In this tutorial Introduction to Market Segmentation consist of definition, types, bases, process, examples and importance of market segmentation.
Table of Contents
- 1 Market Segmentation: Definition
- 2 Types of Market Segmentation
- 3 Bases of Market Segmentation
- 4 Market Segmentation Process
- 5 Importance of Market Segmentation
- 6 Examples of market segmentation
- 7 What is the target market?
Market: is a place where trade activity is carried on. It means buying and selling goods. Market refers to a huge number of audience, thus market segmentation is done and the selected segment is targeted and a product is been positioned.
Market Segmentation: Definition
“Market Segmentation is the sub-dividing of a market into homogeneous subsets of customers, where any subset may conceivably be selected on a market target to be reached with a distinct marketing mix”Philip Kotler
“Market Segmentation consists of taking the total heterogeneous market for a product and dividing into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects.”William J. Stanton
A market segment consists of a group of customers who share a similar set of needs and wants.
Form various definition it is known as market segmentation is breaking a heterogeneous market into small homogeneous markets in which a company can operate.
Types of Market Segmentation
Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities. The organisation can choose to operate in one or more area and pay special attention to local variation. In that way, it can tailor marketing programs to the needs and wants of the local customer.
The geographic segmentation is furthermore useful when there are differences in a location where a product is marketed. The differences can be caused by cultural factors, traditions, politics etc. and furthermore the differences can be significant in one segment, whereas in other segments the differences can be minor and less significant.
In this, the market is divided on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class.
One reason demographic variables are so popular with marketers is that they’re often associated with consumer needs and wants. Variables are easy to identify and measure.
In psychographic segmentation, buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles.
Psychological profiles are often used as a supplement to geographic and demographics when these does not provide a sufficient view of the customer behaviour.
In behavioural segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. It considers variables like brand loyalty and the usage rate of the consumer.
Also Read: What is an Entrepreneurship [Ultimate Guide]
Bases of Market Segmentation
Bases of market segmentation are the factors that are used to divide the market into a small homogeneous market.
- Geographic Segmentation: It includes the following variables:
- Region: By Continent, Country, State
- Size of metropolitan area: Segmented according to population size
- Population Density
2. Demographic Segmentation: It includes the following variables:
- Family Size
- Family Life Cycle
- Social Class
Psychographic Segmentation: It includes the following variables:
Behavioural Segmentation: Behavioural Segmentation is based on actual customer behaviour towards products. Some behavioural variables include:
- Benefits Sought
- Usage Rate
- Brand Loyalty
- User Status
- Readiness to buy
Market Segmentation Process
Market segmentation itself is a process of grouping and sub-grouping a large heterogeneous market of the audience into similar qualities and attributes. This helps the companies concentrate on a specified group of customers they want to target which will help them gain a competitive advantage over their competitors in the market and ultimately help them gain profit. Using market segmentation the marketers can easily customize their marketing strategies. It narrows the risk of ineffective marketing strategies and chooses the right type of market segment that would suit their marketing strategies.
Importance of Market Segmentation
- Market segmentation helps the company understand why the consumer likes or doesn’t likes their product. A marketer can have a clear understanding of his consumer.
- A marketer can satisfy the need of the consumer more effectively. Market segmentation helps in both customer satisfaction and in achieving maximum sales.
- Market segmentation helps the marketer to formulate meaningful marketing strategies.
- Market segmentation makes sure that effective use of the resources is being made.
- Market segmentation helps a company gaining a competitive advantage over its competitors. It helps the company serve the consumers more effectively and gain loyal customers.
- Market segmentation helps to build a close relationship with the customer, it helps then interact with the customers about the product and help them identify a possible market opportunity.
Examples of market segmentation
- Geographic segmentation: McDonald’s is an example of geographic segmentation. It customizes its menu that varies from country to country. McDonald’s has introduced burgers with no beef or no pork in it for India. And likewise in Mexico, more chili sauce is used.
- KFC in India concentrates on veg products in south India and on chicken products in North India.
- Demographic segmentation: Ferrero SpA an Italian manufacturer of branded chocolate is an example of demographic segmentation. Its sub-brand kinder manufacture chocolate specially for children and has also separate colours and toys for girls and boys.
- Psychographic segmentation: It concentrates on the variable of the lifestyle of the consumer. Rolls Royce is an example of psychographic segmentation, it targets the consumer having the potential of buying luxury cars and having a rich lifestyle.
- Behavioral segmentation: the example of behavioural segmentation is given in airlines, hotel, and other industry. Emirates airlines are the best example for it, it offers excellent services to the passengers which helps them retain the customer. It creates brand loyalty and make the customer loyal to their airlines and fly with them frequently.
Read More: Wikipedia
What is the target market?
Target market is a group of audience within which the company is planning to sell its products. It is a process after market segmentation is done, a marketer has to select one or more segments in which a marketer has to implement his marketing strategies.
The target market consists of consumers who have similar characteristics who are more likely to buy the products which will be more profitable for the company. After the selection of one or more market segments, the marketer has to implement its marketing strategies. It has to modify the marketing mix (4Ps) as per the needs to reach to the customer.
After a target market is selected marketer needs to position its product to the selected segment of the customers.