Market

Segmentation
MBA Specialization
Content of the Lesson
 Purpose of segmentation
 Types of segmentation
 Segmentation process
 Levels of segmentation
 the contribution of segmentation to effective marketing
planning;
 how markets can be segmented, and the criteria that
need to be applied if segmentation
 is to prove cost-effective;
 how product positioning follows from the segmentation
process;
 the bases by which products and brands can be
positioned effectively.
 UNDIFFERENTIATED MARKETING or
MASS MARKETING

 Some products appeal to the majority of us – so all

marketing is aimed at the general population.

 Aimed at most or all of the market. This type of

marketing is likely to be expensive.

 This strategy is likely to be used where the product

cannot be easily differentiated to suit the needs
of particular groups of people

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2
DIFFERENTIATED MARKETING
 This can involve marketing different products or
services to different groups of people (segments) or
promoting the same product in different ways.(product-
variety marketing)

 Eg banks having different types of accounts for

different groups of users.

 Eg Ford produce different cars for different customers

 Eg BT has different packages for different customers

10/03/2010 Segmentation 4
Question

 Distinguish between undifferentiated and

differentiated marketing. (1)

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MARKET SEGMENTATION

 Market research will show that a

particular product appeals to a specific
group of people. Producers need this
information to identify groups with similar
needs.

 Breaking down a market into sub-groups

is called market segmentation.
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Definition
 A market segment is a subgroup of people or
organizations sharing one or more
characteristics that cause them to have similar
product needs.
 it is distinct from other segments (heterogeneity
across segments)
 it is homogeneous within the segment (exhibits
common attributes)
 it responds similarly to a market stimuli
 it can be reached by a market intervention
Measurable
Measurable • Size, purchasing power, profiles
of segments can be measured.

Accessible
Accessible • Segments must be effectively
reached and served.

Substantial
Substantial • Segments must be large or
profitable enough to serve.

Differential
Differential • Segments must respond
differently to different marketing
mix elements & actions.

Actionable
Actionable • Must be able to attract and serve
the segments.
Purpose
 Increase marketing
efficiency by focusing
marketing efforts to a
particular group
 Maximize scarce
marketing resources
 Find a market with
limited competition
 Select the most
profitable segment
Segmentation Criteria

 Geographic variables
 region of the world or country, East, West,
South, North, Central, coastal, hilly, etc.
 country size/country size : Metropolitan
Cities, small cities, towns.
 Density of Area Urban, Semi-urban, Rural.
 climate Hot, Cold, Humid, Rainy.
Segmentation Criteria
Geographic
Nations, states,
regions or cities

Demographic
Age, gender, family size
and life cycle, or income

Psychographic
Social class, lifestyle,
or personality

Behavioral
Occasions, benefits,
uses, or responses,
loyalty
Demographic Criteria
 Demographic variables
 age
 gender
 sexual orientation
 family size
 family life cycle
 education
 income
 occupation
 education
 socioeconomic status
 religion
 nationality/race
 language
Psychographic Criteria
 Psychographic
variables
 personality
 life style
 value
 attitude
 Behavioral Criteria
 Behavioral variables
 benefit sought
 product usage rate
 brand loyalty
 product end use
 readiness-to-buy stage
 decision making unit
 profitability
 income status
Benefits of Segmentation

 Sales should increase

 Satisfy customer needs more successfully
 Customer feedback more easily obtained
 Reduced costs as money is not wasted on ineffective
advertising and promotion

market segmentation 15
Questions
 Outline the benefits of market segmentation. (2)

 For each of the products listed below suggest the most

likely target market:
 Geo channel
 Dawn Newspaper
 Punjab University law degree
 Fresh and Lo semi-skilled Milk
 Suzuki Mehran
 Hero honda

market segmentation 16
Market Segmentation
Process
1. Determine the characteristics of segments in
the target market & separate these segments
in the market based on these characteristics.
2. Verify the market segments size if adequate
enough to support the organization's product.
3. Develop a marketing strategy to target this
market.
Market Segmentation
Process
6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
3. Develop Measures
of Segment Attractiveness
Targeting
2. Develop Profiles
of Resulting Segments
1. Identify Bases Market Segmentation
for Segmenting the Market
Levels of Segmentation
Mass
Mass Marketing
Marketing
Same
Same product
product to
to all
all consumers
consumers
(no
(no segmentation)
segmentation)
Segment
Segment Marketing
Marketing
Different
Different products
products to
to one
one or
or more
more segments
segments
(some
(some segmentation)
segmentation)

Niche
Niche Marketing
Marketing
Different
Different products
products to
to subgroups
subgroups within
within segments
segments
(( more
more segmentation)
segmentation)

Micromarketing
Micromarketing
Products
Products to
to suit
suit the
the tastes
tastes of
of individuals
individuals or
or locations
locations
(complete
(complete segmentation)
segmentation)
NICHE MARKETING
Companies identify a “gap” in the market.
This involves a business aiming a product at a particular, often tiny,
segment of the market.

WHY?
 Small firms can sell in markets which have maybe been overlooked by
or or ignored by other firms.
 They can avoid competition in the early stages
 Can focus on the needs of the consumers in these segments.
 Many small firms have just one product

 Examples of Niche Markets:

 The Whisky Shop
 Tie Rack

market segmentation 20
Niche Market
PROBLEMS –
 Does not spread risk
 In time, market may attract large business
which can benefit from economies of
scale

 can be more and frequent swings in

consumer spending than in a large
market.
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Question

 Describe a niche market. (3)

 Explain the advantages and

disadvantages of operating in a niche
market (4)

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Solutions

 Do practice

segmentation 23