Segmentation

Market Segmentation

The process of dividing a market into meaningful groups that are relatively similar and identifiable.

• Importance

  • It enables the marketer identify specific needs and wants of the different segment

    • Formulate a more direct marketing mix for the different identified segments

Market Segment

A subgroup of people or organizations sharing one or more characteristics that cause them to have relatively similar product needs.

Criteria for Market Segmentation

• Substantial

  • Large enough to justify the maintenance and development of a special segment marketing mix and should be profitable

• Measurable

  • The size of the segment can be determined and measurable

• Accessible

  • The marketing mix should be able to reach the segments

• Responsiveness

  • Different segments should respond differently to the marketing mixes

Steps in Market Segmentation

1. Select a market or product category for study

2. Choose bases for segmenting the market

3. Choose segment descriptors

4. Profile the resulting segment

5. Select target markets

6. Implement and maintain appropriate market mixes

Segmentation Variable

A characteristic of individuals, groups, or organizations that is used to divide a total market into segments. Can be single or multiple.

Bases for Segmenting the Consumer Markets

• Geographic

  • Method of dividing markets based on the region of the country or world, market size, market density or climate

• Demographic

  • Basis of demographic variables such as age, gender, income, ethnic background, and family life cycle

• Psychographic

  • The method of dividing markets based on personality, motives, lifestyle, and geodemographics

• Benefits offered by the Product

  • Based on personality, motives, lifestyle, and geodemographics

  • Personality

    • Individual characteristics reflect traits, attitudes, habits

  • Motives

    • Consumers have motives for purchasing products

    • E.g. safety, rationality, status

  • Lifestyle

    • Lifestyle segmentation groups individuals according to activities, interests, and opinions

  • Geodemographics

    • Basis of neighborhood lifestyle categories

    • Is a combination of geographic, demographic, and lifestyle segmentation

• Usage Rate

  • Based on usage rate, benefits, occasions, user status, readiness stage, attitude towards the product

Bases for Segmenting the Business Markets

• Demographic

  • Industries which will be served

  • Company size

  • Location or geographical areas

• Operating Variables

  • Customer technologies

  • Heavy or light users

  • Customer requirements

• Purchasing Approaches

  • Centralized

  • Decentralized

• Key Purchasing Criteria

  • Quality

  • Delivery

  • Technical support

  • Price

• Personal Characteristics

  • Buyer-seller similarity

  • Attitudes toward risk

  • Loyalty

• Situational Factors