UNIT 02 1

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1. To Understand Why Market Segmentation Is Essential

2. To Understand the Criteria for Targeting Selected Segments Effectively

3. To Understand the Bases for Segmenting Consumers

4. To Understand How Segmentation and Strategic Targeting Are Carried Out

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 The process of dividing a potential market into distinct subsets of consumers and

selecting one or more segments as a target market to be reached with a distinct

marketing mix

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 Segment Marketing
 Serving needs of a particular group; different marketing mix for different segments. e.g. Vegetarian
recipes in India
 Niche Marketing
 Marketing to a single group, tailoring the mix to their specific needs and attract them e.g. Bran Breas,
Diet Coke
 Differentiated Marketing
 Organizations sell multiple versions of a product; each appealing to different market segment.
Differentiated strategy can produce greater sales. e.g. Pepsi in 300ml as well as 2 litres
 Individual Marketing
 Tailoring market mix to suit individual customers and create value for each individual. e.g. Designer
clothes

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 Consumer needs differ
 Differentiation helps products compete
 Segmentation helps identify media

 Not all consumers are alike – different customers have different needs
 By segmenting the market and choosing target markets, companies can
differentiate their products to provide the benefits that the segments desire
 Once a marketer has identified their segment, they can choose media that is
targeted to that segment for their advertising

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 Discover the needs and wants of groups of consumers to develop specialized

products to satisfy group needs

 Used to identify the most appropriate media for advertising

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Identifiable Sizeable Stable

Congruent with the company’s

Accessible objectives and resources

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 First of all, the target must be identifiable. This means that the marketer must be
able to see or find the characteristic they have chosen for segmentation
 The segment must also be sizeable. It must be large enough to be profitable to the
marketer
 A stable segment means that the consumers are not “fickle” and not likely to
change very quickly
 A group of consumers must be accessible to be targeted. The marketer must be
able to reach that market in an affordable way
 Finally, the target must be congruent with the company’s objectives and resources

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The value proposition, expressed
through promotion, stating the
product’s or service’s capacity to
deliver specific benefits

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 This two-by-two matrix is important for understanding types of segmentation
schemes

 It is possible to break segmentation into two broad groups; those that are based on
the consumers themselves and those that are based on the consumers’ interaction
or potential interaction with the product and are therefore consumption based

 Within each of these two larger types of schemes, segmentation variables can be
considered to be based on facts or what is absolutely known and measureable
about the consumer versus perceptions, which are abstract and can be determined
only through more complex questioning

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 Age Gender

Family Life-
Marital Status
cycle

Income,
Education, and
Occupation

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 Demographics are the core of almost all segmentation because they are easy and
logical

 In addition, they are a cost-effective way to reach segments and demographic shifts
are easier to identify than other types of shifts

 When researching segmentation and media exposure, a consumer researcher will

learn that media exposure is often directly related to demographics

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 Age segmentation includes segments such as the baby boomers (born between
1946-1955), generations X (born between 1965-1969), Y/Millennials (born between
1970-1994) and Z (born between 1995-Date)

 Family life-cycle is based on the premise that many families pass through similar
phases in their lives and share major life events such as moving, marriage, birth of
a child, and retirement

 Income, education, and occupation tend to tie together and lead to segmentation
based on social class

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 Gender is used obvious for products which are gender specific. e.g. Shaving
Creams, Fairness Creams etc. However, changing roles are seen in other ads
like detergents etc. (Ariel, Fair & Handsome etc)
 Marital Status impacts on consumption. Investments after marriage

 Household type and size of household matters. Kelloggs shows young

household (couple with small kids)
 Rational ads for educated customers, more emotional appeal to others

 Nescafe depicts sophistication, style (higher income), Bru coffee is a middle

class household. Ability to pay. Porche car for high income group
 Employment data to design product positioning

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 Clues on likely purchase behavior. Identifies segments based on
geographical boundaries. People in a same area share similar needs.
Regional differences are accounted for by climate, culture, religion,
concentration etc. e.g. Coastal cities with rainfall for Umbrellas
 Difference in needs among rural, urban and suburban areas. e.g.
Eveready Torch for rural areas, emergency lights for sub-urban areas
 Pakistani zones-viz. North, South, East and West greatly differs in their
culture, food habits, TV viewing patterns, social customs etc; hence
affecting their purchasing patterns. e.g. Regional TV Channels with
regional programmes
 Feasible for marketer to concentrate efforts and resources and fully
utilize the available services

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 Based on geography and demographics

 People who live close to one another are similar

 Geodemographic segmentation is a popular use of geography in targeting. People

who live close to one another are likely to be similar in tastes, incomes, lifestyles
and consumption. They might eat similar foods, like the same movies, and take the
same types of vacations

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Refers to inner/ intrinsic qualities of an individual

 Motivation: Understand ‘why’ of consumer’s buying pattern. e.g. Why did

ready to eat food items are less successful in Pakistan?

 Desired Benefits: need and benefits various segments seek from the
product. e.g. Honda Civic: for convenience & comfort and Audi for status
symbol

 Attitude: attitude towards brands give rise to distinct segments.

(negatives, functionalists, fun lovers etc. e.g. the ‘name bottle’ pack of
Coke)

 Lifestyle: predict buyer behavior on the basis of attitude, interests and

opinions (VALS 2). Colgate for trust and traditions 24
 Personality: one’s personality determines the kind of product and the image thus
associated e.g. Reid & Tailor- corporate image, Peeru Clothing in Pakistan

 Brand Loyalty: measure of customer attachment to a particular brand. They prefer a

particular product irrespective of thick and thin e.g. Nestle

 Behavior: emotional and cognitive process going on inside a consumer’s head, lead
to many problems. Segmenting the market based on specific behavior patterns
and product use. E.g. while travelling in a train most people buy magazines who
otherwise do not buy

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 Family Life Cycle: All families pass through phases of formation, growth
and dissolution. At each stage, requirements vary and hence becomes an
important segment to be captured. (Suzuki Mehran is the first car of most
families)

 Social Class: relative status and social standing is important to consumers.

It is a function of income, education and occupation. Knowledge of buying
patterns, behavior etc. is important to appeal to different segments (J.)

 Culture, Cross Culture & Sub culture: segmenting the domestic and
international markets on the basis of cultural heritage as members of the
same culture share same values, beliefs and customs. Within the larger
culture distinct subgroups and subcultures are united by certain
experiences, values or beliefs and make effective segments. Culturally
different segments

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 Usage rate: segmenting based on the rate of product usage. Division
of market into heavy, moderate and light users and planning the
marketing mix differently for each. e.g. ‘Frequent Flyer’ scheme of
airlines

 Loyalty status: consistency with which consumers continue to buy

same brand of a particular product and show their commitment. e.g.
‘Loyality Cards’ offered by retail stores.

 User status: whether consumers have used the product in past, use it
currently or are likely to use the same in future. Different mix could
be needed for each category. e.g. Upgrade your Molty Foam
Mattress, return the old one and buy a new one at discount.

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 Psychographics includes activities, interests, and opinions

 They explain buyer’s purchase decisions and choices

 Group prospective of, current or previous customers, by their shared personality traits,
beliefs, values, attitudes, interests, and lifestyles

 Demographics will tell us the consumer’s ability to buy them and will work for
segmentation of basic products, but psychographics or lifestyles are based on
consumer’s values

 These shared values, activities, opinions, and interests are an effective way to explain
buyers’ purchase decision

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 VALS is the most popular segmentation system that combines lifestyles and values

 It is related to Maslow’s hierarchy of needs and the concept of social character

 The system looks at three primary motivations and then the resources that
individuals might have to draw upon

 The lower resource consumer is at the bottom and labeled as survivors while the
highest resource consumer is often the innovator

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 Status Oriented High on Resources
High on Innovation
Actualizers
Principle Oriented Action Oriented

Fulfilleds Achievers Experiencers

Believers Strivers Makers

Strugglers

Low on Resources
A N Bhattacharya
Low on Innovation 31
 Usage rate

Usage situation

Benefit segmentation

Perceived brand loyalty

Brand relationship

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 Consumption-specific bases include facts about actual consumption behavior and

cognitions consumers have about products and services in the form of attitudes
and preferences

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 Usage rate is often based on whether a group of consumers are heavy, medium,
light, or nonusers of a product
 Many marketers target the heavy consumers since they are often the most loyal and
account for the largest portion of sales
 A company with a strong growth objective might target the other usage segments
to fuel their growth in the marketplace
 Furthermore, a marketer might target those who are unaware of their product in
order to start the process that could lead to purchase
 Level of involvement

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 Segmenting on the basis of special occasions or situations

 Usage rate or amount is important to some marketers, but it might also be worth
considering WHEN a given product is used

 This is the basis for a usage-situation segmentation opportunity

 People might consume certain products for special events, certain days of the
week, or certain times during the year

 Think of the rise of sales in chocolate and flowers for Valentine’s Day

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 Benefits that represent consumer needs
 Important for positioning
 Benefits of different media
 Features versus benefits

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 In many ways, segmentation is tied to the benefits that a group desires from your
product or service

 Knowing these benefits is important for positioning your product in the minds of
the consumer

 Consumers are constantly weighing the benefits of different types of media and
noticing that digital media might be preferred in immediacy and accessibility but
that traditional media often provides more depth and details

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 Brand loyalty includes the behavior to the brand – how often somebody purchases
the brand, in addition to the attitude or feeling the consumer has to a brand

 Many companies have frequency award or loyalty programs where loyal customers
receive rewards and benefits for purchasing often

 Customer relationships are very complex and differ based on commitment by the
customers, their sense of loyalty, their expectations of specialty treatment, their
confidence in the company, and how they are treated by staff and employees from
the company

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 Brand loyalty includes
 Behavior
 Attitude

 Frequency award programs are popular

 Customer relationships can be active or passive
 Retail customers seek
 Personal connections vs. functional features

 Banking customers seek

 Special treatment
 Confidence benefits
 Social benefits

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 Concentrated Marketing
 One segment

 Differentiated
 Several segments with individual marketing mixes

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 Concentrated marketing usually involves only one segment, whereas a
differentiated marketing strategy is targeting several segments with individual
marketing mixes

 Differentiated marketing is usually used by financially strong companies that are

well established in their market sector

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SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Geographic Segmentation
Region Southwest, Northern Areas, Punjab
City Size Major Metropolitan Areas, Small Cities, Towns
Density of Area Urban, Suburban, Rural
Climate Temperate, Hot, Humid, Rainy
Demographic Segmentation
Age Under 12, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+
Sex Male, Female
Marital Status Single, Married, Divorced, Living Together, Widowed
Income Under $25,000, $25,000-$34,999, $35,000-$49,999,
$50,000-$74,999, $75,000-$99,999, $100,000 and over
Education High School Graduate, College Graduate, Postgraduate

Occupation Professional, Agricultural, Military

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SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Psychological Segmentation
Motivation Affection, Sense of Self-worth
Personality Extroverts, Novelty Seeker, Aggressives, Innovators
Perception Low-risk, Moderate-risk, High-risk
Learning-involvement Low-involvement, High-involvement
Attitudes Positive attitude, Negative attitude
Psychographic
(Lifestyle) Segmentation Economy-minded, Outdoors Enthusiasts, Status Seekers,
Interests, Opinions, Values
Sociocultural Segmentation
Cultures American, Italian, Chinese, Mexican, French, Pakistani
Religion Catholic, Protestant, Jewish, Muslim, other
Subcultures (Race/Ethnic) African American, Caucasian, Asian, Hispanic
Social Class Lower, Middle, Upper
Family Life Cycle Bachelors, Young Married, Full Nesters, Empty Nesters

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SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Usage-Rate Segmentation
Frequency Heavy Users, Medium Users, Light Users, Non-users
Awareness Status Unaware, Aware, Interested, Enthusiastic
Brand Loyalty None, Some, Strong
Use-Situation Segmentation
Time Leisure, Work, Rush, Morning, Night
Objective Personal, Gift, Snack, Fun, Achievement
Location Home, Work, Friend’s Home, In-store
Person Self, Family Members, Friends, Boss, Peers
Benefit Segmentation Convenience, Social Acceptance, Long Lasting, Economy,
Value-for-the-money
Hybrid Segmentation
Demographic/ Combination of demographic and psychographic profiles
Psychographics of consumer segments profiles
SRI VALSTM Innovators, Thinkers, Believer, Achievers, Strivers,
Experiencer, Makers, Survivors

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