Chapter-5Chapter-5

RETAIL MARKET RETAIL MARKET SEGMENTATIONSEGMENTATION

What is a market?What is a market? ‘ ‘A market is a group of potential customers with A market is a group of potential customers with

similar needs who are willing to exchange something of similar needs who are willing to exchange something of value with sellers offering various goods and services value with sellers offering various goods and services that can satisfy these needs’that can satisfy these needs’

• Mass marketing approach: Mass marketing approach: - - approaching the entire set of customers with a approaching the entire set of customers with a uniform marketing approach thereby creating the uniform marketing approach thereby creating the largest potential market (sale of staple food items like largest potential market (sale of staple food items like rice and bread)rice and bread)• Differentiated Approach Differentiated Approach - strategy of market segmentation - strategy of market segmentation - marketer selects one or more of the segments as the - marketer selects one or more of the segments as the

target market and positions his outlet as per the target market and positions his outlet as per the profile of the targeted segment (Diet Coke sold to profile of the targeted segment (Diet Coke sold to market segment of health conscious adults) market segment of health conscious adults)

What is market segmentationWhat is market segmentation ‘ ‘The process of dividing the heterogeneous total market The process of dividing the heterogeneous total market

into small groups of customers who share a similar set of into small groups of customers who share a similar set of wants’wants’

• Major characteristicsMajor characteristics - is an aggregating process: clustering people with similar - is an aggregating process: clustering people with similar

or homogenous needs and respond to the marketing mix or homogenous needs and respond to the marketing mix in the same way in the same way

- different kind of promotional activities are developed for - different kind of promotional activities are developed for serving different market segments serving different market segments

- identifying niche segments- identifying niche segments- customized products and services are provided to - customized products and services are provided to

customer groups (Whirlpool automatic washing customer groups (Whirlpool automatic washing machines in urban Mumbai with large groups of working machines in urban Mumbai with large groups of working women can be segmented)women can be segmented)

Benefits of segmentationBenefits of segmentation

Benefits of segmentationBenefits of segmentation • Development of marketing mixDevelopment of marketing mix

- helps to identify target audience - helps to identify target audience - customize marketing strategies in terms of product, - customize marketing strategies in terms of product,

price and promotion for customers price and promotion for customers

• Store location decisionStore location decision- to concentrate stores where target population are - to concentrate stores where target population are

found found

• Understanding customer behaviorUnderstanding customer behavior

- how and why the target group behaves and acts - how and why the target group behaves and acts - determining the buying behavior after segmenting the - determining the buying behavior after segmenting the

market market

Benefits of segmentationBenefits of segmentation contdcontd

• Merchandising decisionsMerchandising decisions- deciding on which items will occupy the store shelves - deciding on which items will occupy the store shelves

for displayfor display- understanding the preference of target groups - understanding the preference of target groups

• Promotional campaigns Promotional campaigns - effective and accurate promotional campaigns - effective and accurate promotional campaigns

• Positioning Positioning - major feature of segmentation . Sarvanna stores are - major feature of segmentation . Sarvanna stores are

positioned for lower middle class consumers where as positioned for lower middle class consumers where as the clientele of Lifestyle and Shoppers Stop are for the clientele of Lifestyle and Shoppers Stop are for the upper income class and the elite the upper income class and the elite

Segmenting, targeting and Segmenting, targeting and positioningpositioning

Criteria for effective market Criteria for effective market segmentationsegmentation

Criteria for effective market Criteria for effective market segmentationsegmentation contdcontd

• Homogeneous within:Homogeneous within:- similar needs, wants and buying behavior- similar needs, wants and buying behavior

- an effective marketing programme can be developed - an effective marketing programme can be developed

(Gillette Mach 3 for young male adults)(Gillette Mach 3 for young male adults)

• Heterogeneous withinHeterogeneous within - customers between segments stay different for better - customers between segments stay different for better

focus from retailers focus from retailers

• Substantial Substantial - should have sufficient discretionary income should have sufficient discretionary income (Ebony must ensure high income groups exist in their (Ebony must ensure high income groups exist in their

trade area) trade area)

Criteria for effective market Criteria for effective market segmentationsegmentation contdcontd

• Actionable Actionable - - useful for identifying target groups and deciding on useful for identifying target groups and deciding on

marketing mix variables (Café Coffee Day attracts marketing mix variables (Café Coffee Day attracts college goers and young working executives to enjoy college goers and young working executives to enjoy coffee in a fashionable outlet)coffee in a fashionable outlet)

• Accessible Accessible - - reachable target market and accessible to target reachable target market and accessible to target

consumer groups (Crossroads is readily accessible consumer groups (Crossroads is readily accessible with parking facilities) with parking facilities)

• MeasurableMeasurable - size, purchasing power and characteristics of market - size, purchasing power and characteristics of market

segment should be measurable segment should be measurable

Kinds of marketsKinds of markets

• Consumer marketsConsumer markets- individuals and households purchasing goods - individuals and households purchasing goods

for self consumption (groceries like for self consumption (groceries like milk ,poultry etc .) milk ,poultry etc .)

• Industrial marketsIndustrial markets- individuals, groups and organizations - individuals, groups and organizations

purchasing goods for reproductions of other purchasing goods for reproductions of other productsproducts

Kinds of markets Kinds of markets contdcontd

• Re-seller Market Re-seller Market - market of the middlemen like wholesalers and market of the middlemen like wholesalers and

retailers who buy goods for resale retailers who buy goods for resale - main focus of retailing is on consumer productsmain focus of retailing is on consumer products- convenience products: convenience products: purchased frequently like purchased frequently like

packaged foods, milk ,medicines etcpackaged foods, milk ,medicines etc- shopping products:shopping products: furniture, clothing apparels etc furniture, clothing apparels etc- specialty items: special effort to purchase branded specialty items: special effort to purchase branded

jewellery of DeBeers jewellery of DeBeers - unsought items:unsought items: potential customers have yet to potential customers have yet to

know or know through promotions (ICICI know or know through promotions (ICICI PRUDENTIAL LIFE INSURANCE, PRUDENTIAL LIFE INSURANCE, HUTCHINSON etc.)HUTCHINSON etc.)

Bases of segmentationBases of segmentation• Geographic segmentationGeographic segmentation

– – divided on the basis of geographic units like regions divided on the basis of geographic units like regions and districts (Subhiksha Stores in Chennai) and districts (Subhiksha Stores in Chennai) • Demographic segmentationDemographic segmentation

- division on the basis of variables like age, gender, - division on the basis of variables like age, gender, income level, family size, occupation, education, and income level, family size, occupation, education, and marital status (Life Style may segment the market by marital status (Life Style may segment the market by income class)income class)• Psychographic segmentation Psychographic segmentation -based on lifestyle, personality, values, and -based on lifestyle, personality, values, and interests interests - value and lifestyle segmentation (VALS)- value and lifestyle segmentation (VALS) - e- each consumer is targeted with a unique style of ach consumer is targeted with a unique style of

living based on the VALS concept living based on the VALS concept

Bases of segmentation Bases of segmentation contdcontd

• Behavioural segmentationBehavioural segmentation- based on consumer responses or use of product (i.e. use based on consumer responses or use of product (i.e. use

related and usage related segmentation)related and usage related segmentation)

• Behavioural variables Behavioural variables - reason/occasion to purchase (Diwali sees higher sale of - reason/occasion to purchase (Diwali sees higher sale of

paints)paints)- frequency and quantity of purchase (buying vegetables - frequency and quantity of purchase (buying vegetables

or meat on a weekly basis) or meat on a weekly basis) - product usage (heavy beer drinkers and occasional - product usage (heavy beer drinkers and occasional

drinkers) drinkers) - loyalty status (loyal customers to Subhiksha stores) - loyalty status (loyal customers to Subhiksha stores) - buyer readiness stage (stages like innovators, early - buyer readiness stage (stages like innovators, early

adopters or laggards for cellphone handsets) adopters or laggards for cellphone handsets) - source of purchase: choice of shopping locations (local - source of purchase: choice of shopping locations (local

kirana stores or the neighboring mall)kirana stores or the neighboring mall)

Choice of segments to Choice of segments to target the markettarget the market

measure the attractiveness and capacity of the segmentestimate its size, purchasing power, growth rate, presence of competition, etc.opt for an untapped segmentchoose to operate in a segment where there are already existing players

e.g. CROSSROADS targets clientele from upper middle-class customersdevoted to each of the four shopping categories—women, kids, men, and home furnishings

Profiling of customersProfiling of customers • Customer DemographicsCustomer Demographics - age, sex, income levels, educational background, and age, sex, income levels, educational background, and

professional backgroundprofessional background- Family decision-making Family decision-making

(a CTV or a 2-wheeler purchase)(a CTV or a 2-wheeler purchase) • Customer Psychographics Customer Psychographics

– purchasing behaviour of the target populationpurchasing behaviour of the target population– purchase motivationpurchase motivation– purchasing process purchasing process – source of purchasesource of purchase– time and place utility time and place utility

Buyer’s intentions surveyBuyer’s intentions survey

• Frequency of customer visits to storeFrequency of customer visits to store• Weekday/weekend shopping patternsWeekday/weekend shopping patterns• Store selection criteria: how buyer’s go Store selection criteria: how buyer’s go

about selecting the storeabout selecting the store• Spending per visit:. how much the customer Spending per visit:. how much the customer

spends on an average during each visitspends on an average during each visit• Planned vs unplanned shopping: items Planned vs unplanned shopping: items

purchased in a planned way and impulse purchased in a planned way and impulse purchasespurchases

• Store loyalty: do they patronize a few stores Store loyalty: do they patronize a few stores or shop around for bargainsor shop around for bargains

Market segmentation in IndiaMarket segmentation in India

• Marketer uses segmentation models based Marketer uses segmentation models based on demographics, geo-demographics, SEC on demographics, geo-demographics, SEC data, and benefits and usagedata, and benefits and usage

• Prominent examples are McDonalds, Prominent examples are McDonalds, Nescafe, Café Coffee Day, BenettonNescafe, Café Coffee Day, Benetton