Market segmentation is a process of dividing a market into distinct subsets of consumers
with common needs, characteristics or behaviour and selecting one or more segments to
target with a distinct market mix.
A market segment is therefore a group of customers who respond in a similar way to a given
set of marketing effort.
The market segmentation strategy allows producers to avoid head on competition in the
market place by differentiating their offerings not only on the basis of price but also
styling, packaging, promotional appeal, distribution methods and superior service.
The costs of consumer segmentation research, shorter production runs and differentiated
promotional campaigns are more than offset by increased sales.
Market segmentation is the first step in a three phrase marketing strategy. After
segmenting the market into homogeneous clusters, the marketer selects one or more
segments to target by deciding a specific marketing mix i.e. a specific product, price,
channel and or promotional appeal for each distinct segment.
The third step is market positioning of the product so that it’s perceived by the consumers
in each target segment as satisfying their needs better other competitive offerings.
Bases for Segmentation:
The first step in developing a market segmentation strategy is selecting the most
appropriate base on which to segment the market. The main strategies used in segmenting
consumer markets are Geographic, Demographic, behavioral, psychographic
(Lifestyle) characteristics, sociocultural variables, user related characteristics, use
situation factors, benefits sought, forms of hybrid segmentation and economic factors.
(a) Geographic Segmentation
Geographic segmentation means dividing the market into different geographical locations
or units such as nations, states, regions, cities or estates. The theory behind this strategy is that people who live in a given area share some similar needs and wants that differ from
those living in other areas.
Many companies in Kenya segment the country into five regions, Nairobi, Mountain, Rift
Valley, Nyanza and Coastal.
Companies do localize their products, advertising, promotion and sales efforts to fit the
needs of individual regions e.g. Daily Nation Newspapers has the Nairobi, Western and
Coast editions. Marketing research shows divergent consumer purchasing patterns among
the urban, suburban and rural areas.
Geographic segmentation is a useful strategy for most marketers. It is relatively easy to
find geographically based differences for many products. The geographic segmentations
are easily reachable through the local media including newspapers, TV and radio and
regional editions of magazines.
b) Demographic Segmentation
Demography refers to the vital and measurable statistics of a population. Demographic
characteristics such as age, gender, marital status, income, occupation, family size,
family life cycle, religion, race, generation, education and nationality are mostly used as
the basis for market segmentation.
Using these variables, the market could be segmented as follows: Based on age (children,
youth, and adults), based on income (high income, middle income, low income), and
based on gender (for men, women).
Most cosmetic products are specially designed, promoted and advertised to reinforce the
feminine image e.g. Nivea.
c) Behavioural Segmentation
Divides buyers into groups based on their knowledge, attitudes, uses or response
to a product. The segments that emerge include:
i. Occasion segmentation – Divides the market into groups according to occasions when
buyers get the idea to buy, actually buy or use the purchased item e.g. coffee for cold
season.
ii. Benefit Segmentation – Divides the market into groups according to the benefits that
consumers seek from the product e.g. for a laundry detergent like Omo, Sunlight, Jik, etc. customer are segmented on the basis of benefits sought e.g. The product gives benefits like cleaning, fabric softening, strengthening and fresh smell
iii. Loyalty Status – A market can be segmented by consumer loyalty.
Consumers can be loyal to brands (Nike), stores (Nakumatt, Wal-mart, Bata) and companies (Toyota, Ford). Buyers can be divided according to loyalty as; completely loyal, somewhat loyal or not loyal. A company can target the less loyal customers and turn them to loyal customers.
d) Psychographic
Segments the market based on the social class, lifestyle and personality.
Personality traits include:
i) Social class: Lower lower; upper-lower; working class, middle class,
upper-middle, lower upper; upper-upper.
ii) Lifestyle: Straights, swingers, longhairs.
iii) Personality: Compulsive, authoritarian, ambitious, high-achievers
Importance of Segmentation
(a) It’s an acknowledgement that people are different and special
(b) It helps marketers define customer needs more precisely
(c) Helps marketers in developing market mixes and products to meet needs
(d) Helps in the allocation of resources because segments differ in sizes
(e) Provides better evaluation of marketing performance in segments
Requirements for Effective Segmentation.
1. Measurable – The size, purchasing power and profiles of segments can be measured.
2. Accessible – The market segment can be reached and served. E.g if your target
market is school going students, the best time to advertise is in the evenings.
3. Substantial – The market segments should be large and profitable enough to serve e.g
Toyota targets the African market with economical cars, because the larger populations are
medium income earners.
4. Differentiable – The segments are conceptually distinguishable and respond differently to
different market mix elements and programs e.g. people in rural areas are price sensitive and
averse to high price; urbanites are less price sensitive.
5. Actionable – Effective programs can be designed for attracting and serving the
segments.
Titany answered the question on November 3, 2021 at 07:45