Market Segmentation
Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers.
The Need for Market Segmentation
The marketing concept calls for understanding customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike.
Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication.
Requirements of Market Segments
In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:
market segmentation - demographic segmentation Demographic segmentation consists of dividing the market into groups based on variables such as age, gender family size, income, occupation, education, religion, race and nationality.
The main demographic segmentation variables are summarised below:
Age---Consumer needs and wants change with age although they may still wish to consumer the same types of product. So Marketers design, package and promote products differently to meet the wants of different age groups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-based segments).
Life-cycle stage--A consumer stage in the life-cycle is an important variable - particularly in markets such as leisure and tourism. For example, contrast the product and promotional approach of Club 18-30 holidays with the slightly more refined and sedate approach adopted by Saga Holidays.
Gender---Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics.
Income--Another popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Coutts bank; Moet & Chandon champagne and Elegant Resorts - an up-market travel company. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Examples include Aldi (a discount food retailer), Airtours holidays, and discount clothing retailers such as TK Maxx.
Social class--Many Marketers believe that a consumers "perceived" social class influences their preferences for cars, clothes, home furnishings, leisure activities and other products & services. There is a clear link here with income-based segmentation.
Lifestyle--Marketers are increasingly interested in the effect of consumer "lifestyles" on demand. Unfortunately, there are many different lifestyle categorisation systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients and campaigns!
market segmentation - psychographic segmentation Psychographic segmentation is sometimes also referred to as behavioural segmentation.
This type of segmentation divides the market into groups according to customers’ lifestyles.
It considers a number of potential influences on buying behaviour, including the attitudes, expectations and activities of consumers. If these are known, then products and marketing campaigns can be customised so that they appeal more specifically to customer motivations.
The main types of psychographic segmentation are:
Lifestyle – different people have different lifestyle patterns and our behaviour may change as we pass through different stages of life. For example, a family with young children is likely to have a different lifestyle to a much older couple whose children have left home, and there are, therefore, likely to be significant differences in consumption patterns between the two groups. One of the most well-known lifestyle models, the “sagacity lifestyle model”, identifies four main stages in a typical lifestyle:
Opinions, interests and hobbies – this covers a huge area and includes consumers’ political opinions, views on the environment, sporting and recreational activities and arts and cultural issues. The opinions that consumers hold and the activities they engage in will have a huge impact on the products they buy and marketers need to be aware of any changes. Good recent examples include the growth of demand for organic foods or products that are (or are “perceived” to be) environmentally friendly
Targeting is the next step in the process of design and decision making. In this process a product is designed, keeping in mind one ore more segments that were identified during the market segmentation. Target marketing differs from mass marketing. Mass marketing, as the name suggests, is intended to reach the whole population at large. But, target marketing is intended to reach the specific audience.
This process is called targeting. Once market segments are created, organization then targets them.
Targeting is the second stage and is done once the markets have been segmented.
Organizations with the help of various marketing plans and schemes target their products amongst the various segments.
In the above example of video games, teenagers and young people are often targeted. Most of these games are played by boys and the best way to attract teenage and adult men is through action oriented games which are violent. So, in the gaming segment, the general targets are teenagers and young people. Children and preteens also come under a segment. The games designed for children are not so violent and these games are generally based on their favorite movie or cartoon characters like Batman, Spiderman, Ironman, Hulk, Superman, etc.
Positioning is the next step in the process of STP decision making. It can be described as the process in which the target market is targeted. This is done through proper advertising. Advertising, as we know is the process of communicating to the customer. The purpose of an advertisement is fulfilled only when it has effectively communicated to the target audience. The purpose of positioning is to place the product in such a position where the product and its perceived uses are known to the customers.
These actions are sequential most of the time, but there exceptions for the sequences to take place in the correct order. There are some exceptions, for example, when Mountain Dew was launched for the first time, it was promoted as carbonated water. But, after a loosing battle with the giant in the industry, Coca-Cola, Mountain Dew took a new avatar by endorsing extreme sports. Only after taking up extreme sports as their mascot, they were able to succeed in the market. In the case of Mountain Dew, the target section was the young audience. This was only realized after loosing the battle and then again concentrating on the younger generation through extreme sports were they able to succeed.
Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers.
The Need for Market Segmentation
The marketing concept calls for understanding customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike.
Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication.
Requirements of Market Segments
In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:
- Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified.
- Accessible: the segments must be reachable through communication and distribution channels.
- Substantial: the segments should be sufficiently large to justify the resources required to target them.
- Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes.
- Durable: the segments should be relatively stable to minimize the cost of frequent changes.
market segmentation - demographic segmentation Demographic segmentation consists of dividing the market into groups based on variables such as age, gender family size, income, occupation, education, religion, race and nationality.
The main demographic segmentation variables are summarised below:
Age---Consumer needs and wants change with age although they may still wish to consumer the same types of product. So Marketers design, package and promote products differently to meet the wants of different age groups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-based segments).
Life-cycle stage--A consumer stage in the life-cycle is an important variable - particularly in markets such as leisure and tourism. For example, contrast the product and promotional approach of Club 18-30 holidays with the slightly more refined and sedate approach adopted by Saga Holidays.
Gender---Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics.
Income--Another popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Coutts bank; Moet & Chandon champagne and Elegant Resorts - an up-market travel company. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Examples include Aldi (a discount food retailer), Airtours holidays, and discount clothing retailers such as TK Maxx.
Social class--Many Marketers believe that a consumers "perceived" social class influences their preferences for cars, clothes, home furnishings, leisure activities and other products & services. There is a clear link here with income-based segmentation.
Lifestyle--Marketers are increasingly interested in the effect of consumer "lifestyles" on demand. Unfortunately, there are many different lifestyle categorisation systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients and campaigns!
market segmentation - psychographic segmentation Psychographic segmentation is sometimes also referred to as behavioural segmentation.
This type of segmentation divides the market into groups according to customers’ lifestyles.
It considers a number of potential influences on buying behaviour, including the attitudes, expectations and activities of consumers. If these are known, then products and marketing campaigns can be customised so that they appeal more specifically to customer motivations.
The main types of psychographic segmentation are:
Lifestyle – different people have different lifestyle patterns and our behaviour may change as we pass through different stages of life. For example, a family with young children is likely to have a different lifestyle to a much older couple whose children have left home, and there are, therefore, likely to be significant differences in consumption patterns between the two groups. One of the most well-known lifestyle models, the “sagacity lifestyle model”, identifies four main stages in a typical lifestyle:
- Dependent (e.g., children still living at home with parents);
- Pre-family (with their own households but no children);
- Family (parents with at least one dependent child); and
- Late (parents with children who have left home, or older childless couples).
Opinions, interests and hobbies – this covers a huge area and includes consumers’ political opinions, views on the environment, sporting and recreational activities and arts and cultural issues. The opinions that consumers hold and the activities they engage in will have a huge impact on the products they buy and marketers need to be aware of any changes. Good recent examples include the growth of demand for organic foods or products that are (or are “perceived” to be) environmentally friendly
Targeting is the next step in the process of design and decision making. In this process a product is designed, keeping in mind one ore more segments that were identified during the market segmentation. Target marketing differs from mass marketing. Mass marketing, as the name suggests, is intended to reach the whole population at large. But, target marketing is intended to reach the specific audience.
This process is called targeting. Once market segments are created, organization then targets them.
Targeting is the second stage and is done once the markets have been segmented.
Organizations with the help of various marketing plans and schemes target their products amongst the various segments.
In the above example of video games, teenagers and young people are often targeted. Most of these games are played by boys and the best way to attract teenage and adult men is through action oriented games which are violent. So, in the gaming segment, the general targets are teenagers and young people. Children and preteens also come under a segment. The games designed for children are not so violent and these games are generally based on their favorite movie or cartoon characters like Batman, Spiderman, Ironman, Hulk, Superman, etc.
Positioning is the next step in the process of STP decision making. It can be described as the process in which the target market is targeted. This is done through proper advertising. Advertising, as we know is the process of communicating to the customer. The purpose of an advertisement is fulfilled only when it has effectively communicated to the target audience. The purpose of positioning is to place the product in such a position where the product and its perceived uses are known to the customers.
These actions are sequential most of the time, but there exceptions for the sequences to take place in the correct order. There are some exceptions, for example, when Mountain Dew was launched for the first time, it was promoted as carbonated water. But, after a loosing battle with the giant in the industry, Coca-Cola, Mountain Dew took a new avatar by endorsing extreme sports. Only after taking up extreme sports as their mascot, they were able to succeed in the market. In the case of Mountain Dew, the target section was the young audience. This was only realized after loosing the battle and then again concentrating on the younger generation through extreme sports were they able to succeed.