Market Segmentation

Market Segmentation

The concept of market segment is based on the fact that the market of commodities are not Homogeneous but Heterogeneous. Market represents a group of customers having common characteristics but two consumers are never common in their nature, habits, hobbies, income and purchasing techniques. On the basis of these characteristics, customers having similar qualities are grouped into segments. The characteristics of customers in one segment will be differ from other segment.

“ Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub markets or segments, each of which tends to be homogenous in full significant aspects..”

- William T. Stanton

“ …….Grouping of buyers or segmenting the market is described as market segmentation ”

- R.S. Davas

Effective marketing requires a clear picture of the consumer characteristics that can be described as the consumer profile.

Segmentation is the key to the marketing strategy of many companies. Segmentation is a demand-oriented approach that involves modifying the firm’s product and/or marketing strategies to fit the needs of individual market segments rather than those of the aggregate market.

According to William Stanton, “Market segmentation is the process of dividing the total heterogeneous market for a product into several sub-markets or segments each of which tend to be homogeneous in all significant aspects.

Market segmentation is basically a strategy of ‘divide and rule’. The strategy involves the development of two or more different marketing programmes for a given product or service, with each marketing programme aiming at each segment. A strategy of market segmentation requires that the marketer first clearly define the number and nature of the customer groupings to which he intends to offer his product or service. This is a necessary condition for optimizing efficiency of marketing effort.

RATIONALE FOR MARKET SEGMENTATION

There are three reasons why firms use market segmentations:

Ø Because some markets are heterogeneous

Ø Because market segments respond differently to different promotional appeals; and

Ø Because market segmentation consider with the marketing concept.

Heterogeneous Markets:

Market is heterogeneous both in the supply and demand side. On supply side, many factors like differences in production equipments, processing techniques, nature of resources or inputs available to different manufactures, unequal capacity among the competitors in terms of design and improvement and deliberate efforts to remain different from other account for the heterogeneity. Similarly, the demand side, which constitute consumers – is also different due to differences in physical and psychological traits of consumer. Modern business managers realize that under normal circumstances they cannot attract all of the firm’s potential customers to one product, because different buyers simply have different needs and wants. To accommodate this heterogeneity, the seller must provide different products. For example, in two wheelers, the TVS Company first introduced TVS50 Moped, but later on introduced a variety of two wheelers, such as TVS XL, TVS Powerport, TVS Champ, TVS Sport, TVS Scooty, TVS Suzuki, TVS Victor, to suit the requirements of different classes of customers.

2. Varied Promotional Appeals:

A strategy of market segmentation does not necessarily mean that the firm must produce different products for each market segment. If certain promotional appeals are likely to affect each market segment differently, the firm may decide to build flexibility into its promotional strategy rather than to expand its product line. For example, many political candidates have tried to sell themselves to the electorate by emphasizing one message to labour, another to business, and a third to farmers.

As another example, the Sheraton Hotel serves different district market segments, such as conventioneers, business people and tourists. Each segments has different reasons for using the hotel. Consequently, Sheraton uses different media and different messages to communicate with the various segments.

3. Consistency with the Marketing Concept

A third reason for using market segmentation is that it is consistent with the marketing concept. Market segmentation recognizes the existence of distinct market groups, each with a distinct set of needs. Through segmentation, the firm directs its product and promotional efforts at those markets that will benefit most from or that will get the greatest enjoyment from its merchandise. This is the heart of the marketing concept.

Over the years, market segmentation has become an increasingly popular strategic technique as more and more firms have adopted the marketing concept. Other historical forces being the rise of market segmentation include new economies of scale, increased education and affluence, greater competition, and the advent of new segmentation technology.

Bases of Market Segmentation

There are a number of bases on which a firm may segment its market

1. Geographic basis

a. Nations

b. States

c. Regions

2. Demographic basis

a. Age

b. Sex

c. Income

d. Social Class

e. Material Status

f. Family Size

g. Education

h. Occupation

3. Psychographic basis

a. Life style

b. Personalities

c. Loyalty status

d. Benefits sought

e. Usage rate (volume segmentation)

f. Buyer readiness stages (unaware, aware, informed, interested, desired, intend to buy)

g. Attitude stage (Enthusiastic, positive, indifferent, negative, hostile)