MARKET SEGMENTATION

Markets consist of buyers who differ in one or more respects. They may differ in their wants,
resources, geographical locations, attitudes and buying practices. It is therefore necessary for a
marketer to segment his/her market.The process of grouping customers in markets with some
heterogeneity into smaller , more similar or homogeneous segments. The identification of target
customers groups in which customer groups in which customers are aggregated into groups with
similar requirements and buying characteristics.
Market segment – A group of individuals, groups or organizations sharing one or more similar
characteristics that cause them to have relatively similar product needs and buying
characteristics.Benefits of Market Segmentation Products are designed to be
responsive to the needs of the marketplace. – segmenting markets facilitates a better
understanding of customer’s needs, wants and other characteristics. The sharper focus that
segmentation offers, allows those personal, situational and behavioral factors that characterize
customers in a particular segment can be considered. By being closely in touch with segments,
marketers can respond quickly to even the slight changes in what target customers want.Increase
profits – different consumer segments react in contrasting ways to prices, some are far less price
sensitive than others. Segmentation allows an organization to gain from the best price it can in
every segment, effectively raising the average price and increasing profitability.Effective Resource
Allocation - organizations are more capable of making products that customers want and can
afford.
There is product differentiation – Various products are made to meet the needs of each
customer segment. Requirements of Good Market Segments Identifiable -The marketer
should be able to identify which consumers are members of a particular market segment. There
must be some common characteristics that the consumers have. Measurable - The characteristics
that are common to the groups of consumers should be measured in terms of size, purchasing
power and other characteristics.
Substantial -The segment should be large enough to generate sales volume that ensures
profitability; otherwise it will not be economical to design a unique marketing mix for it. Is the
market worth the effort? Accessible: the segments must be reachable through communication and
distribution channels.Durable: the segments should be relatively stable to minimize the cost of
frequent changes. Responsive - Market segments must be defined in their willingness to purchase
a product in response to variations in the marketing mix.
Variables / Bases For Segmenting Consumer MarketsGeographic segmentation -
This calls for dividing the market into different geographical units such as Nations, States, Regions
– West, North, Central, South, e.t.c.
Geographical segmentation assists the seller to position retail outlets in most appropriate locations
as well as simply identifying the needs on the basis of the consumers own location. Demographic
segmentation -This consists of dividing the market into groups on the basis of demographic
variables such as:- Age, sex, family size, family life cycle, income, education, occupation, religion,
race and nationality.
Age -Consumer needs and wants change with age. Hence the market should be segmented as
young, old, e.t.c. Gender -This can be employed to segment such markets for clothes deodorants,
lotions, magazines, e.t.c. Thus the markets can be for either men or women, male or female
Family life cycle (FLC) -The product needs for a household vary according to marital status and
the present ages of children. Thus family life cycle can be divided into:-Single,,Young, married with
no children,Young, married with young children,,Older married with children, e.t.c.
d) Income -Marketers can segment the market according to the distribution of income e.g. under
1000 shillings per month, 2000/=, 4000/= per month, e.t.c.
e) Occupation -Variables include; bankers, teachers, farmers, clerks, students, housewives,
secretaries, e.t.c. A marketer can choose to specialize in the needs of one occupation group.
f) Education - Some primary education, Some high school education, College education
Psychographic segmentation
In psychographic segmentation, buyers are divided into different groups on the basis of their:-
Motives, Lifestyle and/or Personality characteristics.
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People within the same demographic group can exhibit very different psychographic
profiles.Consumers can thus be sub-divided on the basis of the following psychographic variables.
Lifestyle -Consumers’ lifestyles are derived from their activities, interests and opinions. Each life
style group is influenced by different marketing mixes. Personality -Type of personality groups may
include;,Authoritarian,Ambitious,Assertive,Self-confident,Prestige conscious,Extrovert/Introvert
Behavioral segmentation -Buyers are divided into groups in the basis of their,Knowledge,
Attitude, Use or Response to a product.In this respect, behavioral variables that are used to
segment consumer markets include:-
Occasions benefits -Buyers can be distinguished according to occasions when they
Purchase a product orUse a product
E.g. Occasions when public transport is used mostly. Occasion segmentation can help firms
expand product usage.ii) Benefits -Buyers are classified according to different benefits they seek
from the product. Variables here include:-Economy (Low price),Medical (Decay prevention),Bright
teeth,Good taste, e.t.c. for toothpaste.Benefit segmentation requires determination of:-The major
benefits that people seek from the product,The kind of people who look for such benefit,The major
brands that deliver each benefit.
iii) User status -Many markets can be segmented into
,Non-users.,Ex-users,,Potential users,,First time users and,Regular users of a product,All these people
require different marketing approaches.
iv) Usage rate -Markets can be segmented into Light,Medium and
Heavy user group of products.v) Loyalty status -A market can be segmented by customer loyalty
patterns.According to the loyalty status, the buyers can be divided into:Hard core loyals–
Consumers who buy one brand all the time Soft core loyals – Consumers who are loyal to two or
three brands Shifting loyals – Consumers who shift from favoring one brand to another. Switchers –
Consumers who show no loyalty to any brand
vi) Buyer readiness stage -At any given time, people are in different stages of readiness to buy a
product;,Some people are aware,,Some are informed,,Some are interested,,Some are desirous of
buying,,Some intend to buy.All these make a big difference in designing the marketing programme.
vii) Attitude -People in a market can be classified according to their degree of enthusiasm for a
product.Five attitude classes can be distinguished e.g.Enthusiastic,
,Positive,,Indifferent,,Negative and,Hostile.viii) Volume segmentation -Involves grouping businesses by
size and Purchase patterns

Variables for Segmenting Industrial / Business Markets

Industrial markets can be segmented using the same variables for consumer markets e.g.
geographic, demographic and behavioral. Demographic § Industry – Which industries should we
serve? § Company size –Which size companies should we serve?§ Location – What geographic
areas should we focus on? Operating variables§ Technology – What customer technologies
should we focus on? § User-non-user status – Should we focus on heavy, medium, light users or
non-users?
§ Business capabilities – Should we serve business needing many or few services?
Purchasing approaches§ Nature of existing relationship.- Should we serve companies with
which we have strong relationships or simply go after the most desirable companies? § Power
structure – Should we serve companies that are engineering dominated, financially dominated,? E.t.c.
§ Purchasing criteria i.e. focus on quality, price, service e.t.c.Situational factors §
Urgency – Should we serve companies that need quick and sudden delivery or service § Specific
application: Should we focus on certain applications of our product rather than all applications. §
Size of order.- Should we focus on large or small orders. Personal characteristics §
Buyer-seller similarity – Should we focus on companies whose people and values are similar to
ours?§ Attitude towards risk – Should we focus on risk takers or risk avoiding customers?§
Loyalty – Should we focus on companies that show high loyalty to their suppliers?