WORK BOOK

ON

Market Segmentation.
Brief introduction to marketing:
Marketing (or advertising) is the process by which companies advertise products or
services to potential customers. ."[1] It is an integrated process through which companies create
value for customers and build strong customer relationships in order to capture value from
customers in return.

Marketing is used to create the customer, to keep the customer and to satisfy the
customer. With the customer as the focus of its activities, it can be concluded that marketing
management is one of the major components of business management. The evolution of marketing
was caused due to mature markets and over capacities in the last decades. Companies then shifted
the focus from production to the customer in order to stay profitable.

The term marketing concept holds that achieving organizational goals depends on
knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes
that in order to satisfy its organizational objectives, an organization should anticipate the needs and
wants of consumers and satisfy these more effectively than competitors.

WHAT IS MARKETING IF IT IS NOT ABOUT SEGMENTATION?

Satisfying people’s needs and making a profit along the way is the purpose of
marketing. However, people’s needs differ and therefore satisfying them may require different
approaches. Identifying needs and recognizing differences between groups of customers is at the
heart of marketing. We cannot do everything, we cannot satisfy everybody; resources do not stretch
that far. This means we have to be clever in targeting our offers at people who really do want and
need them, and we have to be strong in setting aside those who do not. This early observation is
fundamental, as it requires us to think as hard about where we don’t want to sell our product as
where we do.

This brings us to the consideration of the difference between marketing and selling.
Selling focuses on the product in hand and our pressure to get rid of it, almost regardless of the
needs of the customer. It is clear that brutal selling may leave a customer with a product they wish
they had never bought and therefore, they may never return as a customer again. Marketing takes a
longer-term view. The matching of customers’ needs and suppliers resources may take more time
and effort but the customer is more likely to be comfortable with their decision and be loyal.
The fundamentals of marketing are the same fundamentals of segmentation. Know your customers,
know how they differ, and have a clear proposition that lights their fire. We will return to these
issues but first we will examine the differences between consumer and business-to-business
markets, as our challenge is to arrive at a business-to-business segmentation.

THE DIFFERENCE BETWEEN CONSUMER & BUSINESS-TO-BUSINESS MARKETS

Business-to-business markets are characterized in a number of ways that makes them
very different to their consumer cousins. The number of customers supplied by a chemical company
is likely to number in the hundreds or small number of thousands in contrast to consumer
companies that ultimately address markets of many thousands or millions.
Business-to-business customers range wide in their consumption of products. A few customers
dominate followed by a long tail of customers with a comparative miniscule consumption. Private
individuals have physical limitations in the amount of product a single person can consume.
Companies, by comparison, do not.

The selection of a supplier in business-to-business markets is more complicated. Since people are
buying on behalf of their organization rather than themselves, there is (at face value) a greater
pressure to be objective and rational about their decision. In business-to business markets the buyers
and specifiers may well know as much about the products purchased as the companies that supply
them. In a business-to-business situation it is unlikely that just one person will make the buying
decision. A specifier may test and approve the product; a production manager may run it through
trials; a board of directors may impose an overriding structure on the source of supply; a buyer will
almost certainly negotiate the price. Compare this with an item of clothing or personal care or food
where an individual will have most sway, occasionally influenced by another member of the family.

The aim of segmentation in consumer markets is to bring the focus on to manageable

groups of like-minded individuals who have a high disposition for a product. Coca-Cola has
customers who want low cost drinks for consumption at home. It has customers who want a mixer
or a non-alcoholic drink in a bar. It has customers who are hot and thirsty and want a cool refresher
outside the Duomo in Florence. The same consumers may at various times join one of the segments
and when they do, they will see the product in a different light and value it in a different way.
In business-to-business markets the aim of segmentation is similarly to arrive at clusters of like-
minded companies. There is a very strong pressure to use segmentation in business-to-business
markets to win a competitive advantage as there is often little to differentiate one product from
another. Segmentation therefore links strongly with a strategy to achieve a sustainable differentiated
position.

II.Targeting Markets
Marketing concept emphasized the importance of understanding customers since they are the
reason an organization is in business. With customer knowledge in hand, it is now time to turn our
attention to the process of addressing customers’ needs through actions undertaken by the marketer.
What is Marketing? Major decisions in marketing include:
1. Selecting Target Markets
2. Developing Products/Services
3. Creating Promotions
4. Arranging Distribution
5. Setting Price
6. Adding Support Services
segmentation is alll concerned about - how marketers determine which groups of customers to
target. This is number one step in marketing decisions.This is a critical point in marketing planning
since all additional marketing decisions are going to be directed toward satisfying the markets
selected.
For those new to marketing, selecting target markets may seem like a relatively easy
decision to make. In fact, many inexperienced marketers will simply conclude that “We will just
sell to whoever wants to buy.” However, this mind-set is both ineffective and inefficient as the
marketer is likely to drain resources in their quest to locate those willing to buy. Using a target
market approach an organization attempts to get the most from its resource by following a planned
procedure for identify customers that appear to be the best candidates to respond to the marketer’s
message.
What is a Market?
The simplest way to define a market is to think of it as consisting of all the people or
organizations that may have an interest in purchasing a company’s products or services. In other
words, a market comprises all customers who have needs that may be fulfilled by an organization’s
offerings. Yet just having a need is not enough to define a market. Many people may say they have
a need for a California mansion that overlooks the Pacific Ocean but most would not be considered
potential customers of a real estate agent who is attempting to sell such a property. So other factors
come into play when defining a market.
The first factor is that markets consist of customers who are qualified to make a
purchase. Qualified customers are defined as those who:

• Seek a solution to a need, and

• Are eligible to make a purchase, and
• Possess the financial ability to make the purchase, and
• Have the authority to make the decision.
A customer must meet ALL factors listed above, though for some markets the customer may have a
surrogate who will handle some of these qualifications for a targeted customer. For instance, a
market may consist of pre-teen customers who have a need for certain clothing items but the actual
purchase may rest with the pre-teens’ parents. So the parents could possibly assume one or more
surrogate roles (e.g., financial ability, authority) that will result in the pre-teen being a qualified
customer.

A second factor for defining a market rests with the company’s ability to service the
market. To an organization a market can only exist if the solutions sought by customers are ones
that the company can satisfy with their offerings. If a company identifies a group of customers who
are qualified to make purchases they only become a market for the company once the company is in
a position to execute marketing activities designed to service those customers.

Thus, a market is defined as a group of customers who are qualified to make purchases of
products or services that a marketer is able to offer. However, even if an organization can offer
products and services to a market, not all markets will fit an organization’s goals and objectives.
With this in mind, we now turn our attention to examining the process marketers follow to choose
which markets are best to target with their marketing effort.

III. Target Markets and Market Segmentation:

Because people are different and seek different ways to satisfy their needs, nearly all
organizations, whether for-profits or not-for-profits, industrial or consumer, domestic or
international, must use a Market Segmentation approach to target marketing. This approach divides
broad markets, consisting of customers possessing different characteristics, into smaller market
segments in which customers are grouped by characteristic shared by others in the segment.
To successfully target markets using a segmentation approach, organizations should engage in the
following three-step process.
1. Identify segments within the overall market
2. Choose the segment(s) that fits best with the organization’s objectives and goals
3. Develop a marketing strategy that appeals to the selected target market(s)

Step 1: Identify Market Segments

The first step in targeting markets is to separate customers who make up large, general markets into
smaller groupings based on selected characteristics or variables (also referred to as bases of
segmentation) shared by those in the group. General markets are most often associated with basic
product groups, such as automobile, beverage, footwear, home entertainment, etc. The purpose of
segmentation is to look deeper within the general market in order to locate customers with more
specific needs within the product group (e.g., seek hybrid automobiles) AND who also share similar
characteristics (e.g., college educated, support environmental issues, etc.). When grouped together
these customers may form a smaller segment of the general market. By focusing market research on
these smaller segments the marketer can learn a great deal about these customers and with this
information can begin to craft highly targeted marketing campaigns.

we take the approach that the variables used to segment markets can be classified into a
three-stage hierarchy with higher stages building on information obtained from lower stages in
order to reach greater precision in identifying shared characteristics. Yet, the more precise a
marketer wishes to be with their segmentation efforts the more this process requires sufficient
funding and strong research capabilities. For instance, a marketer entering a new market may not
have the ability to segment beyond the first two stages since the precision available in Stage 3
segmentation may demand an established relationship with customers in the market.
The three-stage segmentation process presented below works for both consumer and
business markets (e.g., manufacturers, reseller, etc.), though, as one might expect, the variables used
to segment these markets may be different. Each segmentation stage includes an explanation along
with suggestions for variables the marketer should consider. This is not meant to be an exhaustive
list, as other variables are potentially available, but for marketers who are new to segmentation
these will offer a good starting point for segmenting markets.
Stage 1: Segmentation Variables
segmentation consists of variables that can be easily identified through demographics
(i.e., statistics that describe a population), geographics (i.e., location issues) and financial
information. For both consumer and business segmentation this information focuses mostly on easy
to obtain data from such sources as government data (e.g., census information), examining
secondary data sources (e.g., news media), trade associations and financial reporting services.
While Stage 1 segmentation does not offer the segmentation benefits available with higher-level
stages, the marketer benefits from accomplishing the segmentation task in a short time frame and at
lower cost.

Segmentation Variables Segmentation Variables

Consumer Markets Business Markets
Demographics
type (e.g., manufacturer, retailer, wholesaler),
Demographics industry, size (e.g., sales volume; number of retail
age group (e.g., teens, retirees, young outlets), age (e.g., new; young growth, established
adults), gender, education level, ethnicity, growth, mature)
income, occupation, social class, marital Geographics
status location (e.g., national, regional,
Geographics urban/suburban/rural, international), climate
location (e.g., national, regional, Business Arrangement
urban/suburban/rural, international), climate ownership (e.g,. private versus public, independent
versus chain), financial condition (e.g., credit rating,
income growth, stock price, cash flow)

Stage 2 Segmentation Variables

Some firms, especially companies with limited funds or those who feel they need to
move quickly to get their product to market, will stop the search for segmentation variables at the
Stage 1 level. However, moving beyond Stage 1 segmentation offers a rich amount of customer
information that will allow marketers to more effectively and efficiently target customers’ needs. To
segment using Stage 2 variables marketers must use market research techniques that help gain
insight into customers’ current purchase situation and the environment in which the customer
operates.
Information at this stage includes learning what options customers have chosen to
satisfy their needs, what circumstances within customers’ environment could affect how purchases
are made, and understanding local conditions that could impact purchase decisions. Marketers
might locate some of this information through the same sources used in Stage 1 (e.g., may find out
brands most frequently purchased) but most of these variables require the marketer to engage in at
least casual contact with customers in the market.
This can be done through primary research methods, such as surveying the market,
having sales personnel contact customers, purchasing research reports from commercial research
firms or hiring consultants to undertake research projects. The cost and time needed to acquire this
information may be significantly greater than that of Stage 1 segmentation.
Segmentation Variables Segmentation Variables
Consumer Markets Business Markets
Current Purchasing Situation
brands used, purchase frequency, current
suppliers
Current Purchasing Situation
Purchase Ready
brands used, purchase frequency, current
possess necessary equipment, property,
suppliers
knowledge and skill sets
Purchase Ready
Local Environment
possess necessary equipment, property,
cultural, political, legal
knowledge and skill sets
Customers Served by the Business
Local Environment
identify the business’ market
cultural, political, legal
Business’ Perceived Image
identify how targeted businesses are perceived
by their customers

Stage 3 Segmentation Variables

Marketers choosing to segment at the Stage 3 level face an enormous challenge in
gathering useful segmentation information but, for those who do commit to segmenting at this level,
the rewards may include gaining competitive advantage over rivals whose segmentation efforts
have not dug this deep. However to reach the reward the marketer must invest significant time and
money to amass the detailed market intelligence needed to achieve Stage 3 segmentation.

Additionally much of what is needed at Stage 3 is information that is often well

protected and not easily shared by customers. In fact, many customers are unwilling to share certain
personal information (e.g., psychological) with marketers with whom they are not familiar.
Consequently, segmenting on Stage 3 variables is often not an option for marketers new to a market
unless they purchase this access via other means (e.g., hire a consultant who knows the market to
undertake customer research). To get access to this information, marketers who already serve the
market with other products may be able to use primary research such as focus groups, in-depth
interviews, observation research and other high level market research techniques.

Segmentation Variables Segmentation Variables

Consumer Markets Business Markets
Benefits Sought Benefits Sought
price, overall value, specific feature, ease-of- price, overall value, specific feature, services,
use, service, etc. profit margins, promotional assistance; etc.
Product Usage Product Usage
how used, situation when used, etc. how used (e.g., raw material, component product,
Purchase Conditions major selling item at retail level), situation when
time of day/month/year when purchased, credit
terms, trade-in option, etc.
Characteristics of Individual Buyer
purchase experience, how purchase is made,
influencers on purchase decision, importance of
purchase
Psychographics
personality, attitudes, and lifestyle combined
with demographics
used, etc.
Purchase Conditions
length of sales cycle, set product specifications,
bid pricing, credit terms, trade-in option, product
handling, etc.
Characteristics of Buying Center
purchase experience, number of members, make-
up of key influencers, willingness to assume risk;

Step 2: Choosing Market Segments

The second step in selecting target markets requires the marketer to critically evaluate
the segments identified in Step 1 in order to select those which are most attractive. For small firms
this step may not be very involving since they may lack the resources needed to do it effectively. So
they are often left with using their own intuition or judgment to determine which segments are the
most promising. For companies with the time and money to commit to this step, the results may
identify the segments that are primary candidates for current marketing efforts and also present
segments that are future targets for the company’s offerings.
In determining whether a segment is worthy of being a target market, the marketer needs to address
the following questions:

• Is the segment large enough to support the marketer’s objectives? This is an especially
critical question if the marketer is entering a market served by many competitors.
• Is the segment showing signs of growth? One of the worst situations for a marketer is to
enter a market whose growth is flat or declining, especially if competitors already exist.
• Does the company have the necessary skills, knowledge and expertise to service the
segment? The company should understand and be able to communicate with the customers
in the segment, otherwise they may face a significant learning curve in understanding how to
effectively market to a segment.
• Does the segment meet the mission of the company? The segment should not extend too far
beyond the direction the company has chosen to take.

Once one or more segments have been identified the marketer must choose the most
attractive option(s) for their marketing efforts. At this point the choice becomes the firm’s target
market(s).

Step 3: Develop Marketing Strategy

The results of analyzing market segments leads the marketer to consider one of the
following target marketing strategies.

• Undifferentiated or Mass Marketing – Under this strategy the marketer attempts to appeal
 to one large market with a single marketing strategy. While this approach offers advantages
in terms of lowering development and production costs, since only one product is marketed,
there are few markets in which all customers seek the same benefits. While this approach
was very popular in the early days of marketing (e.g., Ford Model-T), few companies now
view this as a feasible strategy.
.
Background of mass marketing:
Mass marketing or undifferentiated marketing has its origins in the 1920s with the
inception of mass radio use. This gave corporations an opportunity to appeal to a wide variety of
potential customers. Due to this, variety marketing had to be changed in order to persuade a wide
audience with different needs into buying the same thing. It has developed over the years into a
worldwide multi-billion dollar industry. Although sagging in the Great Depression it regained
popularity and continued to expand through the 40s and 50s.
It slowed during the anti-capitalist movements of the 60's and 70's before coming back
stronger than before in the 80's, 90's and today. These trends are due to corresponding upswings in
mass media, the parent of mass marketing. For most of the twentieth century, major consumer-
products companies held fast to mass marketing- mass producing, mass distributing and mass
promoting about the same product in about the same way to all consumers. Mass marketing creates
the largest potential market, which leads to the lowest costs.
Mass marketing is used to effect attitude change to as wide an audience as possible.
Often this would take the form of selling a product like toothpaste. Toothpaste isn't made specially
for one consumer and it is sold in huge quantities. A company or individual who manufactures
toothpaste wishes to get more people to buy their particular brand over another. The goal is when a
consumer has the option to select a tube of toothpaste that the consumer would remember the
product which was marketed.
Mass marketing is the opposite of niche marketing, where a product is made specially
for one person or a group of persons. Other products of mass marketing are furniture, artwork,
automobiles, residential communities, fizzy drinks and personal computers. Typically, things which
are perceived to be necessary/essential to the consumer are subject to mass marketing.
Even "products" like politicians and services from professions such as law, chiropractic and
medicine, are subject to mass marketing.

• Differentiated or Segmentation Marketing :

Marketers choosing this strategy try to appeal to multiple smaller markets with a unique
marketing strategy for each market. The underlying concept is that bigger markets can be divided
into many sub-markets and an organization chooses different marketing strategies to reach each
sub-market it targets. Most large consumer products firms follow this strategy as they offer multiple
products (e.g., running shoes, basketball shoes) within a larger product category (e.g., footwear).
Segmentation marketing will be discussed henceforth in detail which is our main topic .
 • Concentrated or Niche Marketing –
This strategy combines mass and segmentation marketing by using a single marketing
strategy to appeal to one or more very small markets. It is primarily used by smaller marketers who
have identified small sub-segments of a larger segment that are not served well by larger firms that
follow a segmentation marketing approach. In these situations a smaller company can do quite well
marketing a single product to a narrowly defined target market.

In practice, product vendors and trade businesses are commonly referred as mainstream
providers or narrow demographics niche market providers (colloquially shortened to just niche
market providers). Small capital providers usually opt for a niche market with narrow demographics
as a measure of increasing their gain margins.

Nevertheless, the final product quality (low or high) is not dependant on the price
elasticity of demand; it is associated more with the specific needs that the product is aimed at satisfy
and in some cases with brand recognition with which the vendor wants to be associated (e.g.,
prestige, practicability, money saving, expensiveness, planet environment conscience, power, &c.).

Online niche marketing:An often used technique for affiliate marketers is Internet-based niche
marketing. By appealing to smaller segments of larger markets, referred to as niches, a website can
be developed and promoted quickly to uniquely serve a targeted and usually loyal customer base,
giving the affiliate a small but regular income stream. This technique is then repeated across several
other niche websites until a desired income level is achieved. A bigger niche is harder to market to
as the expense of online advertisements increases according to the popularity of the keywords used
(on Adwords, for example).

Some niches may become saturated with marketers, increasing competition and thus,
according to the economic law of supply and demand, reduceing the slice of the pie available to
each competitor. One solution is to find smaller, "undiscovered," but still profitable, niches, usually
by searching out the best keywords to target. These lower cost keywords are called long-tailed
keywords, as in the long tail of secondary keyword phrases that usually follow the main keyword in
popularity of number of searches conducted by internet users. Some are too obscure and may have
very few or even no clicks per month, and therefore not much use to target.

The concept of niche marketing can be well understood by the following example: A
number of television channels cater to the need of a particular niche; for example, sports channels
like STAR SPORTS, ESPN, STAR CRICKET, and TENS SPORTS target a niche of sports lovers.

• Customized or Micro-Marketing -
This newest target marketing strategy attempts to appeal to targeted customers with
individualized marketing programs. For micro-marketing segmentation to be effective the marketer
must, to some degree, allow customers to “build-their-own” products. This approach requires
extensive technical capability for marketers to reach individual customers and allow customers to
interact with the marketer. The Internet has been the catalyst for this target marketing strategy. As
more companies learn to utilize the Internet micro-marketing is expected to flourish.

Micromarketing was a term coined in 1988, by Ross Nelson Kay, as a marketing

technique used to describe a form of "Target" marketing that was more precise and focused than
typical "Niche" Marketing techniques. "Micromarketing" became functionally viable with the
proliferation of affordable home computers capable of "tablizing" data in a format that could be
tracked and altered by a single user. "Micromarketing" remains the most effective technique for
small business users to sustain, build and grow their own brand. "Micromarketing" was first
implemented in the real estate industry and remains imbedded in small personal service based
businesses.

Standard pricing policy ignores the differences in customer segments of specific stores
within a regional chain of stores. The process of customizing pricing policies at the individual store
level is known as micromarketing.This marketing strategy tries to appeal to specific customers or
customer segments. It requires a great deal of technical capability and the Internet has been a
catalyst in the development of this strategy.

IV Product Positioning:

No matter which target marketing strategy is selected, the overall marketing strategy
should involve the process of positioning the firm’s offerings in ways that will appeal to targeted
customers. Positioning is concerned with the perception customers hold regarding a product or
company. In particular, it relates to marketing decisions an organization undertakes to get customers
to think about a product or company in a certain way compared to its competitors.

The goal of positioning is to convince customers to believe the marketer’s offerings are
different in some way from its competitors on an important benefit sought by the market. For
instance, if a customer has discovered she has a need for an affordable laptop computer, a company
such as Dell may come to mind since their marketing efforts position their products as offering
good value at a reasonable cost.

To position successfully the marketer must have thorough knowledge of the key benefits sought by
the market. Obviously the more effort the marketer expends on segmentation (i.e., reached Stage 3)
the more likely they will know the benefits sought by the market. Once known, the marketer must:
1) tailor marketing efforts to ensure their offerings satisfy the most sought after benefits,
2) communicate to the market in a way that differentiates the marketer’s offerings from
competitors.

For firms that seek to appeal to multiple target markets (i.e., segmentation marketing), positioning
strategies may differ for each market. For example, a marketer may sell the same product to two
different target markets, but in one market the emphasis is on styling while in another market the
emphasis is on ease-of-use benefits. The important point is that the overall market strategy must be
evaluated for each target market since what works well in one market may not work as well in
another market.

Market segmentation is a strategy that involves dividing a larger market into subsets of
consumers who have common needs and applications for the goods and services offered in the
market. These subgroups of consumers can be identified by a number of different demographics,
depending on the purposes behind identifying the groups. Marketing campaigns are often designed
and implemented based on this type of customer segmentation.

One of the main reasons for engaging in market segmentation is to help the company
understand the needs of the customer base. Often the task of segregating consumers by specific
criteria will help the company identify other applications for their products that may or may not
have been self evident before. Uncovering these other ideas for use of goods and services may help
the company target a larger audience in that same demographic classification and thus increase
market share among a specific sub market base.

Market segmentation strategies can be developed over a wide range of characteristics

found among consumers. One group within the market may be identified by gender, while another
group may be composed of consumers within a given age group. Location is another common
component in market segmentation, as is income level and education level. Generally, there will be
at least a few established customers who fall into more than one category, but marketing strategists
normally allow for this phenomenon.

Category of Need:
The first thing you can establish is a category of need that your offering satisfies. The following
classifications may help.

For businesses:
• Strategic - your offering is in some way important to the enterprise mission, objectives and
operational oversight. For example, a service that helped evaluate capital investment
opportunities would fall into this domain of influence. The purchase decision for this
category of offering will be made by the prospect's top level executive management.

• Operations - your offering affects the general operating policies and procedures. Examples
might be, an employee insurance plan or a corporate wide communications system. This
purchase decision will be made by the prospect's top level operations management.

• Functional - your offering deals with a specific function within the enterprise such as data
processing, accounting, human resources, plant maintenance, engineering design,
manufacturing, inventory control, etc. This is the most likely domain for a product or
 service, but you must recognize that the other domains may also get involved if the purchase
of the product or service becomes a high profile decision. This purchase decision will be
made by the prospect's functional management.

For the individual consumer:

• Social Esteem or Pleasure - your offering satisfies a purely emotional need in the consumer.
Examples are a mink coat or a diamond ring. There are some products that are on the
boundary between this category and the Functional category such as a Rolex watch (a Timex
would satisfy the functional requirement and probably keep time just as well).

• Functional - your offering meets a functional requirement of the consumer such as a broom,
breakfast cereal or lawnmower.

Segmentation of Needs:

Then you should establish what the need is and who is most likely to experience that
need. Your segmentation will be determined by a match between the benefits offered by your
offering and the need of the prospect. Some "need" categories for segmentation include:
a)Reduction in expenses
Prospects might be businesses that are downsizing (right sizing), businesses that have products in
the mature stage of their life cycle or individuals with credit rating problems.

b)Improved cash flow

Prospects might be businesses that have traditionally low profit margins, businesses that have
traditionally high inventory costs or individuals that live in expensive urban areas.

c)Improved productivity
Prospects might be businesses that have traditionally low profit margins, businesses that have
recently experienced depressed earnings or individuals with large families.

d)Improved manufacturing quality

Prospects might be businesses with complex, multi-discipline manufacturing processes.

e)Improved service delivery

Prospects might be service businesses in highly competitive markets, product businesses requiring
considerable post-sale support or individuals in remote or rural areas.

f)Improved employee working conditions/benefits

Prospects might be businesses where potential employees are in short supply.

g)Improvement in market share/competitive position

Prospects might be new entrants to a competitive market.
h)Need for education
Prospects might be businesses or individuals looking for books on business planning, or seminars
on Total Quality Management.

i)Involvement with social trends

Prospects might be businesses concerned with environmental protection, employee security, etc. or
individuals who believe in say 'no' to drugs, anti-crime, etc.

j)Specific - relating to product/service characteristics

Prospects might be businesses or individuals interested in safety, security, economy, comfort,
speed, quality, durability, etc.

Factors that segment prospects

Having determined the more general segmentation characteristics you can proceed to a more
detailed analysis of the market. There are literally thousands of ways to segment a market, but the
following are some of the more typical segmentation categories.

For businesses:
a)Industry by SIC code
This is especially beneficial for vertical market offerings. Size - revenues, employees, locations
In general if your offering is highly sophisticated, requires significant resources or provides greater
value based on volume, then the target should be the larger enterprises.

b)Job position/responsibility
Examples of offerings might be planning software for managers or cleaning agents for maintenance
managers.

c) Climate
Examples of offerings might be dehumidifiers in areas near the ocean or snow plows in northern
areas.

d)Time related factors

Some services in this category are vacation related industries in summer and tax planners in the
spring.

e)Language
An example of a language specific service is a Spanish TV channel.

f)Status in the industry

You might want to target businesses that are the technology leader or revenue leader or employee
satisfaction leader, etc.
g)Accessibility
To minimize promotion and sales expense you may want to target urban rather than rural or local
rather than national prospects.

h)Future potential
A good example is how Apple Computer supplied products to schools at all levels to condition
students graduating into the marketplace.

i)Ability to make a quick purchase decision

Targeting individual purchasers versus business committees can significantly reduce marketing
expense and increase the probability of a quick close.

j)Access (or lack of access) to competitive offerings

Cable TV business's significant investment in their service delivery system has allowed a near
monopoly for some time. IBM's service reputation insured minimal competition during the
mainframe days.

k)Need for customization

Offerings such as police cars, busses for municipalities and specialized computer systems fall into
this category.

l)Product or service application to a business function

Examples are data processing, accounting, human resources and plant maintenance.

For Individual Consumers:

a)Physical Size
Offerings might be big men's clothing, golf clubs for shorter players, etc.

b)Creation of or response to a fad

Examples are hula hoops, Jurassic Park T-shirts, pet rock, physical fitness, etc.

c)Geographic location
Marketers take advantage of location by selling suntan lotion in Hawaii, fur coats in Alaska, etc.

d)Time related factors

You may be able to target vacationers in summer, impulse buyers during the holidays or commuters
at 7AM.

e)Demographics/culture/religion
Ethnic products would fall into this category.
f)Gender
Product examples are scarves for women, ties for men, etc.

g)Age
Product examples are toys for children, jewelry for women, etc.

h)Social status
This could include country club memberships, philanthropic contributions, etc.

i)Education
Product and service examples are encyclopedias, scientific calculators, learning to read tools and
financial counseling.

j)Avocation
This could include products for hunting, fishing, golf, art work, knitting, etc.

k)Special Interests
You could target cat lovers, science fiction readers, jazz music collectors, etc.

l)Accessibility
Because the individual is more difficult to reach you may want to segment by urban versus rural,
train commuters, people who read Wall Street Journal, etc.

m)Access (or lack of access) to competitive offerings

Due to high investment capital requirements or timing of market entry you may be able to capture a
significant market share in a specific geographical area. Examples might be a trash service,
emergency medical support, etc.

n)Need for specific information

Based on features or content of your offering you can target a market segment. A product might be
books on how to start a business or a service might be seminars on how to quit smoking.

o)Need for customization

Product/service examples are home decoration, fashion wear, personal portraits, etc.

p)Need for quality, durability

Product examples are mountain climbing gear, carpenter's tools, etc.

q)Degree of a product/service ingredient

Segmentation based on prospect preferences is common. An example is dark chocolate for some
tastes, light chocolate for others.
Purchase decision influencers:

Once you have isolated a specific segment of the market on which to focus, then you can consider
more subtle influences on the purchase decision. Some of these are:

a)Preference for channel of distribution

Many prospects prefer to buy through a specific distributor or wholesaler. For individuals this may
be due to subtle, as well as, economic reasons. For example, an individual prospect may
immediately think of Wal-Mart or Home Depot when considering an offering like yours. A business
often has a preference so they can have a single communication point for all purchases. This also
often results in lower purchase prices.

b)Number of decision makers

When selling to consumers or businesses, the more individuals or groups involved in the purchase
decision, the more difficult the sale. Marketing costs for selling bread can stay low because one
person normally makes the purchase decision. Car purchases are more complex because the
purchase decision normally involves a husband and wife. Business sales to committees often require
months to achieve a decision.

c)Financial strength of the prospect

Less affluent prospects may desire time payments versus a cash purchase and Chevrolets instead of
Cadillacs.

d)Quantity/volume requirements
Restaurants will want large jars of pickles while individuals want small jars. Businesses use large
amounts of electricity at predictable times.

e)Ability to use the offering

Trying to sell to a prospect who lacks either the knowledge or resources to properly benefit from
your offering will result in a 'no sale' situation or an unhappy customer. The prospect should have
knowledge and resources such as time, equipment, facilities, personnel and complementary
products/services.

f)Commitment required
If the offering requires a high commitment in terms of time, resources or money by the customer
then the target should be prospects who 'really need' the offering rather than prospects who get
some, but not a lot, of benefits.

g)Brand awareness/users
Examples are prospects who ask for IBM compatible PC's or Pitney Bowes mailing machines or
Winnebago R.V.s
h)Attitude toward a personality or enterprise
Reputation helps sell AT&T long distance service, IBM computers, Michael Jordan tennis shoes,
etc.

i)Attitude toward price versus value

For example, purchasers of collectors items aren't price sensitive while purchasers of commodity
items are price sensitive.

j)Experience with other products/services your enterprise has offered

You are looking for a reaction like "I liked your first product so I'll try your second."
Prospect bias Examples are, 'Buy USA', I want a car with a 'solid' feel, fast cars, sweet wines, large
print playing cards, etc.

k)Affiliation with other organizations

Such as the U.S. Chamber of Commerce, AMA, IEEE, doctors, attorneys, pastors, franchisors,
entrepreneurs, etc.

l)After sale support expectations

It is often beneficial to target prospects who have enough expertise that they will require a
minimum of after sale support.

Seller Characteristics that can influence purchase decision:

Another form of influence is how the prospect perceives your offering and/or enterprise. If you can
determine the characteristics your prospects most value in an enterprise they purchase from, you
can identify those your organization possesses and promote them to the prospect.

a)Unique employee skills, knowledge

Extensive experience with a specific market segment or field of scientific inquiry can be a powerful
promotional tool. For example if an enterprise could sat, "Our scientists knows more about corn silk
genetic structures than anyone in the world" they would have a strong sales statement.

b)Special relationships with distribution channels

Product or service accessibility is a critical factor in sales success. If an enterprise could say, "Due
to a unique relationship, the XYZ video stores give us more shelf space than any competitor"
prospects will likely respond positively.

c)Customer service capabilities

Prospects like to know that they can depend on post sale support from the product or service
provider. A statement like, "We have more service outlets in New Hampshire than any competitor"
will help secure sales.
d)Unique product forms
Credible uniqueness such as, "Our product is the only one that offers dynamic digi-whirling" is
appealing to the market.

e)Manufacturing expertise
The market is always interested in purchasing from the "best". If an enterprise can confidently state,
"We are the only enterprise that can manufacture molecular engineered widgets", they have created
an image of being the "best".

f)Longevity
Reliability is important. A statement like, "We have been in business for 50 years, so you can count
on us to be there when you need us" is usually a strong selling point.

g)Purchase Decision Makers classification

Finally, a point to consider is, given the characteristics of your offering, what type of decision
maker will most likely be interested in purchasing from you. It may be beneficial to rank your
prospects based on the following classifications. While you may not be able to make this
classification of the prospect prior to the first contact, if your sales personnel are sensitive to these
characteristics it can strongly influence your sales strategy.

Ultra Conservative - don't rock the boat, whatever they purchase must be consistent with their
current way of doing things.
• They are most likely interested in products/services that are improvements to existing
offerings rather than something new.
• Once established as a customer they are seldom inclined to review alternatives.
• Very negative to technically complex offerings or offerings requiring extensive user
education.
• Cost effective offerings are only of interest if they don't disturb the status quo.
• They are likely to react positively to any volume purchasing opportunities.

Conservatives - are willing to change, but only in small increments and only in a very cost
effective manner.
• Will consider new products/services but only if related concept has been proven to be
effective. More likely to purchase improvements to existing offerings.
• Will probably want to review competitive offerings, but will gravitate to best known
offering with lowest risk decision.
• Negative to neutral when considering technically complex offerings or offerings requiring
extensive user education.
• Strongly influenced by cost effective offerings and/or 'best price' opportunities

Liberals - Regularly looking for new solutions, willing to make change (even major change) if the
benefit can be shown.
• Will usually consider new products/services even if the related concept has not yet been
proven to be effective, but only if the potential benefits can be specified and understood.
• Wants offerings that make effective use of technology, but is not interested in offerings just
because they use a certain technology.
• Will always want to review competitive offerings, but will usually choose the one offering
the greatest benefit, even if there is some risk involved.
• Neutral to positive when considering technically complex offerings or offerings requiring
extensive user education.
• Usually concerned with keeping employees informed and educated, so will often consider
educational offerings.
• Strongly influenced by offerings that most closely deliver the 'end results' desired, even if
they are not the most cost effective.
• Often are on social trend bandwagons so react positively to offerings that address these
needs.

Technical Liberals - enamored with the benefits provided by high tech solutions and any purchase
decision will be biased by the technical content of the offering.

• Usually consider new products/services even if the related concept has not yet been proven
to be effective.
• Often consider just because they use a certain technology.
• Will always want to review competitive offerings, but will usually choose the one offering
the most hi-tech features, even if there is some risk involved.
• Consider themselves technically competent and will expect leading edge use of technology.
• Positive to fanatic when considering technically complex offerings even when requiring
extensive user education.
• Conversion costs usually not a major concern if technical benefits are there.
• Not particularly concerned with keeping employees informed and educated, so educational
offerings are not of great interest.
• Strongly influenced by offerings that most closely deliver the 'end results' desired, even if
they are not the most cost effective.

Self Helpers - consistently defines/designs solutions to their problems, likes to acquire tools that
help in the innovation process.

• Will usually consider new products/services, but the related concept must have been proven
to be effective.
• Often consider just because they use a certain technology that is relevant to the development
program they have underway.
• Will always want to review competitive offerings, but will usually choose the one offering
the most effective 'do it yourself' features.
 • Usually consider themselves technically competent and will expect very effective use of
proven technology.
• Not especially inclined toward technically complex offerings, would rather have user
friendly, but thought provoking, offerings.
• Conversion costs usually not a major concern if offering promises potential for innovation.
• Usually concerned with keeping employees informed and educated, so educational offerings
are of interest.

Segmentation Studies for consumer, business, and health care markets

Market Segmentation Services provides fresh, perspectives for increased customer identification,
selection, profitability, and retention.

integrated approach to brand intelligence combines the best of qualitative methods, and advanced
quantitative analytics to provide you with actionable real world results that can be used to add
customer value across your entire enterprise.
Terms for market segments:
some market segments are referred to by acronyms
List of abbreviations for market segments

Customer segments
• DINKY - Double income no kids
• SOHO - Small Office, Home Office
• VSB - Very Small Business
• SMB - Small Medium Business / SME - Small and medium enterprise
• VALS - Values Attitude and Life-Styles
• LOHAS - Lifestyles of Health and Sustainability
• LOVOS - Lifestyle of voluntary simplicity
• SAM - Segmented Addressable Market
• VLE - Very Large Enterprise

Market/product segments
• BPO - Business Process Outsourcing
• Comms - Communications Sector
• DIY - Do It Yourself market
• FMCG - Fast Moving Consumer Goods
• FSS - Financial Services Sector
• HoReCa - Hotel, Restaurant, Café
• H&LS - Health and Life Sciences
• ICT - Information & Communication Technology
• RPO - Recruitment Process Outsourcing

Market Segmentation Index:

Market Segmentation Index or Celli Index of Market Segmentation, named after the Italian
economist Celli G. GianLuca, is a measure of market segmentation. This Index, is a comparative
measure of the degree of monopoly power in two distinctive markets for products that have the
same marginal costs.The degree of market segmentation is defined as the degree of monopoly
power of the producing firm or exporting country. Higher is the average unit value (AUV) of the
same product sold in the primary market compared to the benchmark market, greater is the degree
of monopoly power in that market and therefore higher is the degree of market segmentation.

Pp/Ps = C, p ≠ s (1)

Pp and Ps are respectively the prices the producing country set in the primary market (primary
market or market of interest) Mp and the secondary market (benchmark) Ms, C is the Market
Segmentation Index (MSI), which measures the degree of segmentation of the producing country in
 the two markets. The MSI was extrapolated from the Lerner Index of market power in the form
L=(P-MC)/P in the case of multiple market segments.

Propositions

• 1 Proposition 1
• 2 Proposition 2
• 3 Proposition 3

Proposition 1
If C > 1 then a monopolist country has a higher degree of monopoly power in segment Mp than
segment Ms and therefore this country has a greater incentive to specialize in Mp.

Proposition 2
If C < 1 then a monopolist country has an lower degree of monopoly power in segment Mp than
segment Ms and therefore this country has a greater incentive to specialize in Ms.

Proposition 3
If C ≈ 1 then a monopolist country experience no difference in the degree of monopoly power
between segment Mp and segment Ms and therefore this country has no monopolistic incentive to
specialize in either markets.

From Learner Index to Market Segmentation Index (MSI)

Assumption 1:
Marginal costs for the monopolist firm are the same for every market segment
Applying Lerner index L=(P-MC)/P to two distinctive market segments we get the degree of
monopoly power in market segment Ms as Ls=(Ps-MC)/Ps and Mp as Lp=(Pp-MC)/Pp. Ps is the
price charged in Ms while Pp is the price charged in Mp.

This result confirms the validity of the Market Segmentation Index, which is a comparative measure
of the degree of monopoly power in two distinctive markets for products that have the same
marginal costs. The result says that when the price in the primary market is strictly greater than the
price in the secondary market then the Lerner's Index is higher in the primary market and therefore
the Market Segmentation Index would also be higher for the primary market.

Requirements of Market Segments

In addition to having different needs, for segments to be practical they should be evaluated against
the following criteria:
 • Identifiable: the differentiating attributes of the segments must be measurable so that they
can be identified.
• Accessible: the segments must be reachable through communication and distribution
channels.
• Substantial: the segments should be sufficiently large to justify the resources required to
target them.
• Unique needs: to justify separate offerings, the segments must respond differently to the
different marketing mixes.
• Durable: the segments should be relatively stable to minimize the cost of frequent changes.

A good market segmentation will result in segment members that are internally homogenous and
externally heterogeneous; that is, as similar as possible within the segment, and as different as
possible between segments.

Target Market:

A 'target market or target Audience is the market segment which a particular product is marketed to.
It is often defined by age, gender and/or socio-economic grouping. Market Targeting is the process
in which intended actual markets are defined, analyzed and evaluated just before the final decision
to enter is made.

Target audience:

In marketing and advertising, a target audience, or target group is the primary group of people that
something, usually an advertising campaign, is aimed at appealing to. A target audience can be
people of a certain age group, gender, marital status, etc. (ex: teenagers, females, single people, etc.)

A certain combination, like men from twenty to thirty is often a target audience. Other
groups, although not the main focus, may also be interested. Discovering the appropriate target
market(s) to market a product or service to is one of the most important stages involved with market
research. Without knowing the target audience, a company's advertising and the selling efforts can
become difficult and very expensive.

Target Audiences are set to focus on different groups: Adults, teens, tweens and
children. It is essential to become familiar with your target market, their habits, behaviors, likes, and
dislikes. Markets differ in size, assortment, geographic scale, locality, types of communities, and in
the different types of merchandise sold and because of the many variations included in a market it is
essential, since you cannot accommodate everyone’s preferences, to know exactly who you are
marketing to and the specific fondness of that market. To better become acquainted with the ins and
outs of your designated target market legend a market analysis must be completed.
A market analysis is a documented examination of a market that is used to enlighten a
business’s preparation activities surrounding decisions of inventory, purchase, work force
expansion/contraction, facility expansion, purchases of capital equipment, promotional activities,
and to improve daily operations and many other aspects of a business. Once you have done your
market analysis, in detail; describe your preferred target market. Your description should include
the information you have gathered during your market analysis.

Consumer behaviour:

Consumer behaviour is the study of when, why, how, and where people do or do not buy products.
It blends elements from psychology, sociology, social anthropology and economics. It attempts to
understand the buyer decision making process, both individually and in groups. It studies
characteristics of individual consumers such as demographics and behavioural variables in an
attempt to understand people's wants. It also tries to assess influences on the consumer from groups
such as family, friends, reference groups, and society in general.
Customer behaviour study is based on consumer buying behaviour, with the customer playing the
three distinct roles of user, payer and buyer. Relationship marketing is an influential asset for
customer behaviour analysis as it has a keen interest in the re-discovery of the true meaning of
marketing through the re-affirmation of the importance of the customer or buyer. A greater
importance is also placed on consumer retention, customer relationship management,
personalisation, customisation and one-to-one marketing. Social functions can be categorized into
social choice and welfare functions.
Belch and Belch define consumer behaviour as 'the process and activities people engage in when
searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as
to satisfy their needs and desires'.'
Contents
[hide]
• 1 Black box model
• 2 Information search
• 3 Information evaluation
• 4 Purchase decision
• 5 Postpurchase evaluation
• 6 Internal influences
• 7 External influences
Black box model
ENVIRONMENTAL FACTORS BUYER'S BLACK BOX
BUYER'S
Marketing Environmental Buyer
Decision Process RESPONSE
Stimuli Stimuli Characteristics
Product Economic Attitudes Problem Product choice
Price Technological Motivation recognition Brand choice
Place Political Perceptions Information search Dealer choice
Promotion Cultural Personality Alternative Purchase timing
Demographic Lifestyle evaluation Purchase amount
Natural Knowledge Purchase decision
 Post-purchase
behaviour
The black box model shows the interaction of stimuli, consumer characteristics, decision process
and consumer responses.[1] It can be distinguished between interpersonal stimuli (between people)
or intrapersonal stimuli (within people).[2] The black box model is related to the black box theory
of behaviourism, where the focus is not set on the processes inside a consumer, but the relation
between the stimuli and the response of the consumer. The marketing stimuli are planned and
processed by the companies, whereas the environmental stimulus are given by social factors, based
on the economical, political and cultural circumstances of a society. The buyers black box contains
the buyer characteristics and the decision process, which determines the buyers response.
The black box model considers the buyers response as a result of a conscious, rational decision
process, in which it is assumed that the buyer has recognized the problem. However, in reality many
decisions are not made in awareness of a determined problem by the consumer.
[edit] Information search
Once the consumer has recognised a problem, they search for information on products and services
that can solve that problem. Belch and Belch (2007) explain that consumers undertake both an
internal (memory) and an external search.
Sources of information include:
• Personal sources
• Commercial sources
• Public sources
• Personal experience
The relevant internal psychological process that is associated with information search is perception.
Perception is defined as 'the process by which an individual receives, selects, organises, and
interprets information to create a meaningful picture of the world'
The selective perception process
Stage Description
- Selective exposure consumers select which promotional messages they will expose themselves to.
- Selective attention consumers select which promotional messages they will pay attention to
- Selective comprehension consumer interpret messages in line with their beliefs, attitudes, motives
and experiences
- Selective retention consumers remember messages that are more meaningful or important to them
The implications of this process help develop an effective promotional strategy, and select which
sources of information are more effective for the brand.CV
[edit] Information evaluation
At this time the consumer compares the brands and products that are in their evoked set. How can
the marketing organization increase the likelihood that their brand is part of the consumer's evoked
(consideration) set? Consumers evaluate alternatives in terms of the functional and psychological
benefits that they offer. The marketing organization needs to understand what benefits consumers
are seeking and therefore which attributes are most important in terms of making a decision.
[edit] Purchase decision
Once the alternatives have been evaluated, the consumer is ready to make a purchase decision.
Sometimes purchase intention does not result in an actual purchase. The marketing organization
must facilitate the consumer to act on their purchase intention. The provision of credit or payment
terms may encourage purchase, or a sales promotion such as the opportunity to receive a premium
or enter a competition may provide an incentive to buy now. The relevant internal psychological
process that is associated with purchase decision is integration.
[edit] Postpurchase evaluation
It is common for customers to experience concerns after making a purchase decision. This arises
from a concept that is known as “cognitive dissonance”. The customer, having bought a product,
may feel that an alternative would have been preferable. In these circumstances that customer will
not repurchase immediately, but is likely to switch brands next time.
To manage the post-purchase stage, it is the job of the marketing team to persuade the potential
customer that the product will satisfy his or her needs. Then after having made a purchase, the
customer should be encouraged that he or she has made the right decision.it is not effected by
advertisement.
[edit] Internal influences
Consumer behaviour is influenced by: demographics, psychographics (lifestyle), personality,
motivation, knowledge, attitudes, beliefs, and feelings. consumer behaviour concern with consumer
need consumer actions in the direction of satisfing needs leads to his behaviour behaviour of every
individuals depend on thinking process
[edit] External influences
Consumer behaviour is influenced by: culture,sub-culture, locality, royalty, ethnicity, family, social
class, reference groups, lifestyle, and market mix factors.

Market segmentation for differnent types od products:

Industrial market segmentation
Industrial market segmentation is a scheme for categorizing industrial and business customers to
guide strategic and tactical decision-making, especially in sales and marketing. While government
agencies and industry associations use standardized segmentation schemes for statistical surveys,
most businesses create their own segmentation scheme to meet their particular needs.
While similar to consumer market segmentation, segmenting industrial markets is different and
more challenging because of greater complexity in buying processes, buying criteria, and the
complexity of industrial products and services themselves. Further complications include role of
financing, contracting, and complementary products/services.

Customer attrition
Customer attrition, also known as customer churn, customer turnover, or customer defection, is a
business term used to describe loss of clients or customers.
Banks, telephone service companies, Internet service providers, pay TV companies, insurance
firms, and alarm monitoring services, often use customer attrition analysis and customer attrition
rates as one of their key business metrics (along with cash flow, EBITDA, etc.) because the "...cost
of retaining an existing customer is far less than acquiring a new one."[citation needed] Companies
from these sectors often have customer service branches which attempt to win back defecting
clients, because recovered long-term customers can be worth much more to a company than newly
recruited clients.
Industry applications of customer attrition
ndustry applications
Financial services such as banking and insurance use applications of predictive analytics for churn
modeling, because customer retention is an essential part of most financial services' business
models. Other sectors have also discovered the power of predictive analytics, including retailing,
telecommunications and pay-TV operators. One of the main objectives of modeling customer churn
is to determine the causal factors, so that the company can try to prevent the attrition from
happening in the future. Some companies want to prevent their good customers from deteriorating
(e.g., by falling behind in their payments) and becoming less profitable customers, so they
introduced the notion of partial customer churn.
Customer attrition merits special attention by mobile telecom service providers worldwide. This is
due to the low barriers to switching to a competing service provider especially with the advent of
Mobile Number Portability (MNP) in several countries. This allows customers to switch to another
provider while preserving their phone numbers. While mature markets with high teledensity (phone
market penetration) have churn rates ranging from 1% to 2% per month, high growth developing
markets such as India and China are experiencing churn rates between 3% to 4% per month. By
deploying new technologies such churn prediction models coupled with effective retention
programs, customer attrition could be better managed to stem the significant revenue loss from
defecting customers.
Research on customer attrition
Scholars have studied customer attrition at European financial services companies, and investigated
the predictors of churn and how the use of customer relationship management (CRM) approaches
can impact churn rates. Several studies combine several different types of predictors to develop a
churn model. This model can take demographic characteristics, environmental changes, and other
factors into account.[1]
Research on customer attrition data modeling may provide businesses with several tools for
enhancing customer retention. Using data mining and software, one may apply statistical methods
to develop nonlinear attrition causation models. One researcher notes that "...retaining existing
customers is more profitable than acquiring new customers due primarily to savings on acquisition
costs, the higher volume of service consumption, and customer referrals." The argument is that to
build an "...effective customer retention program," managers have to come to an understanding of
"...why customers leave" and "...identify the customers with high risk of leaving" by accurately
predicting customer attrition.[2]
[edit] Reducing customer attrition
There are organizations that have developed international standards regarding recognition and
sharing of global best practice in customer service in order to reduce customer attrition . The
International Customer Service Institute has developed The International Customer Service
Standard to strategically align organizations so they focus on delivering excellence in customer
service, whilst at the same time providing recognition of success through a 3rd Party registration
scheme
Market segmenatation by differnent manufactures.
NOKIA:
Nokia cell phones have been arranged into four different categories, according to use, price, need
etc. The four categories are Multimedia, Business, Lifestyle and Connect and each category
contains several different phone models. Here for this exercise, I shall evaluate these different
business units in relation to the 4Ps model of marketing.
1) In what way are the 4P issues different in Nokia's different mobile phone business units?

The business units were created as a means of product segmentation. Each of these units caters to a
different market segment and has a different target audience. Concerning product development,
each of these units sets out from a different starting point. The business phone development unit
would not consider appearance and fashion-forwardness as its first priority; it would prioritize
connectivity (as in internet connections, WAP, Bluetooth etc.) and time management applications
such as the calendar. That is not to say that business users are not interested in the appearance of
their phone, but when choosing which they want to pay for, appearance or functionality, they
choose functionality. Therefore, developing the functions that business users use is more important
for the E-series product development than the N-series, which is targeted at an audience of young
users who want to use their phones to connect to the "wireless world" and also as a multimedia unit
which allows seamless use between the phone and the pc. The business unit phones are most likely
to be priced according to the value-based method, because most of these users are not buying it for
status or psychological reasons. They need it in their work and therefore are willing to pay a price,
even if it is higher, to make working easier. Also often business phones are paid for, at least in part,
by the employer which allows for a bit higher price. Business phones can be distributed in slightly
different ways than normal...

examples of different types of segmenatation

1.Geographic segmentation:
It is well known that people with similar demographic and psychographic characteristics tend to live
nearby, for example, in suburbs, counties, shires, states, regions, countries, etc. People living within
the same geographical boundaries often exhibit similar buying patterns. This is in part due to
similarities in demographic and psychographic characteristics of residents. This phenomena is
further enforced by local weather, environment, and cultural differences. Segmenting markets along
geographical boundaries can lead to more specialized and focused marketing approaches.
Geographic segmentation can use the following information;
• National census data: National census includes various demographic and psychographic
information on residents of geographical segments: median income, age, education, and so
on. National census information is available from;
• United States: http://www.census.gov/
• United Kingdom: http://www.statistics.gov.uk/
• Australia: http://www.abs.gov.au/
• New Zealand: http://www.stats.govt.nz/
• Canada: http://www.statcan.ca/
 • India: http://www.censusindia.net/
• Geographic Information Systems (GIS): These are digital mapping systems containing
geographic data allowing manipulation of data. Certain geographic information may be used
in segmentation. For example, average temperature, rainfalls, and so on. More important use
of GIS system is plotting results of geographic segmentation on a map so that important
geographical clusters can be identified.
• Customer behavioral information: Customer density, past purchasing behaviors, and
products they bought can be added to geographical segmentation processes.

Examples of Geographical Segmentation

Geographical segmentation can be used for various purposes. The followings are geographic
segmentation examples;
• Shop outlets: Locations for new shop outlets can be identified.
• Advertising: Areas for advertisement can be identified. Segmentation can also reveal
information for advertisement media.
• Product selection: Different geographic segments have differing consumption patterns.
Introducing different products for different geographic segment can bring more sales!
• Military recruitment: Military recruits have certain demographic attributes. Focusing on
geographic segments with such profiles, military can find new recruits more efficiently.
• Catalog sales: In catalog sales direct marketing, generally demographic information of
customers is not available. Census information derived from geographic data can be used to
develop better customer segmentation and predictive models.

Trend Analysis and Monitoring for Geographic Segmentation

Geographical segmentation can be applied to Trend Analysis and Monitoring. For example, the
following report shows segment trends for profits and revenues. Replacing the "Segment" variable
with geographic regions, sales revenue trends by geographic segments can be monitored;

Geographic Segmentation Techniques and Methods

Geographic segmentation is mainly used for mass marketing, as opposed to one-to-one marketing.
(Note that one-to-one marketing techniques are described in Database Marketing and Direct
Marketing.) The sole purpose is to identify geographical segments that have similar properties as
the ones that sell well. To this end, customer profiling and neural clustering techniques can be
applied;
• Customer Profiling
Profiling customers (or equivalents) can be used to identify geographic segments. First,
develop profiles from customer profiles. If there is no customer profile database readily
available, survey may be used to collect profiles. Then use the profiles to identify cities and
suburbs from census and GIS systems.
• Neural Clustering
 Census and customer data can be merged along geographic variables, for example, zip code.
Then combined information can be used to neural clustering tools to obtain geographic
segmentation. Geographic segments that belong to the same clusters with the ones that sell
well, will be the segments for marketing focus, since they have the similar properties as the
one that sell well!
Demographic Segmentation
Demographics originates from the word ‘demography’ which means a ‘study of population’. The
population can be divided into age, gender, income, and family lifecycle amongst other variables.
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. Gender segmentation is commonly used within the cosmetics, clothing and magazine industry.
All Bar One within the UK have developed their bars to attract the female audience, taking
opportunity of the rise in the number of women who now enjoy ‘social drinking’. In the UK we
have also seen the introduction of Maxim, (www.maxim-magazine.co.uk) a male lifestyle
magazine covering male fashion, films, cars, sports and technology. We have also seen the
introduction of unisex cosmetic products like CK1 which works on the similarities between the two
genders.

Age & lifecycle segmentation: As people age their needs and lifestyles
change.

Income segmentation is another strategy used by many organisations. 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. In today's globally competitive
environment brands are specifically developed and positioned within particular income segments
inorder to maximise turnover.
Products and services are also aimed at different lifecycle segments. Holidays are developed for
families, the 18-30's singles, and for those in their 50's.

market segmentation - behavioural segmentation

Behavioural segmentation divides customers into groups based on the way they respond to, use or
know of a product.
Behavioural segments can group consumers in terms of:
Occasions
When a product is consumed or purchased. For example, cereals have traditionally been marketed
as a breakfast-related product. Kelloggs have always encouraged consumers to eat breakfast cereals
on the "occasion" of getting up. More recently, they have tried to extend the consumption of cereals
by promoting the product as an ideal, anytime snack food.
Usage
Some markets can be segmented into light, medium and heavy user groups
Loyalty
Loyal consumers - those who buy one brand all or most of the time - are valuable customers. Many
companies try to segment their markets into those where loyal customers can be found and retained
compared with segments where customers rarely display any product loyalty. The holiday market is
an excellent example of this. The "mass-market" overseas tour operators such as Thomson,
Airtours, JMC and First Choice have very low levels of customer loyalty - which means that
customers need to be recruited again every year. Compare this with specialist, niche operators such
as Laskarina which has customers who have traveled with the brand in each of the last 15-20 years.
Benefits Sought
An important form of behavioural segmentation. Benefit segmentation requires Marketers to
understand and find the main benefits customers look for in a product. An excellent example is the
toothpaste market where research has found four main "benefit segments" - economic; medicinal,
cosmetic and taste.
Psychographic

In the field of buzzwords, marketing, demographics, opinion research, and social research in
general, psychographic variables are any attributes relating to personality, values, attitudes,
interests, or lifestyles. They are also called IAO variables (for Interests, Activities, and Opinions).
They can be contrasted with demographic variables (such as age and gender), behavioral variables
(such as usage rate or loyalty), and firmographic variables (such as industry, seniority and
functional area).
Psychographics are often confused with demographics. This confusion can create fundamentally
flawed definitions. For example, historical generations are defined by psychographic variables like
attitudes, personality formation, and cultural touchstones. The traditionally defined "Baby Boom
Generation" has been the subject of much criticism because it uses demographic variables where it
should be using psychographic variables. While all other generations are defined by psychographic
variables, the old Boomer definition is based on a demographic variable—the fertility rates of its
parents.
When a relatively complete profile of a person or group's psychographic make-up is constructed,
this is called a psychographic profile. Psychographic profiles are used in market segmentation as
well as in advertising.
Some categories of psychographic factors used in market segmentation include:
• Activity, Interest, Opinion (AIO)
• Attitudes
• Values
Psychographics can also be seen as an equivalent of the concept of "culture" as used most
commonly in national segmentation.
Media Mark intelligence group(MRI)MRI offers twenty-one consumer segmentations – derived
from the Survey of the American Consumer – which provide marketers with actionable insight into
consumer attitudes and behavior. MRI's segmentations cluster consumers into distinct groups based
on their answers to corresponding batteries of attitudinal questions.
Marketers can use these consumer segmentations to fine-tune their targeting, enhance their
customer profile, or uncover new growth opportunities. Marketers can also partner these
segmentations with demographic and behavioral data to refine marketing strategies and campaigns.
Through MRI, proprietary segmentations can also be custom-designed based on a marketer's unique
needs.
MRI’s 22 psychographic segments include:
• Banking Methods looks at four styles of transactions with banking institutions.
• Buying Styles focuses on different methods and styles of shopping.
• Civic & Political Engagement helps marketers understand the dynamics and motivations of
American adults not just as consumers--but also as citizens.
• Consumer Innovators identifies early adopters of new products.
• Cooking & Food Shopping looks at the cooking of food and the shopping that goes along
with it.
• Diet Control groups consumers based on their various approaches to diet.
• Doctors & Healthcare identifies two consumer groups: those who regularly go to the
doctor… and those who do not.
• Eating & Nutrition explores the relationships consumers have with food and how it fits into
their daily lives.
• Greenevaluates the values, attitudes and behaviors underlying consumers’ relationship with
the environment.
• Interest in Automobiles identifies automotive enthusiasts- the people other people come to
 for advice about cars.
• LeisureStyles looks at the different ways people use their personal time.
• LifeMatrix groups consumers according to lifestyle, values, and life stage.
• Technology focuses on the different ways consumers relate to technology.
• Market Involvement & Savings examines consumers’ attitudes toward money.
• Media Attitudes groups consumers based on how they value various medium – television,
radio, newspapers, magazines, and the Internet.
• Medicine & Drugs groups consumers based on their approach to medical treatment and
remedies.
• Money Borrowing identifies consumers based on their attitudes toward borrowing money.
• Newspaper Readers looks at the different ways American consumers use newspapers in their
daily lives.
• Preferred Automotive Characteristics isolates consumers based on their attitudes towards
automotive characteristics.
• Responsiveness to Ads Across Mediaclassifies consumers according to their interest in
advertising across different media.
• Travel Planning explores how different groups of travelers plan their trips.
• Vacation Preferences focuses on the different ways people approach “enjoyment” while on
vacation.
Time Segmentation
Time segmentation is less common but can be highly effective. Some stores stay open later than
others, or stay open on weekends. Some products are sold only at certain times of the year (e.g.,
Christmas cards, turkeys, fireworks, cranberry sauce). Chili is marketed more aggressively in the
fall, with the onset of cooler weather. Football is played in the fall, basketball in the winter and
spring, and baseball in the spring and summer (or at least this used to be the pattern). The Olympics
come along every two years. Department stores sometimes schedule midnight promotional events.
The time dimension can be an interesting basis for segmentation. In addition to the foregoing,
markets can be segmented by hobbies, by political affiliation, by religion, by special interest groups,
by sports team loyalties, by universities attended, and hundreds of other variables. You are only
limited by your marketing imagination.
Distribution Segmentation
Different markets can be reached through different channels of distribution. For example, a
company might segment the “tick and flea collar” market by selling the product to supermarkets
under one brand name, to mass merchandisers under another brand, to pet stores under another
brand name, and to veterinarians under yet another brand name. This type of distributional
segmentation is common, especially among small companies that grant each channel a unique brand
to gain distribution within that channel. Other examples of distributional segmentation would be an
upscale line of clothing sold only in expensive department stores, or a hair shampoo sold only
through upscale beauty salons.
Media Segmentation
While not common, media segmentation is sometimes a possibility. It is based on the fact that
different media tend to reach different audiences. If a brand pours all of its budget into one media, it
can possibly dominate the segment of the market that listens to that radio station or reads that
magazine. Media segmentation is most often practiced by companies that have some control over
the media and can somehow discourage competitors from using that media.
Price Segmentation
Price segmentation is common and widely practiced. Variation in household incomes creates an
opportunity for segmenting some markets along a price dimension. If personal incomes range from
low to high, the reasoning goes, then a company should offer some cheap products, some medium-
priced ones, and some expensive ones. This type of price segmentation is well illustrated by the
range of automotive brands marketed by General Motors historically. Chevrolet, Pontiac,
Oldsmobile, Buick, and Cadillac varied in price (and status) along a clearly defined spectrum to
appeal to successively higher income groups.
Analytical Methods
Most segmentation analyses are based upon various types of “cluster analysis,” a set of well-defined
statistical procedures that group people according to the proximity of their ratings. Unfortunately,
cluster analysis (regardless of its many types and forms) has inherent limitations and seldom yields
coherent market segments. Cluster analysis routines ignore the pattern of respondent ratings and
rely primarily upon the proximity of respondent ratings. Too often this leads to clusters, or market
segments, that don’t seem to make much sense when crosstabulated against the original
segmentation variables. Another limitation of clustering approaches is that all statements are treated
as equal; whereas, in truth, some statements might be much more important than others in
explaining consumer behavior in a particular product category.
A better way to achieve a good psychographic segmentation is to first identify the statements that
are more important (i.e., the statements that tend to explain or cause specific consumer behaviors).
Correlation analysis and regression can be used for this purpose. Factor analysis is also a powerful
technique to identify the statements and groups of statements that account for much of the variance
in the attitudinal data set. Directly and indirectly, these techniques can help you identify the most
important statements (i.e., attitudes, perceptions, values). Then, these statements become the inputs
to the final segmentation analysis. Many different methods can be used to “cluster” or group the
statements at this point. The final step is to attach a segment code to each market segment identified
and then crosstab all of the questionnaire variables by the segments. You must then study the
segments and the attitudes/statements that make up each segment to make sure they make sense and
hang together. If the segmentation results don’t make sense, then you have to go back, change some
of your assumptions or methods, rerun the analysis, and repeat the crosstab exercise to apply the
“common sense” validity check.
Nonmutually Exclusive Segments
Virtually all segmentation work, historically, has been based upon the assumption of mutually
exclusive market segments. The mutually exclusive model, however, does not always apply to
psychographic or lifestyle segmentation (since most of us hold many overlapping and/or conflicting
beliefs and attitudes). Therefore, it is wise to develop two distinctly different segmentation
solutions: one based upon mutually exclusive segments and one based upon overlapping segments.
Both of these segmentation “solutions” should be crosstabulated by the original questionnaire
variables to identify which type of solution yields the most meaningful (and actionable) market
segments.
Market Segmentation Theory
The Market Segmentation Theory is one of the various theories that are associated with the yield
curve. It is also known as the “segmented market hypothesis”. The Market Segmentation Theory
tries to describe the relation of the yield of a debt instrument with its maturity period.

The Market Segmentation Theory explicates the reasons behind the prominence of normal yield
curves over the other forms of yield curves.
Contention of Market Segmentation Theory
According to the Market Segmentation Theory the financial instruments that have separate term
periods cannot be replaced with one another. This means that the demand as well as supply of debt
instruments having long term periods and short term periods in the financial markets is ascertained
separately.
Choices of Investors
The choices of investors are an important part of the Market Segmentation Theory. According to
this theory the investors need to make their choices beforehand. It has been seen that the investors
normally want to invest in debt instruments that have shorter term periods.

The main reason behind this is that the investors like to have investment portfolios that have a
certain amount of liquidity. The short term debt instruments provide them with that luxury. Thus
according to the Market Segmentation Theory the financial market that deals in debt instruments of
shorter terms would experience more demand.

As per the Market Segmentation Theory if a particular debt instrument has higher demand it is
supposed to cost more. The yield from the same would be relatively low. The fact that the yields of
short-term debt instruments are lower than that of the long-term debt instruments could be
understood from this explanation.
Market Segmentation Theory Facts
In the United States of America the yield curve of the dollar was reversed in the later stages of 2005
and early period of 2006. The yields of the short-term debt instruments were more than that of the
long-term debt instruments. This could be explained by the Market Segmentation Theory.

As per the Market Segmentation Theory the investors might have preferred the long term debt
instruments over the short term debt instruments and this could have contributed to the higher yields
of short-term debt instruments over long-term debt instruments.
Marketing Segmentation strategies used by Cadbury's and Titan
CADBURY’S DAIRY MILK

Right now Cadbury’s new advertisement campaign is doing the rounds over the television. “Meetha
hai khana,aaj pehli tareek hai” is the tagline that the chocolate-giant has come out with. It tries to
bring forth the excitement, which lies in the minds of the general public as they wait for the first
date of each month on the calendar. The monthly salary stashed in their hands enables them to
celebrate and rejoice by spending it on Cadbury’s Dairy Milk.

Cadbury’s Dairy Milk has come out with such memorable ad-campaigns, which settled into the
hearts of everyone.

The story starts with “Once upon a time in 1948…” when Cadbury entered the Indian market. It
originated from a town in the United Kingdom, Bournville(also the name of its recently launched
high-end chocolate) in 1905.
As the Cadbury’s official web site suggests, its journey in India has been an eventful one. In the
early 1990s, it tried to cater to the sweet tooth of the children. Those days they steered the market
and took control over the company’s major market share. However, the strategy changed by letting
out the secret that “everyone has a child inside “ and thus everyone craves for the taste of chocolate.
Cadbury strategies went through a considerable change. It now catered from children to adults and
from chocolate to mithai. As the tagline goes “Khane walon ko kahne ka bahana chahiye”.

The hole-in-one for the company was when it identified sweets to be a very integral part of the
Indian culture. It made sure that the festive and jubilant moods of the society that had paved the
way for kilos and kilos of mithai, now made way for a large number of Cadbury’s.
Meetha did to Cadbury’s what thanda had done for Coco-Cola. Both helped them crawl their ways
through into hearts of the rural population of the country, which had an untapped and astounding
potential.
The advertisement campaign of Amitabh Bachchan, dressed up as a villager, proudly announcing
that his “daughter-figure” won beauty contests for cattle, brought out the laughs and struck a chord
with the same segment of people.
Later came the campaigns of “Pappu paas ho gaya” acknowledged the market potential for college-
going youth. The treats for passing exams were now a Cadbury instead of a mithai.

With Kuch Meetha Ho Jaye, we knew Cadbury’s was now a desert craving as well as a popular gift-
item for festivals such as Raksha Bandhan and Diwali. Cadbury’s also diversified its range of
products with Wowie(with Disney characters for kids),Crackle, Fruit and Nut(variations of the
Dairy Milk),Bournvita(health drink)Deserts,Perk(wafer ingredient) and éclairs(toffee segment).
Cadbury’s today holds 30 per cent markets share in the confectionaries industry and sells around 1
million bars a day.
TITAN wristwatches

Titan entered the Indian market of wristwatches in 1984, at a time when HMT watches were
enjoying a monopoly-situation.
The venture took birth from the TATA group and today is India’s market leader in wristwatches
and the sixth-largest watchmaker in the world.
The constant innovation and effective market segmentation has been the great boon of the company.
Today the company has a model for every price segment and every market.
Initially when the mechanical technology was the norm, Titan went against the tide and built-up its
line with Quartz.
Styling was not a factor initially with the Indian watch industry but Titan was there to make a
difference and gave a fresh breath of life to the age-old rusty style of wristwatches.
Titan is also capturing the rural market very efficiently. Its price range starts from
Rs.475-1200 for the basic consumers. It has also appointed Mahendra Singh Dhoni(himself
belonging to Ranchi) as the brand ambassador of its Sonata collection to reach out to the rural
population. On the other hand, his counter-part Aamir Khan was capturing the minds of the urban
segments.
It brought out the Aqua, a trendy collection for the youth.
Raga was for the sophisticated Indian woman. This was a significant move as the women were now
more liberal in the society and the corporate culture was establishing its roots in India. The needs of
women throughout the nation were changing and the brand was aimed to cater these very needs.
Dash for the kids segment.
Sonata for the masses and the budget-conscious.
Fastrack for the cool and funky fetishes of the youth while Insignia, Steel and Nebula were all
aimed at the luxury watches segment.
Segmentation strategies used by airtel:
Focusing its attention towards youth, women and senior citizens, cellular service provider Airtel
today unveiled its new market segmentation strategy by introducing new pre-paid and post-paid
plans. The new plans offer lower call rates, more value-added services and attractive payment plans.
Hoping that the new plan would add to its revenue and further increase its penetration in new
segments of mobile users, the company said while "Friendz" pre-paid plan was focused at younger
generation, the two new post-paid plans were for women and senior citizens with tailor-made
features as per their specific requirements.
According to Atul Bindal, Chief Marketing Officer and Director (Mobility), Bharti Cellular Ltd.,
the new offerings were being introduced in 20 circles.
Mr. Bindal said "Friendz" pre-paid connection would attract those between 15-19 years of age that
had several interesting features.
Similarly, the "Ladies Special" plan was to allow more and more women to use mobile phones that
had become a necessity today, said Mr. Bindal, adding that the new scheme would give them
special discounts. The plan also offers women the option to club the monthly bills with that of their
spouses. And for those who are above 60 years of age, Airtel has new post-paid plan, Seniors,
where subscribers get discount on one STD number and one local Airtel number. Besides,
subscribers of this plan would get special discounts for health check-ups and would have a facility
to club bills with that of their children, Mr. Bindal added.
Segmentation stratagies used by nike:
.Market segmentation is an essential part in today's business world. It is because not all customers
have the same requirement and a market strategy which does not recognize this fact will result
business failure. Market segmentation is the process of splitting customers, or potential customers
within a market into different groups, or segments, within which customers have the same or similar
requirements satisfied by a distinct marketing mix. Nike has been successful in market
segmentation for selling their soccer boots, which resulted in a significant market share in that
particular product category in recent years...
...Professional soccer players include all the players playing football as their career. This segment
is ranging from the players in the top of the world to those who are hardly recognized by people.
Their needs for soccer boots is high, most probably the highest in the market. They need soccer
boots which can enhance their performance: comfortable when running on the field and playing
football and provide them with good ball control. Price is not a major factor for them when
choosing a pair of soccer boots, because they are either having a high salary or they are sponsored
by their clubs or even the manufacturers of soccer boots. What they need is a pair of high quality
soccer boots which is a combination of well design and good materials...
...The price of the boots showed that Nike's major target customer groups are those on a high
income level, or those who are willing to spend on expensive items. So the ranking of the
professional and amateur soccer players are high on the KCV table. The need of a pair of good
quality soccer boots in the two groups is high and price is not their major considerations. Young
people is also a main target customer group for Nike because the brand has been developed into a
famous one and it is well-known for it high price and style. Nike's footwear is said to be an
expensive goods today. Consumers like the young people, who emphasis much on brand and
identity is more likely to choose Nike...
Market segmenatation of cars:
in india:Marketing Practice Reader Krishnan asks this question :
"Is Indian automobile market (car) driven by family ? Is family influence more when someone buys
a small car or a sedan ?"

The answer to the first question is both Yes & No. The major segment in the Indian car market is
driven by family. This is because of the current state of Indian automobile market. The market is
still evolving .

During the initial stages , every market will be unsegmented . But as the market matures, segments
evolve. Marketers devise new methods /variables to segment the market. In the car market also, we
had the market dominated by the family segment. The first attempt to segment was by Tata Sierra
which tried to bring in the SUV segment. But the market was not ready to accept that product.

Indian car market is predominantly family oriented. In the developed market, we can see different
family members owning different types of cars. One of my colleagues say that a typical American
family will have a small car/office car , an offroader( or a truck) and a sedan . Our market is still to
evolve to that stage. Still for most of us, cars are a luxury rather than a mode of transportation.

Hence , here the primary segmentation was based on the price of the car and also the nature of the
car. So we have A segment, B segment, D segment etc and segments like MUV, SUV, Sedan,
Hatchback ,small car etc .
The dominant segment ( small car/ hatchback) is driven by family. So the entire family takes part in
deciding the purchase of the car. The major determinants being the size of the family, price, cost of
maintaining like mileage , brand , type of car etc.

The buoyant economy and the emergence of neo-rich class has changed the dynamics at the upper
end of the market. I know families which own more than 3 different types of cars to serve different
purposes. In the case of such affluent family, the purchase considerations are different.

My feeling is that the launch of Tata Nano will also see some change in the way Indian car market
is segmented. Now even middleclass can afford to have more than one cars. And cars may move
from a luxury product to a mode of transportation.

In briitish:
f we wished to segment the British car market, we would need to take into account a whole series of
variables and factors. The first part of this paper shows in list (linear) form, some of those variables
and factors. The second part of the paper is concerned with presenting the car market information
in mind map format.

As we will see, we can segment the British car market in terms of whether the car being sold is a
new or a used (second hand) car; whether the car is being provided for the Fleet market, the
Business market or for the Private market? We can further segment the market in terms of the kind
of car are we selling: a mini, a supermini, a lower medium sized car ...

Read through the listing of the segments first and then consider the mind map that you will find in
this paper. If you are unsure of what a mind map is there is a page on this site relating specifically
to them: go to the paper and have a read; but don’t forget to come back here if you need to!

Overall:

British Car Market

Segment 1

New
Used

Segment 2

Fleet
Business
Private
Segment 3: Classification Examples

Mini Rover Mini, Fiat Cinquencento

Supermini Ford Fiesta, VW Polo
lower medium Alfa 33, Renault 19
upper medium Peugeot 405, Nissan Primera
Executive Mercedes 190, Honda Legend
Luxury BMW 7 Series, Lexus LS400
Sports Porsche 911, GM Calibra
utility & other Renault Espace, Mitsubishi Shogun

Segment 4: Domicile of manufacturer

Home
Import

Segment 5: Manufacturers

BMW
Fiat
Ford
GM
Mercedes
Nissan
Peugeot Citroen
Renault
Rover
Toyota
Volkswagen
Other

Segment 6: Retailers

Franchise
Independent
Large
Medium
Small

market segmenTATION of nescafe:

Power root
It would seem that a Chinese company has managed to corner the Malay coffee market indicates the
power of segmentation. The Power root company has used a powerful marketing mix that decided
to focus on the Malay (largest segment in Malaysia) by introducing a host of products that uses the
Tongkat Ali and Kacip Fatimah ingredients to differentiate themselves from the Market Leader -
Nestle with thier flagship product Nescafe.

It would seem that the promotional mix was also a key factor that allowed Ali Cafe / Power Roor to
catch up with the market leader and establish itself as a true Malay based company - it used the
celebrity endorsements (local stars and singers - very very cheap). The had also decided to FOCUS
on 2 segment only - Malay Male and Malay Female - excellent move.

Now if we look at the market leader - what is their approach to the situation:

The have a one now one nescafe campaign - very catchy but then it tells people to drink coffee
since nescafe is another name for coffee now.

The kickstart campaign - aimed at catching the teens - lost cause since the cost involved does not
generate the loyalty required, especially since the younger generation now consider Nescafe is an
older generation drink (same situation faced by Coke-Cola when Pepsi attacked it)

The range of new products that have been launched under the nescafe brand name

- coffee powder

+ original

+mocha

+gold

+premium

- can coffee drink

+host of others that just to complicated to go on with

- 3 in 1 coffee mixes
+rich

+light

+ breakfast +++

Now this is getting pretty confusing to the customers already.

What else is happening to our leader?

They are being beaten by tradition - Aik Choong Coffee is using tradition to win back the Chinese
market segment in a big way

From my point of view the marketing guys in Nestle are really hoping that the Brand is the power
behind thier success - NOPE its the marketing peoples skills in promoting an idea that is important
not the brand - the brand is the car, the driver is the marketeer.
You don't take a Ferrari to race in the Paris-Dakkar championship - you get the right car for the the
right road = Get the right brand for the right segment.
I suppose that in the long run, Nescafe is going to loose thier leadership in the market as the smaller
players break the market into smaller chunks and eat away.
You know why this always happen to the leader - EGO based decisions rather then using PURE
MARKETING KNOWLEDGE.

Market segMENTATION used by pizza hut:

Pizza Hut Inc. has become the first pizza chain to offer both text messaging and mobile Web
ordering options on a nationwide basis.
The Dallas-based company's "Total Mobile Access" service adds a mobile component to online
ordering, which is already one of the most popular segments of Pizza Hut's business. The news
comes less than two weeks after rival Papa John's announced a texting promotion for the Super
Bowl, a major pizza-consuming occasion (see story).
"It's critically important for Pizza Hut to be where our customers are," said Bernard Acoca, digital
marketing director for Pizza Hut.
rom online ordering to text and mobile access, consumers are increasingly seeking faster and more
flexible ways to access our restaurants," he said. "It's important for us to offer new and exciting
ways for our customers to order from Pizza Hut."
Pizza Hut is using Internet ordering software and service firm QuikOrder Inc.'s ClickOrder product
to help with its mobile efforts. The Chicago company was last year awarded a patent for its
Favorder one-click ordering technology -- Amazon has a patent for one-click online checkout -- via
Web sites, mobile phones and PDAs.

American pie
The Internet is the starting point for Total Mobile Access. Consumers log on to the site at
www.pizzahut.com to create their Pizza Playlist, a compilation of up to four favorite orders. They
also enter their payment information. Once registered, they can order either through text or mobile
Web.
The text message process requires a couple of steps. Consumers simply text an order to 749488
(749HUT) and then receive a confirming text from Pizza Hut.
Those with a Web-enabled mobile phone can order directly from the Pizza Hut mobile site. That
site will be automatically modified to fit a phone's screen. As expected, the mobile site has a simple
menu with a popular orders listing and a store locator.
The Pizza Playlist can also include Pizza Hut's latest offering -- Pizza Mia, a low-priced pie for $5
that is topped with whole milk mozzarella cheese with a hint of cheddar and sauce from California
tomatoes on dough made from Great Plains flour.
Total Mobile Access is currently offered to U.S. consumers.
Pizza Hut has worked out how to route mobile orders to the local Pizza Hut restaurant for
fulfillment.
"We have an extensive infrastructure in place that recognizes customers' cell phone numbers and
attaches that number to their online registration," Mr. Acoca said.
Papa John's currently offers national text ordering and national online ordering, but not the
nationwide mobile Web option. Domino's offers national mobile Web ordering and national online
ordering, but not the nationwide text option.

Market research supported Pizza Hut's latest foray.

"Our audience wanted a mobile option that was user-friendly and convenient," Mr. Acoca said.
"Pizza Hut's Total Mobile Access -- encompassing online, text and mobile ordering -- does just
that."

WILL THE SEGMENTATION WORK?

By whatever means the segmentation is arrived at, be it by judgement, by classifying the database
or by statistical techniques, the segments must pass a three-question test:
Are they truly different in a meaningful way? If not then they are not a segment and should be
collapsed into one of the others. In determining, if and how segments differ from one another, it is
helpful to give each a characterising nickname i.e. price fighters, range buyers, delivery buyers and
whatever else suits. The name will ultimately become the shorthand description used in the
company that immediately identifies the customer typology.
Are the segments big enough? If they are not, they will require too much resource and energy.
Can companies be easily positioned in one or other of the segments; especially new and potential
customers, for otherwise the segments cannot grow? A company cannot be in more than one
segment. This is unlike consumer segments where one week I may fit into an airlines business class
segment and another week fit into low cost.
Market Segmentation Analysis

What is Market Segmentation Analysis?

Market segmentation analysis provides a comprehensive examination of the contraceptive market,

identifies current roles of various sectors with respect to consumer groups, and helps determine how
roles need to change to achieve contraceptive security. Specifically, market segmentation analysis
helps to do the following:

• Identify consumer groups and the characteristics that define them, such as age, education,
residence, socioeconomic status, parity, work status, and health insurance coverage;
• Define provider groups (e.g., the public sector, the commercial sector, nongovernmental
organizations (NGOs), and social marketing programs); and
• Understand consumer-provider interaction by addressing the following questions:
- What is the socioeconomic and demographic profile of those who depend on the public
versus the private sector for their family planning (FP) needs? Who supplies contraceptives
to whom? Do the nonpoor benefit from free public sector services? Does use of the two
sectors vary by age (i.e., are youth more likely to use private sector services)?
- What are the methods used by those who obtain contraceptives from the private versus
public sector? For example, is the public sector the primary provider of re-supply methods?

Why Is Contraceptive Market Segmentation Analysis Important?

In many countries, contraceptive users—regardless of their ability to pay—rely heavily on free or

subsidized products made available by the public sector. In particular, significant proportions of
better-off clients obtain subsidized contraceptives from Ministry of Health (MOH) facilities rather
than pay out of pocket in the commercial or NGO sector. The reliance of able-to-pay consumers on
subsidized products poses a severe challenge to
achieving contraceptive security, especially in the face Figure 1: Socioeconomic
of declining contraceptive donations and scarce public Profile of MOH Family
sector resources. Reducing better-off consumers’ Planning Clients in Nicaragua
dependence on the public sector and ensuring that the
needs of vulnerable and priority populations are met in
the absence of donor assistance requires targeted public
sector services and greater involvement of the
commercial sector in the contraceptive market. A
market segmentation analysis is a necessary first step
toward this end—it provides a complete analysis of the
contraceptive market, identifies current roles of
different sectors, and helps determine how those roles
need to change to achieve contraceptive security.
Why Is Contraceptive Market Segmentation Important in Advocating for Contraceptive Security?

A market segmentation analysis yields clear and concrete information and data about problems and
deficiencies in the contraceptive market. It highlights, with user-friendly graphs and tables, key
issues that a country needs to address to move toward contraceptive security. Such issues and
supporting data may include the following:
• Public sector resources benefit those who can afford to pay. Able-to-pay clients should be
redirected to the private sector. For example, as Figure 1 from a recent market segmentation
analysis shows, 45 percent of those who receive contraceptives from the MOH in Nicaragua
belong to the fourth and fifth socioeconomic quintiles; by contrast, only 30 percent of MOH
clients belong to the two lowest quintiles.

• The public sector needs to target its scarce resources to the most vulnerable groups, such as
populations in remote rural areas and the indigent and poor. In Nicaragua, for example, only
30 percent of its clients are poor. The MOH should focus its efforts on increasing the
proportion of poor clients that it serves.

• It is essential to mobilize the private sector to serve current and potential users. In
Nicaragua, at least 45 percent of MOH clients are in the top two income quintiles and should
therefore be redirected to the NGO and commercial sectors to free up MOH resources to
serve the poor and needy.

• Social security institutes need to play a more

significant role in the provision of contraceptives; Figure 2: Sources of
family planning users with social security Contraceptives for Social
coverage currently rely disproportionately on the Security Beneficiaries: Peru
MOH. As Figure 2 from the Peru market
segmentation analysis shows, 45 percent of social
security beneficiaries receive their contraceptives
from the MOH. However, as contraceptive
donations decline, the MOH needs to consider
ways to shift the responsibility for serving eligible
clients back to social security health providers.
Using market segmentation data to make the case
to both the MOH and social security institutes can
be effective for advocacy purposes.

How is a Contraceptive Market Segmentation Analysis

Conducted?

The market for FP services includes contraceptive methods, consumers, and providers.
Contraceptive methods include both modern and traditional methods. Consumers are defined as
women of reproductive age (15 to 44 years), including those using a modern contraceptive method
and those with an unmet need for family planning. Providers are defined as government and private
for-profit (commercial sector) and not-for-profit (NGO) entities. The way in which the various
components of the FP market fit together is referred to as the FP market structure.

An important element of the analysis calls for establishing households’ ability to pay for family
planning services, which requires creation of a standard of living index (SLI) that allows
households to be ranked from poorest to richest. The SLI is defined in terms of whether or not a
household possesses certain assets and household amenities, such as electricity, roof material, wall
material, refrigerator, television, automobile, radio, and other amenities. Factor analysis is the
quantitative method used to create the SLI.

Household data are then used to divide the population into five SLI quintiles, with the poorest group
consisting of women from households with the fewest assets and the richest group comprising
women from households with the most assets. These groups provide the basis for (1) tabulating
socioeconomic and demographic characteristics such as age, education, parity, and place of
residence across the five SLI quintiles; (2) comparing method use and provider sources across the
SLI quintiles to determine the extent of differences across groups; and (3) creating market segments
based on socioeconomic characteristics, method use, and provider sources across quintiles by urban
and rural areas.

What Countries Have Conducted Market Segmentation Analyses?

Many countries, including Bangladesh, Bolivia, Egypt, Ethiopia, Honduras, Jordan, Kenya,
Madagascar, Morocco, Nicaragua, Paraguay, Peru, Philippines, Romania, Turkey, and Ukraine,
have conducted market segmentation analyses.

For example, Turkey conducted a market segmentation analysis with support from the MOH, the
U.S. Agency for International Development (USAID), and partners. The analysis identified current
and potential market niches for the private sector. A workshop on public-private partnerships helped
integrate the private sector into a policy dialogue about the contraceptive financing challenge and
encouraged pharmaceutical companies to view the public sector’s supply needs as a new market.
The information from the market segmentation analysis also helped the MOH advocate successfully
with the Ministry of Finance to increase contraceptive financing such that the MOH budget for
contraceptives saw a substantial increase in 2002.

Kenya recently completed a contraceptive market segmentation analysis (POLICY/Kenya

presentation, 2005). Findings showed that only about 12 percent of urban and rural clients from the
lowest income group use modern contraceptives as compared with over 40 percent among the
wealthiest clients. The majority of the poorest relied on the public sector for contraceptive services
and supplies. The analysis also identified significant leakage of benefits, with two out of every five
among the wealthiest obtaining their contraceptives from the public sector. The Kenya analysis will
be used in policy dialogue among key partners and stakeholders, including members of the new
government, to build commitment to reform and to implement the country’s existing waiver and
exemption policies for more effective targeting to the neediest sectors of the population.
CHOOSING SEGMENTS TO WORK WITH
By plotting the different segments on an X Y grid it is possible to determine which are worth
targeting and, equally important, which are not. The two factors that influence this decision are the
attractiveness of the segment against the supplier’s competitive position within that segment. In this
way it is possible to identify targets that justify resources in targeting and development. In the
example below it may be thought that the price fighters offer no margin and are not worth targeting,
even though they form a large segment. However, the traditionalists may be worth working on to
see if they can be moved north and east to join a more attractive segment such as the range buyers,
quality fanatics or delivery buyers.
The Directional Policy Matrix Used To Select (and De-Select) Segments

Segmentation is the first crucial step in marketing. The grouping together of customers with
common needs now makes it possible to set marketing objectives for each of those segments. Once
the objectives have been set, strategies can be developed to meet the objectives using the tactical
weapons of product, price, promotion and place (route to market).
Common Mistakes
Segmentation studies tend to be large and complicated, so it’s easy for errors and mistakes to be
made. Some of the most common mistakes:
1. Segmenting a segment. For example, someone might want to segment the market for
widgets among 18- to 24-year-olds who live in Vermont and buy brand XYZ. As is evident,
the client is asking that a tiny sliver of the market be segmented. True, this tiny sliver can be
segmented, but rarely are the resulting segments of any value, because they are just too
small. General rule: segment the whole market, including all age groups. The market should
be broadly defined for a segmentation analysis to be most effective. In other words, don’t
preordain the results by sampling restrictions.

2. Overlooking the “universals.” Many attitudinal statements in the questionnaire will not show
up in the final segments, because they tend to be the same across all segments. Statements
that everyone agrees with, or everyone disagrees with (we call them “universals”) cannot
explain much in the multivariate analyses. Variables have to move up and down for the
multivariate analysis to work. The highest rated variables, and the lowest rated, are likely to
fall out of the multivariate analyses. However, you should always look at these universal
statements. Any one of them might be the basis for a positioning or a strategy that would
appeal to everyone. If you find something unique that appeals to everyone, the heck with
segmentation. Go for the whole hog.

3. Creating too many segments. There is a practical limit to the size of segments that
companies can effectively target. If you create more than four or five market segments, you
 run the risk that the resulting segments will be too small to target, at least by mass media.
This is not always true, but it is a good rule of thumb.

4. Targeting all segments. So you have carefully subdivided your target market into five
mutually exclusive psychographic segments, and your boss tells you to develop a marketing
plan to attack each segment. If all of your marketing is direct mail, and you can identify the
addresses that belong to each segment, then you can attack all segments (assuming your
product is relevant to all segments). But, if you use broadcast media in marketing your
product, it is very difficult to target multiple segments because of media “spillover.” What
you say to one segment will be muddled and confused by the different messages targeted to
other segments.

5. Confusing the results. Segmentation studies are large and complicated, with enormous
amounts of data. It is easy to get lost in this treasure trove of answers and come up with
confusing and baffling results.

6. Overlooking the basics. The dazzle and glitter of the advanced, rocket-science multivariate
analyses attract everyone’s attention. No one ever opens up the crosstabs and looks at the
answers to the hundreds of questions asked. Often, hidden in plain view in the plain old
crosstabs are tremendous findings that could form the basis for new or improved marketing
strategies, advertising campaigns, or new products. Rarely does anyone analyze this basic
data, however.

7. Targeting people instead of dollars. A market segment might represent a large percentage of
the population, but a small part of the market. Always look at the dollar potential of market
segments, not just the number of people in the segments.
Final Thoughts
The concept of market segmentation is sound. It’s a way to apply greater marketing energy or force
to a subset of the market. A great deal of money is wasted on psychographic segmentations that
never lead to any marketing actions. If you segment the market by psychographics, there are several
essential uses of the segmentation: first, target your brand to the largest segment with relevant brand
fit (or even target two closely related segments) by media advertising and message. That is, the
advertising message is the way to reach the psychographic segment (rarely can a psychographic
segment be defined by demographics or geography). Second, segmentation can provide the guide
rails for brand positioning. That is, positioning assumes, or takes place in relation to, a target market
segment; you are positioning your brand in relation to a market segment. Third, the segmentation
can define opportunities for new products targeted to each psychographic segment. That is, the
market segments can be a template for new product development. For example, if you find that 15%
of the U.S. population belongs to a “safety first” segment when it comes to buying cars, then you
can design and build the safest car in the world to target this segment. So psychographic
segmentation’s greatest value lies in positioning, targeting via advertising message, and defining
new product opportunities. Go forth and segment.