Introduction:
Markets consist of buyers who differ in one or more respects. They may differ in their wants, resources, geographical locations, attitudes and buying practices. It is therefore necessary for a marketer to segment his/her market.
Meaning of Market Segmentation
The process of grouping customers in markets with some heterogeneity into smaller , more similar or homogeneous segments. The identification of target customers groups in which customer groups in which customers are aggregated into groups with similar requirements and buying characteristics.
Market segment – A group of individuals, groups or organizations sharing one or more similar characteristics that cause them to have relatively similar product needs and buying characteristics.
Benefits of Market Segmentation
Requirements of Good Market Segments
In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:
1. Identifiable: The marketer should be able to identify which consumers are members of a particular market segment. The consumers in the segment should respond in the same way to a particular marketing mix. There must be some common characteristics that the consumers have.
2. Measurable: The characteristics that are common to the groups of consumers should be measured in terms of size, purchasing power and other characteristics.
3. Substantial: The segment should be large enough to generate sales volume that ensures profitability; otherwise it will not be economical to design a unique marketing mix for it. Is the market worth the effort?
4. Accessible: The segments must be reachable through communication and distribution channels.
5. Durable: The segments should be relatively stable to minimize the cost of frequent changes.
6. Responsive: Market segments must be defined in their willingness to purchase a product in response to variations in the marketing mix.
7. Compatible with Corporate Image: The market must be compatible with the firm’s objectives and corporate image.
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.
Variables / Bases For Segmenting Consumer Markets
The following variables are commonly used to segment consumer markets:
1. Geographic Segmentation: This calls for dividing the market into different geographical units such as Nations, States, Regions – West, North, Central, South, e.t.c.
• Countries, Cities or Neighborhoods
• Attention should be paid to variations in geographical needs and preferences.
• Geographical segmentation assists the seller to position retail outlets in most appropriate locations as well as simply identifying the needs on the basis of the consumers own location.
2. Demographic Segmentation: This consists of dividing the market into groups on the basis of demographic variables such as:- Age, sex, family size, family life cycle, income, education, occupation, religion, race and nationality.
These variables are the most popular for distinguishing customer groups because,
• Consumers’ wants and preferences are closely related to them.
• They are easier to measure than most other types of variables.
i. Age: Consumer needs and wants change with age. Hence the market should be segmented as young, old, e.t.c.
ii. Gender: This can be employed to segment such markets for clothes deodorants, lotions, magazines, e.t.c. Thus the markets can be for either men or women, male or female
iii. Family life cycle (FLC): The product needs for a household vary according to marital status and the present ages of children. Thus family life cycle can be divided into:
• Single,
• Young, married with no children,
• Young, married with young children,
• Older married with children, e.t.c.
iv. Income: Marketers can segment the market according to the distribution of income e.g. under 1000 shillings per month, 2000/=, 4000/= per month, e.t.c.
v. Occupation: Variables include; bankers, teachers, farmers, clerks, students, housewives, secretaries, e.t.c. A marketer can choose to specialize in the needs of one occupation group.
vi. Education: Some primary education, Some high school education, College education, University education e.t.c.
vii. Religion: e.g. Muslims, Christians e.t.c.
viii. Race: e.g. white, black e.t.c.
a) Nationality: e.g. Asians, Africans e.t.c.
b) Social class: Social class has a strong influence on people’s preferences, Marketers designing products and/or services for specific social classes build in those features that appeal to the target social class.
ix. Ethnic groups
x. Generation: Consumer is profoundly influenced by the generation in which it grows up. This influences one’s inclination to Music, politics, e.t.c.
3. Psychographic Segmentation: Psychographics are psychological profiles of different consumers developed from research, sometimes referred to as A.I.O. (Attitudes, interests and opinion profiles)
In psychographic segmentation, buyers are divided into different groups on the basis of their: Motives, Lifestyle and/or Personality characteristics.
People within the same demographic group can exhibit very different psychographic profiles.
Consumers can thus be sub-divided on the basis of the following psychographic variables:
i. Lifestyle: Consumers’ lifestyles are derived from their activities, interests and opinions. Each life style group is influenced by different marketing mixes.
ii. Personality: Type of personality groups may include;
• Authoritarian
• Ambitious
• Assertive
• Self-confident
• Extrovert/Introvert
4. Behavioral Segmentation: Buyers are divided into groups in the basis of their,
Knowledge, Attitude, Use or Response to a product.
In this respect, behavioral variables that are used to segment consumer markets include:
i. Occasions Benefits: Buyers can be distinguished according to occasions when they
• Purchase a product or
• Use a product
E.g. Occasions when public transport is used mostly. Occasion segmentation can help firms expand product usage.
ii. Benefits: Buyers are classified according to different benefits they seek from the product. Variables here include:
• Economy (Low price)
• Medical (Decay prevention)
• Bright teeth
• Good taste, e.t.c. for toothpaste.
Benefit segmentation requires determination of:
The major benefits that people seek from the product
• The kind of people who look for such benefit
• The major brands that deliver each benefit.
iii. User Status: Many markets can be segmented into
• Non-users.
• Ex-users,
• Potential users,
• First time users and
• Regular users of a product
All these people require different marketing approaches.
iv. Usage Rate: Markets can be segmented into
• Light,
• Medium and
• Heavy user group of products.
v. Loyalty Status: A market can be segmented by customer loyalty patterns.
According to the loyalty status, the buyers can be divided into:
• Hard core loyals: Consumers who buy one brand all the time
• Soft core loyals: Consumers who are loyal to two or three brands
• Shifting loyals: Consumers who shift from favoring one brand to another.
• Switchers: Consumers who show no loyalty to any brand
A company should
• Study the characteristics of its hard-core customers e.g. whether middle class, larger families, e.t.c.
• By studying soft-core loyals, the company can pinpoint which brands are most competitive with its own.
• By looking at customers who are shifting away from its brands, a company can learn about its marketing weaknesses.
• The company should be aware that what appears to be brand loyalty purchase may reflect.
• Habits,
• Indifference,
• A low price or
• Non-availability of other brands.
vi. Buyer Readiness Stage: At any given time, people are in different stages of readiness to buy a product;
• Some people are aware,
• Some are informed,
• Some are interested,
• Some are desirous of buying,
• Some intend to buy.
All these make a big difference in designing the marketing programme.
vii. Attitude: People in a market can be classified according to their degree of enthusiasm for a product.
Five attitude classes can be distinguished e.g.
• Enthusiastic,
• Positive,
• Indifferent,
• Negative and
• Hostile.
viii. Volume Segmentation: Involves grouping businesses by size and Purchase patterns
Variables for Segmenting Industrial / Business Markets
Industrial markets can be segmented using the same variables for consumer markets e.g. geographic, demographic and behavioral. Other variables that may be used include volume segments.
1. Demographic
• Industry – Which industries should we serve?
• Company size –Which size companies should we serve?
• Location – What geographic areas should we focus on?
2. Operating Variables
• Technology – What customer technologies should we focus on?
• User-non-user status – Should we focus on heavy, medium, light users or non-users?
• Business capabilities – Should we serve business needing many or few services?
3. Purchasing Approaches
• Nature of existing relationship.- Should we serve companies with which we have strong relationships or simply go after the most desirable companies?
• Power structure – Should we serve companies that are engineering dominated, financially dominated,? E.t.c.
• Purchasing criteria i.e. focus on quality, price, service e.t.c.
4. Situational Factors
• Urgency – Should we serve companies that need quick and sudden delivery or service
• Specific application: Should we focus on certain applications of our product rather than all applications.
• Size of order.- Should we focus on large or small orders.
5. Personal Characteristics
• Buyer-seller similarity – Should we focus on companies whose people and values are similar to ours?
• Attitude towards risk – Should we focus on risk takers or risk avoiding customers?
• Loyalty – Should we focus on companies that show high loyalty to their suppliers?
