Market Segmentation

■ Market segmentation, also called market segregation is the process

of dividing large,
heterogeneous market into smaller, homogeneous sub-markets which
have common needs
and characteristics.

■ Dividing a market into distinct groups with distinct needs,

characteristics, or behavior who
might require separate products or marketing mixes.
Requirements for Effective Segmentation
Market segmentation process

■ Market Survey
Segmentation requires investigation of the characteristics of total
market.

• Customer needs.

• Product attributes desired by buyers. .

• The importance rating of the product attributes by the buyers.

• Brand awareness among the buyers.

• Product use pattern including uses and usage rate.

• Buyer's attitude toward the product category.

• Buyer's various characteristic.

■ Segment Identification
• Detailed analysis of the information collected from the market survey is done using
appropriate statistical tools.
• The various factors affecting the products demand in the market are categorized
into minor and
major factors. The major factors are then analyzed in relation to their location in
terms of
buyer's characteristics.

■ Segment Profiling
• Profiling involves identifying similarities and dissimilarities among the clusters of
demand for
the product. With this process is completed the organisation can have different
micro markets
with a variation in demand size, buyer behaviour and buyer's demographic and
psychographic
characteristics.
Segment Evaluation
• Segment attractiveness in terms of size, growth, profit, competition,
technology,
customer loyalty, risks.

• Organisational objectives and resources.

• Segment relations and cooperation.

• Ethical considerations in terms of environment and social well-being.

• Government policies and lows:

• Market coverage desired.

Markets keep on changing and hence the market segmentation should be

done
periodically.
Segment Selection
•Attractive market is selected.

•Selected market is called the target market.

•Marketing mix is designed to offer that target market.

Positioning
• It describes how an organisation's brand differs in relation to its competitors brand in the
mind of
target customers,

• It creates a brand image which customers view as different from the image of
competing brands.

• It makes the product differentiation meaningful.

•Positioning begins with the product brand name and it reinforces the original message
about the
product.
Levels of market segmentation
■ Mass Marketing: Seller offer same product for all the buyers with different
needs and seller engages in the mass production, mass distribution, and
mass promotion of one product for all buyers. In this case, the size of market
will be larger and the promotion and advertising expenses becomes generic
in nature to attract the entire customers.
■ Segment Marketing: In this level of market segmentation, a marketer
divides a total
market ianto several segment depending upon the needs, problems,
requirements,
buying behavior, purchasing capacity, social class, and other demographic
variables,
and then select some of the segments to sell his entire range of products.
■ Niche Marketing: A niche is more narrowly defined group of customers. It
is
identified by dividing a segment into sub segments. The seller caters to a
very
specific market segment which requires more attention and very high
quality of
services.

■ Local Marketing: It focus on brands and promotion to the needs and

wants of local
consumer and design marketing program according to the need of local
consumer
groups cities, neighborhoods and even specific stores.
■ Individual Marketing: It is almost same as direct marketing where the marketers
target the individual customers separately either through direct communication
channels or salesmen. This is mostly used for Business-to-Business marketing
where more attention is required to market a product or services.Sales persons are
used to meet each individual prospective customer and provide demo of the product
or services.E.g. Aquaguard water purifier, Eureka Forbes uses direct salesmen to
visit different houses and sell their famous water purifier products after providing the
proper demo and information about the product.
Market Segmentation Variables
Geographic segmentation tries to divide markets into different geographical
units:

A. Geographic Segmentation

● Regions: By continent, country, state or even neighborhood.

● Size of the area: Segmented according to size of area. E.g. Nepal can
be segmented into 5 regions, 14 zones and 75 districts.

● Population density: Often classified as urban, suburban or rural.

● Climate: According to weather patterns common to certain geographic

regions.
B. Demographic Segmentation

Demographic segmentation consists of dividing the market into groups based on

variables, such as

• Age: Child, young, teenage, middle age, old age.

• Gender: Male or Female.

• Family Size: Joint, Single, Small or average Family. Education: Illiterate, primary,
secondary, graduate, post graduate.

• Occupation: Unemployed, students, service holders, professionals, self-

employed,
farmers,home makers, retired etc.

• Income: High, middle or low income.

• Social Class: Upper class, middle class or lower class.

• Ethnicity: Caste, nationalities or ethnic groups.

• Life Style:

• Religion: Buddhist, Muslim, Hindu, Christian etc.

C. Psychographic Segmentation
Psychographic variables describe consumers in terms of psychological
and
behavioral dimensions.

• Buying Motives

• Rational Motives: Economy, durability, efficiency, convenience.

• Emotional Motives. Love, affection, friendship, belongingness.

Ego motives: Status, respect, prestige, recognition.

• Life style

• Activities: Work, hobbies, vacation, entertainment, shopping, sports.

• Interests: Family, home, job, fashion, food, recreation, hobbies.

• Opinions: Self, politics, business, products, culture etc.

• Personality

It is the sum of total ways in which an individual reacts and interacts with
others.
D. Behavioral Segmentation

• Behavioristic segmentation is based on actual customer behavior towards

products.

• Occasions: Regular, special.

• User status: Regular user, first time, ex user, potential, non.

• Usage rate: Heavy, medium, light user.

• Loyalty status: Hard core, split loyal, shifting loyal, switchers.

• Attitude toward product: Enthusiastic, positive, negative, indifferent, hostile.

Different segments desire different benefits from the same products.

Base for segmenting Organizational Markets

• Use of product: It is concerned with the purpose of using products or how the
customer will
use the product.

• Buying characteristics: It includes price sensitivity, importance of services, types

of purchase
(First purchase or second purchase), requirement of home delivery, buying
procedures etc.

• Size of Market or Size of Purchase: What will be the lot-size per purchase

• Geographical Areas: On the basis of areas' level of industrial development,

nature of
industries and their brand preferences etc.
Selection of Market/Target Marketing

1. Single Coverage segment/ Market/ concentration strategy:

• It develop single marketing mix for that segment.

• For example. Soaltee Hotel targets only foreigner high pay tourists. Rolls-Royce
focus
luxurious cars. Harley Davidson focuses on Heavy and High power motorcycle.
2. Limited Coverage Market:
Only limited markets are selected from total market.

a. Product Specialization:
• Company sells single product to many markets.
• For eg. Microscope manufacturer might sell it to university laboratories,
government laboratories and commercial laboratories.
• Levi's Jeans is popular all over the world.
b. Market Specialization:
• Company satisfy many needs of the particular groups.
• Company offer many products for single market.
c. Selective specialization
• Company selects few market segments that are objectives and resources.
• Advantage of diversifying the company's risks.
• If One segment is unattractive, the company can continue to sell products
and
earn profits from other segments.
3. Full Coverage Market:

• The company attempts to select and serve all customer groups.

• High sales strategy. O Impossible for small company.
• For eg. Coca-Cola, General Motors, IBM.
• A single marketing program can serve all customers known as "Mass
Marketing" or
"Mass Aggregation".
4. Niche Marketing:
• A limited portion of the market is focused.
• Market within the market.
• Large co. doesn't entertain this small segment because they have not watched
this segment or it is unprofitable for them to serve.
• In 1980s, Apple computer used 'Mouse' to operate computer for the first time in
the
world and capture the world market. At that time other computer companies
were using
Dos Format based.
Positioning

Product positioning is the process marketers use to determine how to

best communicate their products' attributes to their target customers
based on customer needs, competitive pressures, available
communication channels and carefully crafted key messages.
•A product position iso the way a product is defined by consumers on
important attributes-the place the product occupies in consumers'
minds relative to competing products.
• Products are made in factories, but brands happen in the minds of
consumers.
Process of Product Positioning

i. Identifying possible competitive advantage (identify differentiation factors):

• Products are presented differently in the markets.

• Differentiation factors are competitive advantages a firm is able to exercise in a market in

relation to its competitors pay.

• Differentiation strategy creates volues for customers for which the customers are willing to
ii. Selecting the right competitive advantages (setting the differentiation factors):
O Select some factors that are relevant to the product, market and organization
itself.
• Organization should consider.
- Number of differentiation factor: consumer don't believe all the claim told by the
company. - differentiation factor should consistent with the organization's image.
- Competitor's positions and their strength.
-Cost of creating and defending positions.
iii. Communicating the competitive advantages:

• The selected positioning variable should be communicated to the consumer or

market.

• Marketing mix strategy should support the positioning strategy.

Types of Product Positioning/Decision

1. Attribute positioning:

• It is the popular positioning tools that marketers often use.

• Marketers do positioning their product as high quality, export item, durability,

taste and low price.
2. Benefit positioning:

• What you get after using or consuming the product is highlighted.

• The organization promises a unique benefit to consumers from the use of the product.

• For eg., Soap, Beauty cream and oil, Toothpaste promotes on benefit about the products.

• Marketers of Toothpaste highlight brightness, strong teeth,fresh breath.

3. Usage occasion positioning (How a product is used):
O It is based on the use of the product on a particular occasion or for a specific
purpose.
O Noodles is presented as substitutes of tiffin. O Travel and Trekking agencies
position the holiday as travel trip, adventure, entertaining and
education tour.
4. User positioning (type of person who uses the product): O It is based on the
target consumers. It involves presenting the product as "the most suitable"
for a particular category of consumers Inventing O Products may be targeted at
high, middle or low income groups, or children, teen age, young,
middle aged or old consumers. O SNPL's John Player and Miss Players has been
focused on urban gents and ladaies.
O Surya Nepal uses to target it products to the following consumers:
O Surya: high class urban consumers.
O Shikhar: middle class urban consumers. O Khukuri: lower-middle class urban
consumers.
5. Competitive positioning:

Our products are promoted better than competitors.

For eg., Pooja soap Vs OK soap. Coke Vs Pepsi.

In the Washing machine market, IFB, LG, Samsung, Whirlpool has focused positioning.
competitive positioning.

In the Banking sector, NABIL Bank, Investment Bank, Himalayan Bank, Everest Bank has

Also followed competitive positioning.