chapter 3
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SEGMENTATION ANDTARGET MARKETING
Chapter-3
What is SEGMENTATION
WHY WE NEED A NICHE ???
Source: Youtube
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SEGMENTATION PROCESS
Applying market segmentation involves a three-stage process:
Identifying Segments» The first and foremost step is to identify the target
market. The marketers must be very clear about who all should be included in a common segment. Make sure the individuals/business in a group have similar characteristics and needs.
Selecting Target Segments» Individual target markets are selected based on the
expectation of obtaining a differential response. Once the target market is decided, it is essential to find out the needs of the target audience. The product must meet the expectations of the individuals. The marketer must interact with the target audience to know more about their interests and demands.
Creating Marketing Mix for each Segment» Devise relevant strategies to promote brands
amongst each segment. Remember you can’t afford to have same strategies for all the segments. Make sure there is a connect between the product and the target audience. Advertisements promoting female toiletries can’t afford to have a male model, else the purpose gets nullified.
Targeting Individuals» Unlike general advertising or sales promotion DM frequently
targets specific individuals » Personalized letters containing names and addresses are sent, » Changes in communication technology ll allow marketeers to
reach more specific segments.» Communications targeted at individuals must be managed by
using computerized records of what is mailed or who is called and what responses are received.
» Database technology allow DM to utilize lists with demographics and purchase histories
Targeting Businesses» In b2b DM demographic variables such as income and
locations have different meanings.» Consumption patterns are altogether different so the buying
patterns are » Direct Marketeers targeting individuals use segmentation
based on cultural background, social class, and family life-cycle stage, but those targeting industries do not.
Clearly Defined and Distinguishable» The chosen segments should be clearly defined to avoid
doubt about which part of the market, the firm's marketing activities are aimed at. Otherwise there is a risk that market activities will "spill over" into different segments. If there is more than one segment, each one should be made up of target markets which require specific marketing, due to differences in buying behavior.
» Example: If married and unmarried men behave similarly when purchasing shoes, there is little value in placing them in different segments.
Substantiality/Suitability» Firms need to ensure that the segment is suitable. The
characteristics of the people making up the segment, suggest the segment are likely to buy the product and have the spending power to buy the product. Segment suitability also includes the size of the segment. If the segment is too small, potential for sales growth will be limited. If it is too large, it will be difficult to create marketing activities to suit all of the groups included in the segment.
REQUIRMENTS FOR SEGMENTATION
Measurability» Before embarking on a sales strategy it is important to know
the size of existing sales in that segment. A firm also needs to know how product sales are growing in the chosen segment. If you can not measure the growth rate, it will be difficult to assess whether your chosen segment is profitable.
» For example smart phone sales are growing rapidly but which segments of the market are they growing in? and in which segments is growth stagnant?
Accessibility» Accessibility is about communicating with your customers
and being able to get things to them. The segments must be reachable through communication and distribution channels.
Stability» The segments should be relatively stable to minimize the
cost of frequent changes
Geographic Segmentation» The market is segmented according to geographic
criteria—nations, states, regions, countries, cities, city size, density of area, neighborhoods, zip codes or climates etc
» Example: People in a country, they show some similar characteristics, they speak same language, the religion might be similar, they might wear specific design and quality of cloths, they might have similar likes and dislikes
Demographic Segmentation» Demographic segmentation divides the market into
groups based on demographic variables including age, gender, family size, structure and life cycle, income and education level etc.
TYPES OF SEGMENTATION
Source: answers.com*
Geo-Demographic Segmentation» Attribution of demographic characteristics to a group of
individuals residing in the same geographic area based on an overlay of demographic survey data against a geographically segmented list. This approach aims to identify groups of small geographic areas that have similar demographic profiles.
» Example: Geo-demography might determine that F-10, Islamabad, comprises a high proportion of well off married people with young children. It would thus be appropriate to target F-10 for children's furniture promotions and so forth.*
Psychological Segmentation» Psychographic segmentation is the practice of dividing groups
via particular psychological traits for the purpose of marketing to these markets. Segmentation takes place via consumer personality, values, attitudes, interests, lifestyle, and social class.
» Example : A company needing to market gold golf clubs to a specific golfer belonging to an expensive membership based country club.
Source: Wiki.answers.com
Socio-Cultural Segmentation» Sociocultural factors are those which include the social and
cultural environment and attitudes of a society. These factors would include societal trends,
» Such as the lifestyle of families and how often they eat out and or shop. It also includes how different demographic segments act.
User Behavior Segmentation» Behavioral Segmentation is market segmentation based on
certain consumer behavior characteristics, such as benefits sought by the consumer, the extent to which the product is consumed, brand loyalty, price sensitivity, and the ways in which the product is used.
Example: If a customer has been using the same brand of toothpaste for 12 years and has had no cavities in that time period, a small price increase will most likely mot be an issue to that customer.
ö Divide and Conquer
ö To provide tailored solutions
ö Help you avoid unprofitable markets
ö To Reduce Marketing Costs
ö It allows companies to focus on equitable distribution of resources
ö To Increased effectiveness in marketing campaign
ö To collect a higher markup from customers who can afford higher prices
BENIFITS OF SEGMENTATION
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