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Bases For Market Segmentation

This document discusses different ways to segment markets, including geographic, demographic, psychographic, and behavioral segmentation. It provides details on each type of segmentation and how companies can divide markets based on variables like location, age, income, lifestyle, purchase behavior, and more. Effective market segmentation requires the segments to be measurable, substantial, accessible, and actionable. When selecting target markets, companies should consider the segment size, expected growth, competitive landscape, cost to reach consumers, and compatibility with their objectives and resources.

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1K views7 pages

Bases For Market Segmentation

This document discusses different ways to segment markets, including geographic, demographic, psychographic, and behavioral segmentation. It provides details on each type of segmentation and how companies can divide markets based on variables like location, age, income, lifestyle, purchase behavior, and more. Effective market segmentation requires the segments to be measurable, substantial, accessible, and actionable. When selecting target markets, companies should consider the segment size, expected growth, competitive landscape, cost to reach consumers, and compatibility with their objectives and resources.

Uploaded by

Jowjie TV
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We take content rights seriously. If you suspect this is your content, claim it here.
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Week 13

Bases for Market Segmentation

There are many ways of segmenting a market. The best way is that which will
suit the purpose of the company or the marketer Markets may be segmented through
any of the four major categories: (1) geographic; (2) demographic; (3) psychographic;
and (4) behavioral.

Geographic Segmentation requires dividing the market into different


geographical units like nations, regions, provinces, cities, towns, or barangays. A
multinational company, for instance, may segment its market into nations and treat each
country as unique. The products the company sells to one country is slightly altered
when selling to another. Some multinationals find that a market segment of one country
is much similar to a market segment of another country. The company may find it more
profitable to serve similar segments regardless of which individual countries they are
located.

Demographic Segmentation refers to dividing the market into segments on the


basis of demographic variables like age, sex, family size, family life cycle, income,
occupation, education, religion, race, and nationality.

A company may choose "age” as a variable in segmenting its market, then use
marketing programs appropriate to the particular age groups it wants to serve.

A company may also segment its market according to sex and pour money and
effort toward serving the identified segment.

Family size is determined by the number of family members. The needs of a two-
member family, for instance, are different from those of a six-member family.

Family life cycle refers to that stage in which a family is currently situated. A
newly-wedded couple is regarded as in the first stage and the second stage
commences after the first baby is born. The succession of stages culminates into the
last stage composing of an elderly couple (or widow) with all children living Separate
lives and having families of their own. Surely, the needs of families vary from stage to
stage. This provides companies a basis for segmenting its markets.

In terms of income, a market may be subdivided into the following: (1) the high
income group; (2) the middle income group and (3) the low income group. The basis for
this type of segmentation rests on the premise that people with more or less similar
income and consequently have the same ability to spend will tend to have more or less
similar needs.

Segmenting the market according to occupation may be useful to some type of


companies. Occupations may be classified according to the following professional,
technical, manager, proprietor, farmer, teacher, housewife, student, and others people
with similar occupations tend to have more or less similar needs. Household appliances,
for instance, are the identified needs of housewives.

Education, religion, race, and nationality are also useful variables of


segmentation to some companies.

Psychographic Segmentation refers to the classification of buyers of


consumers by some psychological characteristics they possess in common. They may
be grouped according to social class or lifestyle

Segmentation by social class rests on the assumption that the human


components of one social class share similar values, interests, behaviors, and
economic positions.

Lifestyle refers to a person's pattern of living in the world as expressed in his or


her activities, interests, and opinions.

A person may have a mental image of what he thinks of himself as he should be.
This image will guide him to adapt a lifestyle fitted to that image or to the attainment of
such image.

Behavior Segmentation is a term that refers to the grouping of buyers on the


basis of their knowledge, attitude, use, or response to a product. Buyer behavior may be
segmented according to various categories, namely: (1) purchase occasion; (2) benefits
sought; (3) user status; (4) usage rate; (5) loyalty status; (6) readiness stage (7) attitude
toward product.

Occasion segmentation calls for grouping of buyers according to occasion when


they get the idea, make a purchase, or use a product.

Buyers may also be segmented according to the benefits they seek from a
particular product.

Another useful way of segmenting a market is by grouping product Users


according to status. User status may be classified as follows: (1) non-users; (2) ex-
users; (3) potential users; (4) first-time users; and (5) regular users. Life insurance
policies, for some reason are purchased by a small percentage of the population. Aware
of this fact, life insurance companies continuously devise marketing strategies to tap the
high percentage of nonusers, ex-users, and potential users.

Segmentation by usage rate is also a way of market segmentation. It is done by


classifying buyers into light-users medium-users, and heavy-users. Oftentimes, the very
few heavy-users of a product consume more than the very many light-users

As companies are more interested in sales volume, marketing strategies are


devised to attract the heavy users in the purchase of specific brands. Also, light-users
are urged to become heavy-users.

Buyers may also be grouped according to their loyalty to particular brands. They
may be classified as follows:

1. those who buy only one brand of a product;


2. those who buy two or three brands;
3. those who shift from one brand to another; and
4. those who have no brand preference.
Loyalty to a particular brand provides better insights to the marketer. It he is
faced with the problem of inducing buyers to switch loyalty to his own brand, his first
move would be to determine the loyalty status of buyers.

Another way of segmenting the market is to classify buyers according to their


readiness to buy. In this regard, they may be categorized into the following stages:

1. people who are unaware of the product;


2. people who are aware of the product;
3. people who are informed of the product;
4. people who are interested in the product;
5. people who desires the product; and
6. people who want to buy the product.

From the point of view of the marketer, the last stage refers to people who are
most prepared to buy. If there are not enough people who intend to buy the product, he
must exert some effort to convert the readiness stage of some.

People's attitude toward the product may also be classified according to their
degree of enthusiasm. These are the following:

1. people who have an enthusiastic attitude toward the product;


2. people who have a positive attitude toward the product;
3. people who have an indifferent attitude toward the product;
4. people who have a negative attitude toward the product;
5. people who have a hostile attitude toward the product.

The enthusiastic attitude is most desired by marketers while the hostile one is the
most unwanted. The marketing task, therefore, will be to change an attitude into an
actual sale.

Requirements for Effective Segmentation

To be useful and effective, market segmentation must meet the following


requirements:
1. it must be measurable;
2. it must be substantial;
3. it must be accessible; and
4. it must be actionable.

Measurable

The variables of a particular segment must be measurable. For instance, if a


segment is defined as men who are college graduates and are currently employed, it
would be relatively easy to find information about the number of such men in the
population. It may also be easy to obtain information about their number per age
bracket.

Substantial

The segment must be large or wide enough to be economically feasible. A


narrow segment consists of members with highly identical needs, making it easier to
design an appropriate marketing program. A narrow segment, however, will have fewer
members and sales potential will be lower.

Accessible

Segmentation will be useful only if the segment members can be reached


economically by a pre-designed marketing effort. This is possible if the segment
members are concentrated in certain geographic areas, buy their needs at particular
stores, and is exposed to certain media.

Actionable

For segmentation to be useful, the firm must have the ability to serve the various
segments. It must be able to develop and implement separate marketing programs for
each segment. Firms without efficient resources will not benefit from segmentation.

Selecting Target Markets


The selection of targets is a marketing activity that should be planned carefully.
The consequence of picking the wrong segments may lead to lost opportunities and
waste of company resources.

To determine which segments are right for the firm, the following criteria must be
considered:

1. Size. In choosing a market segment, it must be large enough to be worth serving.


Size, however, does not necessarily refer to the number of potential buyers but the
volume of sales that may be generated.
2. Expected growth. There are markets that are not currently attractive but some of
these may be expected to grow in the future. An example is the solo ride motorcycle
market which is expected to grow fast because of increasing oil prices.
3. Competitive position. The presence of competition in the segment considered
lowers the firm's chance of successfully making profits. The strength of the
competition must be thoroughly analyzed.
4. Cost of reaching the segment. A market segment that is chosen must be easily
reached by the firm. If marketing efforts to reach it will be too expensive, it may
jeopardize profits, and in that case, it must not be chosen.
5. Compatibility with the firm’s objectives and resources. If the firm does not have
enough resources to serve a prospective segment, the segment must not be
selected.
Activity for Lesson 8 – Week 12

1. Which among the major categories of market segmentation best suits the consumers
of San Antonio Quezon?

2. How do you ensure that the requirements of market segmentation is being met by the
organization?

3. Among the market segmentation criteria which do you think is considered the least?

Note for ODL : Send your answers to [email protected]

Wag sulat kamay nakatype po 

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