Marketing SegmentationMeaning, Objectives, Bases and ImportancePrinciples of Marketing Notes CBCS PatternB.Com 5th Sem Hons
Marketing Segmentation Meaning
A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. Such division is called market segmentation. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. Market segmentation enables the entrepreneur to match his marketing efforts to the requirements of the target market. Instead of wasting his efforts in trying to sell to all types of customers, a small scale unit can focus its efforts on the segment most appropriate to its market. It is defined as “The strategy of dividing the market in order to consume them”.
Marketing Segmentation Definitions
According to Philip Kotler, “It is the subdividing of market into homogenous subsets of consumers where any subset may be selected as a market target to be reached with distinct Marketing Mix”
According to Philip Kotler, market segmentation means "the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes."
According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects."
Objectives of Market Segmentation
a) To identify the need, taste and buying motive of the target consumers
b) Grouping of customers on the basis of their common characteristics such as behaviour, income, age, geography etc.
c) To introduce product according to the needs of the consumers.
d) To make Consumer oriented approach for the firm
e) To introduce suitable marketing mix.
f) To define marketing strategies, targets and goals of the firm.
Bases of Market Segmentation
Market segmentation dividing the Heterogeneous market into homogenous sub-units. Heterogeneous means mass marketing, which refers people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers. The following factors are considered before dividing the market:
1. Geographical Factors:
On the basis of geographical factors, market may be classified as state-wise, region-wise and nation-wise. Many companies operate only in a particular area because people behave differently in different areas due to various reasons such as climate, culture, etc.
2. Demographic Factors:
This is the most widely used basis for market segmentation. Market is classified on the basis of population, using ages, income, sex, etc. as indicators.
a. Age: It is known fact that people of different ages like different products, need different things, and behave differently. Almost all companies use this factor to reach the target market. On the basis of age, market in our country is divided into children’s market, teenager’s market, adult’s market, and the market for old people. Companies use the census data to prepare marketing strategies on the basis of age.
b. Sex: There is a variation of consumption behavior between males and females. This factor is used as a basis for segmentation for products like watches, clothes, cosmetics, leather goods, magazines, motor vehicle, etc.
c. Family Life Cycle: This is another important factor, which influences the consumer’s behavior. E.g.: Before making purchases, a bachelor may consult his friends, a boy may ask his parents and a married man asks his wife. The study of family life cycle helps a company to prepare an effective promotional strategy.
3. Psychological factors:
In psychographic segmentation, elements like personality traits, attitude lifestyle and value system form the base. The strict norms that consumers follow with respect to good habits or dress codes are representative examples. E.g.: Mr. Donald’s changed their menu in India to adopt to consumer preference. The market for Wrist Watches provides example of segmentation. Titan watches have a wide range of sub brands such as Raga, fast track, edge etc. or instant noodle markers, fast to cook food brands such as Maggi, Top Ramen or Femina, women’s magazine is targeted for modern women.
4. Economic Factors:
On the basis of economic factors, markets have been classified in the westerns countries as follows:
a. Upper Class b. Upper-upper class c. Lower-upper class
d. Middle class e. Upper-middle class f. Lower-middle class
g. Lower class h. Upper-lower class i. Lower-lower class
In our country, it is classified as upper class (rich), middle class, and the lower class. Another classification based on income in our country is as follows:
a. Very Rich
b. The Rich class
c. The Aspiration Class and
d. The Destitute.
5. Behavior Factors:
This is one of the most important bases used for market segmentation. Market is classified on the basis of attitude of consumers and special occasions.
a. Occasions: Sellers can easily find out certain occasions when people buy a particular product. E.g.: Demand for clothes, greeting cards, etc. increases during the festival season. Demand for transportation, hotels etc. increases during the holiday seasons.
b. Benefits: Each consumer expects to fulfill certain desire or to derive some benefits from the product he purchases. E.g.: A person may purchase clothes to save money and another to impress others. Based upon this, markets may be classified as markets for cheap price products and market for quality products etc.
c. Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic market, indifferent market, positive market, and negative market.
Essentials elements for success of Marketing Segmentation:
Market segmentation has its own benefits and costs. The strength of it lies in better understanding of consumers for making intelligent marketing decisions and their implementation. The success of marketing segmentation of depends on the following points:
1) Marketing segment must identifiable and measureable: The segment or the group of buyers must be clearly defined. It is essential to know who is in segment and who is outside the segment to get demographic, social and cultural data about segment members. These of data should permit the measurements of the size and importance the segment as a potential product of marketing strategy.
2) It evidence adequate market potential: Either an actual or potential need must exist in order to segment that opens an opportunity. Actual needs are recognised needs – overt demands for existing goods and services. Potential needs can be transformed into perceived wants through education or persuasion. Potential needs are more difficult to ascertain than the actual needs. Here, marketer is to develop strategies only for substantial segments – whether actual or potential.
3) It is economically accessible: Segmentation involves a search for enough similarity among buyers to permit the seller each search of these potential customers economically. For example, segment members could be concentrated geographically, may be shopping at the same store or may be reordering the same magazines. A segment based on motivational characteristics cannot be reached economically.
4) It reacts uniquely to marketing efforts: A given segmentation, to be meaningful, should differ in their responses to marketing efforts. Differing responses will help in optimizing the marketing operations by changing marketing efforts and amount involved.
5) It is relatively stable over a period of time: Marketing strategies are long-range plans. Moreover, lead-time of up to a year often is needed to analysis market and to prepare a plan. Therefore, the segments that emerge rapidly and disappear just as quickly do not offer very good marketing opportunities for a firm that follows the generally accepted approach. Only highly innovative entrepreneurs can, at considerable amount of risk, attempt to serve these segments. It is only an exceptional case than a rule.
6) It is dynamic: Once a company finds its segment, it will not last forever. The marketing is changing constantly. The segments should be modified with the changing marketing scenario. Technology, competition, perceptions and attitudes – all are volatile. Because of such changes, marketers must monitor the market constantly to detect the changes in it to adapt the strategy accordingly. That is nothing different than dynamic segmentation.
Advantages / Importance / Significance of Market Segmentation:
The purpose of segmentation is to determine the differences among the purchases which may affect the choice of the market area and marketing strategies. Following are some of the benefits of marketing segmentation.
1) Facilitates consumer-oriented marketing: Market segmentation facilitates formation of marketing-mix which is more specific and useful for achieving marketing objectives. Segment-wise approach is better and effective as compared to integrated approach for the whole market.
2) Facilitates introduction of suitable marketing mix: Market segmentation enables a producer to understand the needs of consumers, their behavior and expectations as information is collected segment-wise in an accurate manner. Such information is purposefully usable. Decisions regarding Four Ps based on such information are always effective and beneficial to consumers and the producers.
3) Facilitates introduction of effective product strategy: Due to market segmentation, product development is compatible with consumer needs as there is effective crystallization of the specific needs of the buyers in the target market. Market segmentation facilitates the matching of products with consumer needs. This gives satisfaction to consumers and higher sales and profit to the marketing firm.
4) Facilitates the selection of promising markets: Market segmentation facilitates the identification of those sub-markets which can be served best with limited resources by the firm. A firm can concentrate efforts on most productive/ profitable segments of the total market due to segmentation technique. Thus market segmentation facilitates the selection of the most suitable market.
5) Facilitates exploitation of better marketing opportunities: Market segmentation helps to identify promising market opportunities. It helps the marketing man to distinguish one customer group from another within a given market. This enables him to decide his target market. It also enables the marketer to utilize the available marketing resources effectively as the exact target group is identified at the initial stage only.
6) Facilitates selection of proper marketing programme: Market segmentation helps the marketing man to develop his marketing mix programme on a reliable base as adequate information about the needs of consumers in the target market is available. The buyers are introduced to marketing programme which is as per their needs and expectations.
7) Provides proper direction to marketing efforts: Market segmentation is rightly described as the strategy of "dividing the markets in order to conquer them". Due to segmentation, a firm can avoid the markets which are unprofitable and irrelevant for its marketing purpose and concentrate on certain promising segments only. Thus due to market segmentation, marketing efforts are given one clear direction for achieving marketing objectives.
8) Facilitates effective advertising: Advertising media can be more effectively used because only the media that reach the segments can be employed. It makes advertising result oriented.
9) Provides special benefits to small firms: Market segmentation offers special benefits to small firms. The resources available with them are limited as they are comparatively new in the market. Such firms can select only suitable market segment and concentrate all efforts within that segment only for better marketing performance. Such firms can compete even with large firms by offering personal services to customers within the segment selected.
10) Facilitates optimum use of resources: Market segmentation facilitates efficient use of available resources. It enables a marketing firm to use its marketing resources in the most efficient manner in the selected target market. The marketing firm selects the most promising market segment and concentrates all attention on that segment only. This offers best results to the firm in terms of sale, profit and consumer support as compared to the results available from spending such resources on the total market.
In conclusion, it can be said that market segmentation offers benefits not only to marketing firms but also to customers. The marketing job will be conducted efficiently and the available resources will be utilised in a better mariner. These advantages also suggest the importance of market segmentation and make a case in its favour.