Download Segmentation:

Segmentation
Market segmentation can be defined as the process of dividing a market into distinct
subsets of consumers with common needs or characteristics and selection of one or
more segments to target with a distinct marketing mix. A segmentation strategy
benefits both marketers and consumers and is used by manufacturers, retailers, and
non-profit sector.
Eight major classes of consumer characteristics serve as the most common bases for
market segmentation. They are:
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Geographic Segmentation: In geographic segmentation, the market is
divided by location. The strategy is that people who live in the same area
share some similar needs and wants and these differ from those who live in
different areas.
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Demographic Segmentation: Demographic characteristics, such as age,
sex, marital status, income, occupation, and education, are most often used
as the basis for market segmentation. Demographics help to locate a target
market, whereas psychological and socio-cultural characteristics help to
describe how its members think and how they feel.
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Psychographic Segmentation: Psychographic characteristics refer to the
inner or intrinsic qualities of the individual consumers. Consumer
segmentation strategies are often based on specific psychological variables
like needs – motivation, personality, perception, and learning – involvement,
attitudes and lifestyles.
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Socio-cultural segmentation: Socio-cultural segmentation comprises of
sociological and anthropological variables. Socio-cultural variables provide
bases for market segmentation. For example, the consumer markets are
divided into segments based on the family life cycle, social class, core cultural
values, sub-cultural memberships, and cross-cultural affiliation.
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Use-Related Segmentation: A popular and effective form of segmentation
that categorises consumers in terms of product, services, or brand usage
characteristics, such as rate, awareness status, and degree of brand loyalty.
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Usage-Situation Segmentation: Marketers recognise that the occasion or
situation often determines what consumers will purchase or consume.
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Benefit Segmentation: Segmentation based on the kinds of benefits
consumers seeks in a product.
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Hybrid Segmentation: Marketers commonly segment markets by combining
several segmentation variables, rather than relying on a single segmentation
base.
Segmentation by Population
Baby Boomers:
Baby Boomers were those people born just after World War II, between 1946 and
1964. They constitute approximately 45% of the world population. Baby boomers are
in the broad age category that extends from about mid-30s to early-50s.
Characteristics of Baby Boomers:
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Highly motivated consumers.
They enjoy shopping for themselves and for others – consumption-oriented.
As they age, their tastes and preferences change.
Segmenting the Baby boomer market:
Baby boomers can be divided into two sub-segments:
Younger boomers: those in their mid 30s to early 40s; and
Older boomers: those from mid 40s to early 50s.
The Generation X:
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Born: 1966 to 1976
Coming of age: 1984 to 1994
Age in 2000:24-34
Current population: 41 million
Share of adult population: 21 percent
Characteristics of Generation X:
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Often called as Xers, busters, and slackers.
People in the age group of 18 to 29 years.
Job satisfaction is more important to them than salary.
Want to enjoy life and have a lifestyle that provides freedom and flexibility.
Generation X has nothing to hang on to. These are children of divorce and
day care, the latchkey kids of the 1980s. They are searching for anchors with
their seemingly contradictory “retro” behaviour: the resurgence of proms,
coming-out parties, and fraternities. Their political conservatism is motivated
by a “What’s-in-it-for-me?” cynicism. Their alienation is reflected in the
violence and sexual brutality of their times.
Criteria for Effective Targeting of Market Segments
One of the most important decisions a marketer faces is selecting one or more
segments to target with an appropriate marketing mix. But how does a marketer
choose an effective market? An effective market segment should be:
1. Identifiable. To divide the market into separate segments on the basis of a
common need or characteristic, marketers must identify the relevant characteristic.
The identification variables could be based on geography, demographics, lifestyle,
etc.
2. Sufficiency. For a market segment to be an effective target, it must have a
sufficient amount of population to warrant tailoring a product or introducing a new
campaign. To calculate the size of the market, marketers use secondary
demographic data or undertake a survey.
3. Stability. A market segment to be effective must be stable, both in terms of
demographics and psychographics, which must grow over a period of time.
Marketers prefer to avoid “fickle” segments that are unpredictable, yet embrace fads.
4. Accessibility. Marketers must be able to reach out to the market in a costeffective manner. They are constantly looking out for new media that will enable
them to reach their target markets with a minimum of waste and competition
The Etic and Emic approaches to culture
As the world economy gets increasingly integrated, there are chances of crosscultural influences on consumer behaviour. The factors driving the attention of
marketers onto this particular aspect is the migration of companies and the
flourishing media and communications industry. These affect the consumption
patterns of individuals by exposing them to alternative behaviour patterns.
There are basically two approaches to culture: Etic and Emic:
The Etic approach: This approach equates culture to the collective programming of
the mind, which distinguishes the members of one group or category of people from
another. This approach compares one culture with another. While researching for this
approach, marketers look for universal or culture-free theories and concepts. This
approach provides an in-depth analysis of finding out various variables and
constructs that are both common and distinct between two cultures.
The Emic approach: This approach is an alternative to the Etic approach. According
to this approach, the focus is primarily on understanding issues from the viewpoint of
the subjects being studied. It states that culture is the lens through which every
aspect of human behaviour - and the reasons for it - can be studied, comprehended,
assimilated and used. It is the blueprint of human activity. This approach to culture
does not intend to directly compare two or more differing cultures, but promotes an
in depth understanding of culture through "thick description".
Contrary to what most people believe, this approach provides culture-rich
information and not 'culture-free' measures. It can be argued that both the
approaches are like two sides of the same coin. As everything else, the application
will depend on the specific requirement of the company.
Values And LifeStyles (VALS)
Based on Maslow’s Hierarchy of needs and the concept of social character,
researchers in the late 1970s developed a generalised segmentation scheme of the
American population known as the Values And LifeStyles (VALS) programme.
In 1989, SRI revised the VALS 2 system to focus more explicitly on explaining
consumer purchase behaviour. The current VALS 2 typology classifies the American
population into eight distinctive subgroups or segments based on their answers to 35
attitudinal and 4 demographic questions.
The groupings are defined in terms of three major types of orientation on the
horizontal or the x-axis:
a) Principle-oriented: (consumers whose choices are motivated by their beliefs,
rather than by desire for approval);
b) Status-oriented: (consumers whose choices are guided by the actions, approval,
and opinions of others); and
c) Action-oriented: (consumers who are motivated by a desire for social or
physical activity, variety, and risk taking).
Each of these three major self-orientations has distinct attitudes, lifestyles, and
decision-making styles.
These are again divided on the vertical or y-axis on the resources they have, ranging
from scarce to abundant.
Thus the population is divided into eight segments as shown:
Abundant Resources
Actualisers
Principle Oriented
Status
Oriented
Action Oriented
Fulfilleds
Achievers
Experiencers
Believers
Strivers
Makers
Scarce Resources
Strugglers
Segmentation:
Macro-Environment Forces (DENTPC)
The macro - environment of any business consists basically of six factors:
Demographic Environment
The first macro environmental force that marketers monitor is the population,
because people make up the markets. Marketers are keenly interested in the size
and growth rate of population in different cities, regions and nations, age distribution
and ethnic mix.
Economic Environment
The economic environment looks into the available purchasing power in an economy,
which depends on the current prices, savings, debt and credit availability. Marketers
must pay close attention to the major trends in income and consumer spending
patterns.
Natural Environment
Marketers need to be aware of the threats and opportunities associated with the four
trends associated in the natural environment - the shortage of raw material, the
increased cost of energy, the increased levels of pollution, and the changing role of
the governments.
Technological Environment
One of the most dramatic forces shaping people’s lives is technology. Even new
technology is a force for "creative destruction." New technologies that provide
superior value in satisfying needs stimulate investment and economic activity. In the
meantime minor innovations fill the gap. Minor innovations involve less risk but
critics argue that too much research effort is going into producing minor
improvements rather than major breakthroughs. New technology creates major longrun consequences that are not always foreseeable.
Political / Legal Environment
Marketing decisions are strongly affected by the developments in the political and
legal environment. This environment comprises of the laws, government agencies
and pressure groups that influence and limit various organisations and individuals.
Social / Cultural Environment
The society in which people grow shapes their beliefs, values and norms. People
absorb, almost unconsciously, a wide view that defines their relationship with
themselves, others, nature and the universe.
Micro- Environment Factors
Marketing management’s job is to attract and build relationships with customers by
creating customer value and satisfaction. However marketing managers cannot
accomplish this task alone. Their success will depend on the other factors in the
company’s micro-environment, which are:
1. Company: In designing marketing plans, marketing management takes other
company groups into account such as top management, finance, research, and
development, purchasing, manufacturing and accounting. These interrelated groups
form the internal environment.
2. Suppliers: Suppliers are the important link on the company’s overall customer
“value delivery system.” Marketing managers must watch supply availability (supply
shortages, delays, strikes) as they can seriously affect marketing.
3. Marketing Intermediaries: Firms that help the company promote, sell and
distribute its goods to final buyers; they include resellers, physical distribution firms,
marketing service agencies and financial intermediaries.
4. Customers: The company needs to study its customer markets namely -
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Consumer Markets (individuals and households that buy goods and services
for consumption),
Business markets (for further processing of goods),
Reseller Markets (reselling goods and services at a profit),
Government Markets (agencies buying goods and services to produce public
services), and International Markets.
5. Competitors: As business is full of competition, marketers must do more than
simply adapt to the needs of consumers. Each firm should consider its own size and
industry position compared to its competitors. It should then devise proper strategies
to sustain in the market.
6. Publics: Any group that has an actual or potential interest, or impact on an
organisation’s ability to achieve its objectives. There are seven types of publics:
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Financial Publics
Media Publics
Local Public
General Public
Citizen Action Publics
Internal Publics
Government Publics