costs on production and distribution.
  It refers to the process of combining different marketing strategies, channels, and activities to create a
cohesive and unified approach to reaching and engaging with customers which involves aligning various
elements such as advertising, public relations, social media, sales promotions, and branding efforts to
deliver a consistent message and experience to the target audience.

Market Orchestration:

 It is the technique of selecting the additional segments while offering the same product or service to
more than one market segment.
 The firm is to decide which segments are to be included and whether it is advisable to do so. Generally
this problem is faced by hotels, restaurants, departmental stores and other business lines where
customers of differing life-styles come together face to face.
 It refers to the strategic coordination and management of various marketing resources, channels, and
activities in a systematic and seamless manner to achieve cohesive and integrated marketing efforts
such as advertising, promotions, content, social media, public relations, and sales activities to deliver a
consistent and impactful message to the target audience.
Product Positioning
It is concerned with selecting the marketing mix that is most appropriate to each target market segment.

Definition:

According to Professor Philip Kotler, “Positioning is the act of designing the company’s image and value offers
so that the segment’s customers understand and appreciate what the company stands for in relation to its
competitors.”

Types:

Product Positioning Alternatives:

1. By making altogether different claim or USP

2. Highlighting the new product features

3. By entering in new market segment

4. By introducing a new package design

Determinants of Successful Product Positioning:

1. Design creative product proposition

2. Existence of warranted competition

3. Sizeable and profitable market segment

4. Sensitive market segment

5. Adequate consumer behavior information

The Steps in Product Positioning:

1. Identifying potential competitive advantages

2. Choosing the competitive advantages

3. Signaling the competitive advantage

Errors in Product Positioning:

1. Error of under-positioning

2. Error of over-positioning

3. Error of confused positioning