Market segmentation. A market is a group of potential customers with similar needs who are willing to exchange something of value with sellers offering.

Market segmentatio

n

A market is a group of potential customers

with similar needs who are willing to

exchange something of value with sellers

offering various goods and services that can

satisfy these needs. The marketer has the

option of either approaching the entire set of

customers with a uniform marketing

approach or adopting a differentiated

approach for different sets of customers.

While the former refers to mass marketing

the latter refers to the strategy of market

segmentation

• Market segmentation is

the process of dividing the

heterogeneous total

market into small groups

of customers who share a

similar set of wants. Each

of these smaller groups

posses somewhat

homogeneous

characteristics.

• At its most basic level, the term “market

segmentation” refers to subdividing a market

along some commonality, similarity. That is,

the members of a market segment share

something in common. The purpose of

segmentation is the concentration of

marketing energy and force on the

subdivision (or the market segment) to gain a

competitive advantage within the segment.

•  

Customers in a Segment Must Have:

• similar needs• They all must seek

similar benefits• They should all be

satisfied by a similar retail offering

• The needs of this customer group should be different from the needs of customers in other segments.

Definition

• A market segment is a subgroup of

people or organizations sharing one

or more characteristics that cause

them to have similar product needs.

it is distinct from other segments

(heterogeneity across segments)

it is homogeneous within the segment

(exhibits common attributes)

it responds similarly to a market stimuli

The Fundamental Criteria for Evaluating a Retail Market Segment:

• Identifiability: is important because it permits

the retailers to determine (1) the segments size

and (2) with whom the retailer should

communicate when promoting its retail offering.

• Actionability: means that the definition of a

segment must clearly indicate what the retailer

should do to satisfy its needs.

• Accessibility: The target market segment must

be reachable so as to serve them effectively.

• Size, purchasing power, profiles of segments can be measured.

• Segments must be effectively reached and served.

• Segments must be large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• Segments must respond differently to different marketing mix elements & actions.

• Must be able to attract and serve the segments.

Purpose• Increase marketing

efficiency by focusing marketing efforts to a particular group

• Maximize scarce marketing resources

• Find a market with limited competition

• Select the most profitable segment

Approaches for Segmenting Markets:• Geographic Segmentation: This

is perhaps the most common form of market segmentation, wherein companies segment the market by attacking a restricted geographic area. For example; corporations may choose to market their brands in certain countries, but not in others.

•  

• Price Segmentation: Price segmentation is common and widely practiced. Variation

• in household incomes creates an opportunity for segmenting some markets along a price dimension. If personal incomes range from low to high, then a company should offer some cheap products, some medium-priced ones, and some expensive ones.

Demographic Criteria

• Demographic variables

– age

– gender

– education

– income

– occupation

– education

– socioeconomic status

– religion

– culture

• Demographic Segmentation- Gender, age, and education level are common demographic variables. Some brands are targeted only to women, others only to men. Music downloads tend to be targeted to the young, while hearing aids are targeted to the elderly.

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