Market segmentation is the process of dividing the market into parts that are different from one another. It is the identification of potential customers who would buy your products. Different customers have different needs and it is not possible to satisfy these needs by treating all customers in a similar way. Most organisations do not have all the resources to satisfy the needs of all the customers. Therefore, it is necessary to identify the similar groups of customers and to serve one or two group with the available resources. When market segmentation is done well the members in each segment of the market are as similar to each other as possible inside a segment and are also as different as possible among segments. Levels of market segmentation:
1. Mass Marketing: providing the same product to all consumers. Example: Salt. 2. Segment marketing: providing different products to many segments. 3. Niche Marketing: providing different products but to sub segments. 4. Micro-Marketing: providing product which are preferable to individual choices.
There are four important bases on which market segmentation are carried out amongst consumer markets. They are as follows:
Geographic segmentation: This kind of segmentation divides the market on the basis of geographical area. Marketers use geographic segmentation to divide the markets in geographical areas in order to be able to provide products to consumers depending on their different needs. Different geographical areas have different needs and wants. For example, people living in a village will not have the same needs and wants as the people living in a city. Therefore, it is important for marketers to divide the markets into geographical areas. This can be done by region, size, climate, population, etc. A geographical area can be a city, country or just a small area in a city depending on the requirements and the similarity of consumer needs and wants. For example, McDonalds’ is a global organisation selling burgers in so many countries. It is known for its beef burgers but McDonalds’ in India does not sell beef burgers instead selling chicken burgers as it is against the Hindu religion to eat beef.
Demographic segmentation: Demographic originates from the word demography which means the study of population. This segmentation is done by dividing the market into parts based on the age, gender, income, family lifecycle, education, ethnicity, nationality, religion, etc. Demographic variables are one of the most popular for segmenting consumer groups. As these are common variables differentiating the needs and wants of people.
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Examples of demographic segmentation include: Huggies diapers which provide an example for the age demographic segmentation as they produce products (diapers) for kids. Also Marketers focus on the affluent market segments depending on the income, a good example is designer brands like Louis Vuitton providing luxury goods for consumers earning higher income. Gender segmentation is mostly used in the cosmetics industry or the clothing industry or even magazines, for example vogue has a separate magazine for men, i.e. “Vogue Men’s”.
Psychographic segmentation: Psychographic segmentation divides the market on the basis of personality, social class and lifestyle.
Lifestyle segmentation involves dividing the market depending on the way people live. Marketers divide these segments on the basis of Activities-Interests-Opinions of the consumers. This includes what the interests of the consumers are, what the consumers prefer to buy and where he /she buy it from.
Social Class is particularly based on the occupation of the consumer. This is divided into various classes such as:
References: * Kotler, Philip, 1997, Marketing Management, 9th edition, pp. 249-268.
* David Parmerlee, 2000, Auditing markets, products, and marketing plans, McGraw-Hill Professional.
* Marketing best Practices, 2004, Second Edition, Thomson South Western.
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