What is Market Segmentation? Definition, bases, types and example?


Market segmentation. Definition, Bases, and Example. 


Market segmentation   is the   actual process   of identifying   segments of  the  market  and  the process   of  dividing   a  broad  customer   base  into   sub-groups  of   consumers  consisting  of existing and prospective customers.


What is Market Segmentation? Definition, bases, types and example?


Market segmentation is the real procedure of distinguishing sections of the market and the way toward isolating an expansive client base into sub-gatherings of shoppers consisting of existing and imminent clients.

 Market division is a shopper situated process and can be applied to practically any sort of market. In isolating or sectioning markets, specialists regularly search for shared qualities, for example, basic needs, normal premiums, comparative ways of life or even comparable segment profiles.

So,  market   segmentation   assumes   that different segments require different marketing programmes, as diverse customers are usually targeted through different  offers,  prices, promotions, distributions or some combination of marketing variables.

For example, Southwest Airlines’ single-minded focus on the short-haul, point-to-point, major-city routes, allowed them to prosper as their competitors floundered. The  airline’s  focus on specific segments allowed them  to do a better job of deciding what their target segment really valued (for example, convenience, low price, on-time departures and arrivals among the other things.

Types of Market Segmentation


1. Demographic Segmentation

Demographic segmentation is defined as a market segmentation method based on variables such as age, gender, income etc. This is a type of market segmentation which helps organizations to understand consumer behaviour correctly that in turn helps them perform better.

But, before we explore into the depth of what demographic segmentation is let us first discuss a few terminologies that will help us understand the concept better.

The word demography has been derived from the Greek word “demos” meaning people and the English word “graphy” which literally means “the study of”. When these two words are combined they mean the study of people.

In market segmentation research, however, there is a slight variation in the manner in which the word is used. In marketing, it defines people that form a specific market for a product or a service based on demographics. To study the market, it is important to know the demographic who comprise that market space.

Demographic segma attributes like age, sex, gender, religion, and educational qualification, play an important role in research. Whether it’s with a purpose of launching a new product or introducing changes or implementing new services, businesses need to stay on board and up to date with this ever-changing market. Therefore, the study of how population based on demographic segmentation behave towards changes in products or services is essential to know. This one aspect helps businesses stay ahead of their competitors and perform better.

 2. Geographic Segmentation

Geographic segmentation is a process of grouping customers based on where they live. Companies segment their target market geographically when needed to focus on a specific area.

Geographic market segmentation tends to optimize the marketing strategies of a business by matching products and services to different regions, cities and countries where the customers live.

All of these parameters help companies to geographically target markets where specific customers or more buyers of their products are present. This provides an effective direction for marketing activities towards those areas that benefit the most.

Generally, this type of segmentation is practiced by organizations that work on a large scale. Through this form, companies offer different marketing messages to local customers and a different message to international customers based on their preferences and likings.

Geographic segmentation is also an effective tool that can be used by small companies. Small businesses can target their specific customers and focus primarily on marketing their products. This also allows them to devise market strategies that will stretch both company’s budget and customer base.

In addition to this, rural and urban customer preferences towards a single product are also different. Geographic market segmentation is the right marketing strategy to use as it helps in targeting areas where more buyers of a product are located.

3.Psychographic segmentation


In the market segmentation Psychographic   segmentation   could   be   used   to   segment   markets   according   to   personality traits, values, motives,   interests  and lifestyles. A psychographic  dimension  can be used by 5
itself to segment a   market,   or  it can be combined  with   other  segmentation variables.

Psychographic variables are used when purchasing behaviours correlate with the personality or lifestyles   of consumers.
 Diverse consumers   may respond  differently   to the   businesses’ marketing efforts.
For example, affluent business travellers who are used to high standards of living will expect an airline’s service to complement such a lifestyle (Swarbrooke, & Horner, 2001).
The lifestyle one leads and expects to lead greatly depends on an individual’s social status which is generally influenced by occupation. Social grades (grades in status) may be broken down as follows:

  • Higher managerial, administrative or professional.
  • Intermediate managerial, administrative or professional.
  • Supervisory, clerical and junior managerial, administrative or professional.
  • Skilled manual workers.
  • Semi or unskilled manual workers.
  • State pensioners or widows, casual or lowest grade workers.

Most business class passengers come from the A, B and C1 social grades. These people have high occupational status. They may earn high incomes and are usually accustomed to a good lifestyle.

Therefore, they may demand a very high standard of service. Marketing managers must carefully consider additional facilities for these passengers, as they should ensure their comfort,   at  all   times.

Examples   of  additional   facilities  that   could  be  provided   to  these individuals (particularly those who are in Class A) could include; separate cabin for business class, separate check-in desks, the use of private lounge, and so on. Air travel is no longer an  elitist luxury.

Although members of the A and B social grades form a substantial number of  leisure travellers, many airlines, particularly low-cost carriers are increasingly targeting lower social grades, namely, C2, D and E, as a means of exploiting the market.

4. Behavioural segmentation


Behavioral segmentation refers to the grouping of total consumers in a market into homogeneous groups based on their mutual buying behavior patterns.

There are many factors that affect the consumer behavior while responding to a product and take a decision to buy it. The consumer decision making process is greatly influenced by consumer behavior. This is how behavioral segments are targeted by marketers.

The main point behind behavioral market segmentation is to understand your customer needs and wants based on their buying behavior of product or service. Behavioral segmentation group consumers based on some similarity. This similarity is the mutual behavior of consumers towards a product.

Behavioral segmentation in marketing allows marketers to market product in a specific manner that targets their potential consumers through offering a message that caters some need and want of consumers, stimulating them to purchase the product.

Also, behavior market segmentation allows companies to create market strategies that customize their products offering something unique to consumers that they want or desire, thus proving more competitive in the market as well.

Behavioral segmentation is used generally by products or services that are a niche in nature and target specific needs and requirements of an individual.

Example of behavioural segmentation.

Behavioural segmentation that studies the behavior of consumers towards a product or service consists of different variables that are studied by marketers to accordingly devise a market strategy. Based on the particular requirement of the market, behavioral segmentation is divided into variables namely brand loyalty, benefit sought, readiness to buy/purchase, and usage based segmentation

Bases of Market Segmentation


Segmenting is dividing a group into subgroups according to some set ‘basis’. These bases range from age, gender, etc. to psychographic factors like attitude, interest, values, etc.


Gender

Gender is one of the most simple yet important bases of market segmentation. The interests, needs and wants of males and females differ at many levels. Thus, marketers focus on different marketing and communication strategies for both. This type of segmentation is usually seen in the case of cosmetics, clothing, and jewellery industry, etc.


Age group

Segmenting the market according to the age group of the audience is a great strategy for personalized marketing. Most of the products in the market are not universal to be used by all the age groups. Hence, by segmenting the market according to the target age group, marketers create better marketing and communication strategies and get better conversion rates.

Income

Income decides the purchasing power of the target audience. It is also one of the key factors to decide whether to market the product as a need, want or a luxury. Marketers usually segment the market into three different groups considering their income. These are

High Income Group
Mid Income Group
Low Income Group

This division also varies according to the product, its use, and the area the business is operating in.


Place

The place where the target audience lives affect the buying decision the most. A person living in the mountains will have less or no demand for ice cream than the person living in a desert.

Occupation

Occupation, just like income, influences the purchase decision of the audience. A need for an entrepreneur might be a luxury for a government sector employee. There are even many products which cater to an audience engaged in a specific occupation.


Usage

Product usage also acts as a segmenting basis. A user can be labelled as heavy, medium or light user of a product. The audience can also be segmented on the basis of their awareness of the product.


Lifestyle

Other than physical factors, marketers also segment the market on the basis of lifestyle. Lifestyle includes subsets like marital status, interests, hobbies, religion, values, and other psychographic factors which affect the decision making of an individual.

The Benefits Of Market Segmentation


By dividing   the   market   into   segments,   marketing   managers   can   acquire   a   better understanding of the  needs   and   wants   of   customers. This enables them to customise or to ‘tailor’ the company’s marketing activities more accurately and responsibly to the individual customers’ likings. Segmentation marketing supports businesses in meeting and exceeding their customers’ requirements. It may also allow them to evaluate the competitors’ strengths and weaknesses.
This way, they could discover business opportunities in markets which were not served well. Customer   segmentation  enables   marketers   to  adopt   a   more   systematic   approach  when planning   ahead  for   the   future. 
This   leads  to   better   exploitation  of   marketing   resources, resulting in the development of a more finely-tuned marketing programme. For example, the businesses’   integrated   marketing   communications   can   be   better   organised,   as   targeted advertising (for   example  native  advertising)  and  promotional  activities can   be directed   at individual customers.

For example, the emergence of data-driven, digital technologies such as sensor analytics, geo-location and social data-capture could track the users’
movements and other  real-time  phenomena.   These  disruptive  technologies   are  increasingly being  used   by 3
tourism  businesses as  they add value to customer-centric marketing endeavours.

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1 Comments

  1. Great Article, Being an accountant and business consulting firm Actually I was looking something regarding market segmentation and customer sub groups, you have explained things in a better way. Worth reading it.

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