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Principles of Marketing - Market Segmentation

Marketing Segmentation
A market consists of large number of individual customers who differ in terms
of their needs, preferences and buying capacity. Therefore, it becomes necessary to
divide the total market into different segments or homogeneous customer groups.
Such division is called market segmentation. They may have uniformity in
employment patterns, educational qualifications, economic status, preferences, etc.
Market segmentation enables the entrepreneur to match his marketing efforts to
the requirements of the target market. Instead of wasting his efforts in trying to sell
to all types of customers, a small scale unit can focus its efforts on the segment
most appropriate to its market. It is defined as The strategy of dividing the market
in order to consume them.
According to Philip Kotler, It is the subdividing of market into homogenous
subsets of consumers where any subset may be selected as a market target to be
reached with distinct Marketing Mix
According to Philip Kotler, market segmentation means "the act of dividing
a market into distinct groups of buyers who might require separate products and/or
marketing mixes."
According to William J. Stanton, "Market segmentation in the process of
dividing the total heterogeneous market for a good or service into several
segments. Each of which tends to be homogeneous in all significant aspects."
Basis of Segmentation:
Market segmentation dividing the Heterogeneous market into homogenous
sub-units. Heterogeneous means mass marketing, which refers people as a people.
Homogeneous means dividing the market into different sub units according to the
tastes and preferences of consumers. The following factors are considered before
dividing the market:
1. Geographical Factors: On the basis of geographical factors, market
may be classified as state-wise, region-wise & nation-wise. Many companies operate
only in a particular area because people behave differently in different areas due to
various reasons such as climate, culture, etc.
2.
Demographic Factors: This is the most widely used basis for market
segmentation. Market is classified on the basis of population, using ages, income,
sex, etc as indicators.

a. Age: It is known fact that people of different ages like different


products, need different things, & behave differently. Almost all companies use this
factor to reach the target market. On the basis of age, market in our country is
divided into childrens market, teenagers market, adults market, & the market for
old people. Companies use the census data to prepare marketing strategies on the
basis of age.
b. Sex: There is a variation of consumption behavior between males &
females. This factor is used as a basis for segmentation for products like watches,
clothes, cosmetics, leather goods, magazines, motor vehicle, etc.
c. Family Life Cycle: This is another important factor, which influences
the consumers behavior. E.g.: Before making purchases, a bachelor may consult his
friends, a boy may ask his parents & a married man asks his wife. The study of
family life cycle helps a company to prepare an effective promotional strategy.
3. Psychological factors: In psychographic segmentation, elements
like personality traits, attitude lifestyle & value system form the base. The strict
norms that consumers follow with respect to good habits or dress codes are
representative examples. E.g.: Mr. Donalds changed their menu in India to adopt to
consumer preference. The market for Wrist Watches provides example of
segmentation. Titan watches have a wide range of sub brands such as Raga, fast
track, edge etc. or instant noodle markers, fast to cook food brands such as Maggi,
Top Ramen or Femina, womens magazine is targeted for modern women.
4. Economic Factors: On the basis of economic factors, markets have
been classified in the westerns countries as follows:
a. Upper Class
upper class

b. Upper-upper class

c. Lower-

d. Middle class
middle class

e. Upper-middle class

f. Lower-

g. Lower class

h. Upper-lower class

i. Lower-lower

class
In our country, it is classified as upper class (rich), middle class, & the
lower class. Another classification based on income in our country is as follows:
a. Very Rich
Destitute.

b. The Rich class

c. The Aspiration Class &

d. The

5. Behavior Factors: This is one of the most important bases used for
market segmentation. Market is classified on the basis of attitude of consumers and
special occasions.
a. Occasions: Sellers can easily find out certain occasions when people
buy a particular product. E.g.: Demand for clothes, greeting cards, etc increases
during the festival season. Demand for transportation, hotels etc increases during
the holiday seasons.
b. Benefits: Each consumer expects to fulfill certain desire or to derive
some benefits from the product he purchases. E.g.: A person may purchase clothes

to save money & another to impress others. Based upon this, markets may be
classified as markets for cheap price products & market for quality products etc.
c. Attitude: On the basis of attitude of consumers, markets may be
classified as enthusiastic market, indifferent market, positive market, & negative
market.

Advantages / Importance / Significance of Market Segmentation:


The purpose of segmentation is to determine the differences among the purchases
which may affect the choice of the market area & marketing strategies. Following
are some of the benefits of marketing segmentation.
1)
Facilitates consumer-oriented marketing: Market segmentation
facilitates formation of marketing-mix which is more specific and useful for
achieving marketing objectives. Segment-wise approach is better and effective as
compared to integrated approach for the whole market.
2)
Facilitates introduction of suitable marketing mix: Market
segmentation enables a producer to understand the needs of consumers, their
behavior and expectations as information is collected segment-wise in an accurate
manner. Such information is purposefully usable. Decisions regarding Four Ps based
on such information are always effective and beneficial to consumers and the
producers.
3) Facilitates introduction of effective product strategy: Due to
market segmentation, product development is compatible with consumer needs as
there is effective crystallization of the specific needs of the buyers in the target
market. Market segmentation facilitates the matching of products with consumer
needs. This gives satisfaction to consumers and higher sales and profit to the
marketing firm.
4) Facilitates the selection of promising markets: Market segmentation
facilitates the identification of those sub-markets which can be served best with
limited resources by the firm. A firm can concentrate efforts on most productive/
profitable segments of the total market due to segmentation technique. Thus
market segmentation facilitates the selection of the most suitable market.
5) Facilitates exploitation of better marketing opportunities: Market
segmentation helps to identify promising market opportunities. It helps the
marketing man to distinguish one customer group from another within a given
market. This enables him to decide his target market. It also enables the marketer
to utilize the available marketing resources effectively as the exact target group is
identified at the initial stage only.
6) Facilitates selection of proper marketing programme: Market
segmentation helps the marketing man to develop his marketing mix programme on
a reliable base as adequate information about the needs of consumers in the target
market is available. The buyers are introduced to marketing programme which is as
per their needs and expectations.
7)
Provides proper direction to marketing efforts: Market
segmentation is rightly described as the strategy of "dividing the markets in order
to conquer them". Due to segmentation, a firm can avoid the markets which are
unprofitable and irrelevant for its marketing purpose and concentrate on certain

promising segments only. Thus due to market segmentation, marketing efforts are
given one clear direction for achieving marketing objectives.
8) Facilitates effective advertising: Advertising media can be more
effectively used because only the media that reach the segments can be employed.
It makes advertising result oriented.
9) Provides special benefits to small firms: Market segmentation offers
special benefits to small firms. The resources available with them are limited as
they are comparatively new in the market. Such firms can select only suitable
market segment and concentrate all efforts within that segment only for better
marketing performance. Such firms can compete even with large firms by offering
personal services to customers within the segment selected.
10) Facilitates optimum use of resources: Market segmentation
facilitates efficient use of available resources. It enables a marketing firm to use its
marketing resources in the most efficient manner in the selected target market. The
marketing firm selects the most promising market segment and concentrates all
attention on that segment only. This offers best results to the firm in terms of sale,
profit and consumer support as compared to the results available from spending
such resources on the total market.
In conclusion, it can be said that market segmentation offers benefits not
only to marketing firms but also to customers. The marketing job will be conducted
efficiently and the available resources will be utilised in a better mariner. These
advantages also suggest the importance of market segmentation and make a case
in its favour.