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Lecture 6 Notes

Market segmentation refers to dividing a large market into smaller subgroups with similar characteristics. It involves identifying consumer subgroups based on factors like gender, age, income, occupation, and lifestyle. This allows companies to target specific marketing strategies at each subgroup. The benefits of market segmentation include increased efficiency, stronger brand image, greater customer loyalty, and more effective digital advertising.

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45 views

Lecture 6 Notes

Market segmentation refers to dividing a large market into smaller subgroups with similar characteristics. It involves identifying consumer subgroups based on factors like gender, age, income, occupation, and lifestyle. This allows companies to target specific marketing strategies at each subgroup. The benefits of market segmentation include increased efficiency, stronger brand image, greater customer loyalty, and more effective digital advertising.

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Classinfo Cu
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© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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What is Segmentation?

Segmentation refers to a process of bifurcating or dividing a large unit into


various small units which have more or less similar or related characteristics.

Market Segmentation

 Market segmentation is a marketing concept which divides the complete


market set up into smaller subsets comprising of consumers with a similar
taste, demand and preference.
 A market segment is a small unit within a large market comprising of like
minded individuals.
 One market segment is totally distinct from the other segment.
 A market segment comprises of individuals who think on the same lines and
have similar interests.
 The individuals from the same segment respond in a similar way to the
fluctuations in the market.

Basis of Market Segmentation

1. Gender

The marketers divide the market into smaller segments based on gender.
Both men and women have different interests and preferences, and thus the
need for segmentation.

Organizations need to have different marketing strategies for men which


would obviously not work in case of females.

A woman would not purchase a product meant for males and vice a versa.

The segmentation of the market as per the gender is important in many


industries like cosmetics, footwear, jewellery and apparel industries.

2. Age Group

Division on the basis of age group of the target audience is also one of the
ways of market segmentation.

The products and marketing strategies for teenagers would obviously be


different than kids.

Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams


Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products,
Magazines, apparels and so on

3. Income
Marketers divide the consumers into small segments as per their income.
Individuals are classified into segments according to their monthly earnings.

The three categories are:

High income Group


Mid Income Group
Low Income Group

Stores catering to the higher income group would have different range of
products and strategies as compared to stores which target the lower income
group.

Pantaloon, Carrefour, Shopper’s stop target the high income group as


compared to Vishal Retail, Reliance Retail or Big bazaar who cater to the
individuals belonging to the lower income segment.

4. Marital Status

Market segmentation can also be as per the marital status of the individuals.
Travel agencies would not have similar holiday packages for bachelors and
married couples.

5. Occupation

Office goers would have different needs as compared to school/college


students.

A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store
as it caters specifically to the professionals.

Types of Market Segmentation

 Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals. The


individual’s attitude, interest, value help the marketers to classify them into
small groups.

 Behaviouralistic Segmentation

The loyalties of the customers towards a particular brand help the marketers
to classify them into smaller groups, each group comprising of individuals
loyal towards a particular brand.

 Geographic Segmentation

Geographic segmentation refers to the classification of market into various


geographical areas. A marketer can’t have similar strategies for individuals
living at different places.
Nestle promotes Nescafe all through the year in cold states of the country as
compared to places which have well defined summer and winter season.

McDonald’s in India does not sell beef products as it is strictly against the
religious beliefs of the countrymen, whereas McDonald’s in US freely sells
and promotes beef products.

How to Determine Your Market Segment

There's no single universally accepted way to perform market segmentation. To


determine your market segments, it's common for companies to ask themselves the
following questions along their market segmentation journey.

Phase I: Setting Expectations/Objectives

 What is the purpose or goal of performing market segmentation?


 What does the company hope to find out by performing marketing
segmentation?
 Does the company have any expectations on what market segments may
exist?

Phase 2: Identify Customer Segments

 What segments are the company's competitors selling to?


 What publicly available information (i.e. U.S. Census Bureau data) is relevant
and available to our market?
 What data do we want to collect, and how can we collect it?
 Which of the five types of market segments do we want to segment by?

Phase 3: Evaluate Potential Segments

 What risks are there that our data is not representative of the true market
segments?
 Why should we choose to cater to one type of customer over another?
 What is the long-term repercussion of choosing one market segment over
another?
 What is the company's ideal customer profile, and which segments best
overlap with this "perfect customer"?

Phase 4: Develop Segment Strategy

 How can the company test its assumptions on a sample test market?
 What defines a successful marketing segment strategy?
 How can the company measure whether the strategy is working?

Phase 5: Launch and Monitor

 Who are key stakeholders that can provide feedback after the market
segmentation strategy has been unveiled?
 What barriers to execution exist, and how can they can be overcome?
 How should the launch of the marketing campaign be communicated
internally?

Benefits of Market Segmentation

Marketing segmentation takes effort and resources to implement. However,


successful marketing segmentation campaigns can increase the long-term
profitability and health of a company. Several benefits of market segmentation
include;

 Increased resource efficiency. Marketing segmentation allows management


to focus on certain demographics or customers. Instead of trying to promote
products to the entire market, marketing segmentation allows a focused,
precise approach that often costs less compared to a broad reach approach.
 Stronger brand image. Marketing segment forces management to consider
how it wants to be perceived by a specific group of people. Once the market
segment is identified, management must then consider what message to craft.
Because this message is directed at a target audience, a company's branding
and messaging is more likely to be very intentional. This may also have an
indirect effect of causing better customer experiences with the company.
 Greater potential for brand loyalty. Marketing segmentation increases the
opportunity for consumers to build long-term relationships with a company.
More direct, personal marketing approaches may resonate with customers
and foster a sense of inclusion, community, and a sense of belonging. In
addition, market segmentation increases the probability that you land the right
client that fits your product line and demographic.
 Stronger market differentiation. Market segmentation gives a company the
opportunity to pinpoint the exact message they way to convey to the market
and to competitors. This can also help create product differentiation by
communicating specifically how a company is different from its competitors.
Instead of a broad approach to marketing, management crafts a specific
image that is more likely to be memorable and specific.
 Better targeted digital advertising. Marketing segmentation enables a
company to perform better targeted advertising strategies. This includes
marketing plans that direct effort towards specific ages, locations, or habits via
social media.

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