Market Segmentation: Basis of Market Segmentation06/02/2020
Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
Market segmentation is an extension of market research that seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group. The objective of market segmentation is to minimize risk by determining which products have the best chances for gaining a share of a target market and determining the best way to deliver the products to the market. This allows the company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).
Examples of Market Segmentation
Market segmentation is evident in the products, marketing, and advertising that people use every day. Auto manufacturers thrive on their ability to identify market segments correctly and create products and advertising campaigns that appeal to those segments.
Cereal producers market actively to three or four market segments at a time, pushing traditional brands that appeal to older consumers and healthy brands to health-conscious consumers, while building brand loyalty among the youngest consumers by tying their products to, say, popular children’s movie themes.
Basis of Market Segmentation
The marketers divide the market into smaller segments based on gender. Both men and women have different interests and preferences, and thus the need for segmentation.
Organizations need to have different marketing strategies for men which would obviously not work in case of females.
A woman would not purchase a product meant for males and vice a versa.
The segmentation of the market as per the gender is important in many industries like cosmetics, footwear, jewellery and apparel industries.
(ii) Age Group
Division on the basis of age group of the target audience is also one of the ways of market segmentation.
The products and marketing strategies for teenagers would obviously be different than kids.
- Age group (0 – 10 years) – Toys, Nappies, Baby Food, Prams
- Age Group (10 – 20 years) – Toys, Apparels, Books, School Bags
- Age group (20 years and above) – Cosmetics, Anti-Ageing Products, Magazines, apparels and so on
Marketers divide the consumers into small segments as per their income. Individuals are classified into segments according to their monthly earnings.
The three categories are:
- High income Group
- Mid Income Group
- Low Income Group
Stores catering to the higher income group would have different range of products and strategies as compared to stores which target the lower income group.
Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to Vishal Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to the lower income segment.
(iv) Marital Status
Market segmentation can also be as per the marital status of the individuals. Travel agencies would not have similar holiday packages for bachelors and married couples.
Office goers would have different needs as compared to school / college students.
A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters specifically to the professionals.
Types of Market Segmentation
(a) Psychographic segmentation
The basis of such segmentation is the lifestyle of the individuals. The individual’s attitude, interest, value help the marketers to classify them into small groups.
(b) Behaviouralistic Segmentation
The loyalties of the customers towards a particular brand help the marketers to classify them into smaller groups, each group comprising of individuals loyal towards a particular brand.
(c) Geographic Segmentation
Geographic segmentation refers to the classification of market into various geographical areas. A marketer can’t have similar strategies for individuals living at different places.
Nestle promotes Nescafe all through the year in cold states of the country as compared to places which have well defined summer and winter season.
McDonald’s in India does not sell beef products as it is strictly against the religious beliefs of the countrymen, whereas McDonald’s in US freely sells and promotes beef products.
- Market segmentation seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group.
- Markets can be segmented in several ways such as geographically, demographically, or behaviorally.
- Market segmentation allows a company to focus its resources on efforts that can be the most profitable.
A sports-shoe manufacturer might define several market segments that include elite athletes, frequent gym-goers, fashion-conscious women, and middle-aged men who want quality and comfort in their shoes. In all cases, the manufacturer’s marketing intelligence about each segment enables it to develop and advertise products with a high appeal more efficiently than trying to appeal to the broader masses.