BM-201

Project on Marketing

Market Segmentation

Submitted by:

NITIN GUPTA NITISH SHARMA PRATEEK THAKUR SHUBHAM KANSAL

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TABLE OF CONTENTS

1. Objectives 2. Introduction a. What is a market? b. What is market segmentation? c. Concept of Market Segmentation 3. Need for Market Segmentation 4. Target marketing Advantages and Disadvantages 5. Target Market Selection 6. Levels of Market Segmentation Mass->Niche->Local->Individual 7. Segmenting Consumer Markets a. Geographical Segmentation b. Demographic Segmentation c. Psychographic Segmentation d. Usage Segmentation 8. Positioning Strategy 9. Segmenting Business Markets Less potential customers 10. Conclusion 11. References

Objectives:
1. Understand the concepts: market, segmentation, and target markets 2. Learn the advantages and disadvantages of target marketing 3. Explain the steps in target market selection 4. Discuss segmentation criteria, strategies, bases, and information sources 5. Understand market profiling and positioning strategies

What is a market?
Individuals or organizations who: Are willing, able, and capable of purchasing a firms product Segmentation is critical because demand is often heterogeneous

What is market segmentation?

Market Segmentation is a method of dividing a market (Large) into smaller groupings of consumers or organisations in which each segment has a common characteristic such as needs or behaviour.

According to Philip kotler , Market segmentation is sub-dividing a market into distinct and homogeneous subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct marketing mix.

Concept of Market Segmentation:

The concept of market segment is based on the fact that the market of commodities are not homogeneous but they are heterogeneous. Market represent a group of customer having common characteristics but two customer are never common in their nature, habits, hobbies income and purchasing techniques.

Henry Ford epitomized this approach by making Ford Model T in black color:

Need for market Segmentation

Why is there a need for market segmentation? Simply because according to the marketing concept by Philip Kotler, understanding customers and satisfying their needs better than the competition is the priority of an organisation. But different customers have different needs, and it is rarely possible to satisfy all customers by treating them alike. Thus there is a need for Market Segmentation.

Advantages of target marketing:

Easier analysis of potential and actual consumers Tailoring of products to market Assessment of demand potential Identify competing products Increased sales effectiveness and cost efficiencies Product positioning and easy identification of opportunities

Disadvantages of Target Marketing

Increased marketing costs Personalization can become burdensome to manage Faux segmentation may be viewed cynically Narrow segmentation can impact brand loyalty

Tarket Marget Selection:

Identitfy Total Market

Select Positioning Strategy

Develop and Implement Appropriate Marketing Mix

Determine Need for Segmentation

Assess Potential Profitibility of Segment and Select Target Segment

Monitor, Evaluate and Control

Determine Bases for Segmentation

Profile Each Selected Segment

Levels of Market Segmentation

SEGMENTATION

Mass Marketing

Niches

Local

Individual

I.

Mass Marketing: Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production and mass distribution. Thus is the principles of Market Segmentations are not applied, the firms ignore the differing customer needs and another firm would likely enter the market with a product that serves a specific group, and the incumbent firms would lose the customers. Example Ford-T model.

II.

Niche Marketing: A niche market refers to a small, tightly defined group of consumers or households that share certain demographic, attitudinal or behavioural characteristics. An example of a niche market would be people seeking Gothic styled wedding dresses. Other examples, sports channels like STAR Sports, ESPN, STAR Cricket, and Fox target a niche of sports lovers, Rolls Royce is a luxury car made for elite section of the society.

III.

Local Marketing A local market refers to a group of consumers or households that reside within a defined geographic area and fall within the normal catchment area for a specific business. For instance, the catchment area for a pharmacy would normally be approximately 5 km radius of the pharmacy's address. Ex. Spiderman 3 was released in 5 different language in India including bhojpuri.

IV.

Individual Marketing Personalized marketing (also called personalization, and sometimes called one-toone marketing) is an extreme form of product differentiation. Whereas product differentiation tries to differentiate a product from competing ones, personalization tries to make a unique product offering for each customer. Ex. Dell offers customization of its laptops for all the customers.

Segmenting Consumer Markets

Geographic

Demographic

Psychographic

Usage

Geographic Segmentation

Divide the market into different group based on: Region South India , North , Western Region, East City metro cities, cities with population more than 1 million World Density Climate States

Ex.- Mcdonalds globally, sell burgers aimed at local markets, for example, burgers are made from lamb in India rather than beef because of religious issues. In Mexico more chilli sauce is added and so on.

Demographic Segmentation
Demographic Age Gender Income Lifecycle Ethnicity Segmentation is division of Market on the basis of-

1. Age-As people age their needs and wants change, some organisations develop specific products aimed at particular age groups For example- nappies for babies, toys for children, clothes for teenagers and so on.

2. Gender- Gender segmentation is commonly used within the cosmetics, clothing and magazine industry. For example-In the UK we have also seen the introduction of Maxim, a male lifestyle magazine covering male fashion, films, cars, sports and technology.

3. Income- Income segmentation is another strategy used by many organisations. In today's globally competitive environment brands are specifically developed and positioned within particular income segments inorder to maximize turnover. Example- Stores like Harrods, Harvey Nicohals are predominantly aimed at the affluent market. Daewoo aim their vehicles at price sensitive buyers who require a bundle of benefits for the price.

Lifecycle - Holidays are developed for families, the 18-30's singles, and for targets senior 50's Bank Al Habib those in their citizens
Dove Targets Women

Psychographic /Behavioural Segmentation

Psychographic segmentation is sometimes also referred to as behavioural segmentation. This type of segmentation divides the market into groups according to customers lifestyles. It considers a number of potential influences on buying behaviour, including the attitudes, expectations and activities of consumers. If these are known, then products and marketing campaigns can be customised so that they appeal more specifically to customer motivations. The main types of psychographic segmentation are: A. Lifestyle different people have different lifestyle patterns and our behaviour may change as we pass through different stages of life. For example, a family with young children is likely to have a different lifestyle to a much older couple whose children have left home. B. Opinions, interests and hobbies this covers a huge area and includes consumers political opinions, views on the environment, sporting and recreational activities and arts and cultural issues. Good recent examples include the growth of demand for organic foods or products that are (or are perceived to be) environmentally friendly.

C. Degree of loyalty customers who buy one brand either all or most of the time are valuable to firms. By segmenting markets in this way, firms can adapt their marketing in order to retain loyal customers, rather than having to focus constantly on recruiting new customers. D. Occasions this segments on the basis of when a product is purchased or consumed. Marketers often try to change customer perception of the best time to consumer a product by promoting alternative uses for a product. For example, recently Kelloggs has attempted to change the image of cereals to that of an any time snack, rather than simply a breakfast meal.

E. Benefits sought this requires marketers to identify and understand the main benefits consumers look for in a product. Toothpaste, for example, is not only bought to maintain healthy teeth and gums, but also because of its taste and in order to help combat bad breath!

Usage Segmentation

Markets can be segmented by how often or how heavily consumers use a specific product 80/20 Principle - 80% of revenue generated by 20% of customers

Light Users 80%

Heavy Users 20%

Usage segmentation can take a number of directions. For example, the marketer may want to identify various segments of users for a particular product category or users of the companys brand. In other cases, one may want to segment users into those who buy frequently versus those who only buy occasionally (either product or brand), or into those users who usually purchase just one brand versus those who switch from brand to brand. It may also be useful for the marketer to understand how segments how segments arise based on different product usage situations. Ay usage segmentation approach needs to specify the relevant dimensions of interest.

Positioning Strategy
Differentiation through: Product attributes - characteristics as a positioning base Product usage - positioning based on a products typical use Symbol - use of a symbol or icon to position a product in the consumer consciousness Price/quality - emphasize value in terms of quality, price, or both Product user - the typical user of a product Product class - positioning against another type of product or product class Competition - comparisons to a products competition (directly or indirectly)

Segmenting Business Markets

The approach to business market segmentation is conceptually similar to the approach for consumer markets. As we know, while business markets have less potential customers (as opposed to consumer markets), B2B firms still need to be selective when determining their strategic approach to the market. This is because it is common for a B2B firm to have substantial investment costs and will often need to implement labour-intensive promotional strategies.

I.

Demographics Industry size, growth potential, etc.

II.

Operating Characteristics Technology, brand-user status, etc.

III.

Purchasing Approaches Purchasing policies, size of orders, etc.

IV.

Product Use or Usage Situation The way the product will be used and customer service levels required

V.

Situational Factors Urgency, special product uses

VI.

Buyers Personal Characteristics Women employed outside the house

Conclusion
In this report we have identified the underlying principle of market segmentation. It then looks at the segmentation process and the variables that can be used for grouping customers in consumer and business markets. Segmentation analysis, targeting, and positioning are then reviewed. Segmentation is discussed with a view to obtaining the most from it.

References

http://www.citeman.com/7790-usage-segmentation.html http://wiki.answers.com/Q/The_difference_between_a_local_and_a_niche_market http://www.managementstudyguide.com/target-marketing.htm http://smallbusiness.chron.com/discuss-difference-between-market-segmentation-targetmarketing-1480.html http://en.wikipedia.org/wiki/Niche_market http://en.wikipedia.org/wiki/Market_segmentation