Unit 3 - Market Segmentation

3.1. Introduction

The previous Unit 2 explored and explained the understanding consumer behaviour. This Unit 3

looks at market segmentation and targeting. In this Unit you will learn that market means different

things to different people and that specific people are target for particular products. However,

business markets are grouped based on specific characteristics.

At the end of studying this Unit, you should be able to know, understand and explain markets, market

segments and market targeting. The unit covers the characteristics of markets and importance of

market segments, bases for segmenting consumer markets, and steps in segmenting a market. The

next section is an opening case study.

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Case Study 3.1

Carbonates (Soft drinks) Market in South Africa - Outlook to 2023: Market

Size, Growth and Forecast Analytics

Summary

Carbonates (Soft drinks) Market in South Africa - Outlook to 2023: Market

Size, Growth and Forecast Analytics is a broad level market review of

Carbonates market in South Africa.

Sweetened, non-alcoholic drinks containing carbon dioxide. Excludes

carbonated tea-based and coffee-based products (included in iced/rtd tea

drinks and iced/rtd coffee drinks respectively) and carbonated sports drinks

and energy drinks. And also excludes sweetened water-based carbonated

flavoured drinks. These are included under Enhanced Water or Flavoured

Water.

Includes syrups for home carbonated soft drinks dispensers and out of home

fountain syrups (expressed in rtd volume). And includes carbonated juice,

carbonated nectars and products, regardless of juice content and soda water

i.e., carbonated water with sodium salts.

Carbonates market in South Africa registered a positive compound annual

growth rate (CAGR) of 4.68% during the period 2013 to 2018 with a sales

value of ZAR 48,092.44 Million in 2018, an increase of 1.39% over 2017. The

market achieved its strongest performance in 2015, when it grew by 10.26%

over its previous year and its weakest performance in 2018, when it increased

to 1.39% over 2017.

Furthermore, the research handbook details out Sales Value and Volume for

top brands for the year 2015 to 2018 and overall market sales by Distribution

Channel (Hypermarkets & Supermarkets, Convenience Stores, Department

Stores, Dollar Stores, Variety Store, Cash & Carries and Warehouse clubs,

eRetailers, Food & Drinks specialists, Drug stores & Pharmacies, Health &

Beauty Stores, Other general retailers and others) where ever applicable.

(Market Research, 2021)

Case Study Question

Given this case perspective, in what ways would a soft drink marketer in

South Africa find market segmentation helpful?

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Learning Outcomes 3.1

Describe the characteristics of markets and market segments.

Video Activity 3.1

Nestle CEO talks 'scrambling to meet demand' due to coronavirus crisis.

Visit the video link below, watch and answer the question that follow:

https://www.youtube.com/watch?v=a4FghHZB1oE

Analyse this interview and establish what is key to Nestlé’s success in

marketing their products during this Covid-19 pandemic business stress?

3.2 Markets and Market Segments

A market is generally attributed to a place where the seller meets the buyer. It is also spoken of as

where two or more sellers and buyers are competitively involved in the buying and the selling of

goods and serves in exchange for money. The examples of Nestle 'scrambling to meet demand'

during the Covid-19 pandemic business stress period will bring us into perspective.

3.2.1 Market

Market means different things to different people (Lamb, et al., 2020:136). Market can simply be

defined as a group of people or businesses who have a need for a product and the willingness and

ability to buy the said product. According to Lamb, et al., (2020:136), a market comprise the following

4 elements must be present:

1. A group of people or organisation

2. The need or want for a product

3. Willingness to purchase – using cash or credit

4. The ability to buy the product – that is, the people in need must have the resources to exchange

for the product.

There cannot be a market if there is not a need or a want but no resources to make the purchase or

if there are resources but no willingness to make purchase.

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Practical Application or Examples 3.1

Nokia handsets

Nokia is offering a wide range of handsets for both males and females. There

are handsets for females that would be sleeker and more colourful. These

compare to sturdy handsets for males. Generally, males do not prefer stylish

and bling handsets. Drawing from Nokia’s product offering, we can see that

the marketers and organisations cannot offer similar products for all

individuals.

Think Point 3.1

Imagine you as a marketer have observed now that in South Africa today

working parents are the increase – largely working single mothers. So,

single-parent families and families with both parents employed is now a

part of the new normal. However, for a marketer this is a new market and

market segmentation opportunity for your organisation whose core

business is for people who love children and a business that cares for

children.

1. Drawing up from this scenario list the child-care needs of the community

in which your organisation is operating.

2. How will you group the market for the services your organisation is

offering the community?

3.2.2 Market Segments

Lamb, et al., (2020:136) define Market segment as “subgroup of people or organisations sharing one

or more characteristics that cause them to have similar product needs”. This simply means within a

market there are groups of people or companies who would have similar product needs due to the

characteristics that they share. Let us look at the following practical example of Nokia handsets.

Drawing from the above example, the same applies to the businesses with similar characteristics that

can be grouped to form a market segment.