MARKETING

UNIT - II
MARKET SEGMENTATION AND
CONSUMER BEHAVIOUR
 MARKET SEGMENTATION
What Is Market Segmentation?
Market segmentation is a marketing term that refers to
aggregating prospective buyers into groups or segments with
common needs and who respond similarly to a marketing action.
Market segmentation enables companies to target different
categories of consumers who perceive the full value of certain
products and services differently from one another.
WHY MARKET SEGMENTATION ?
❑ To develop marketing activities
❑ Increase marketing effectiveness
❑ Understanding customers & generate greater customer
satisfaction
❑ Design a Marketing Mix that precisely matches the expectation
of customers in the targeted segment
❑ Adjustment of product to the market need
❑ To overcome competition effectively
❑ To contribute towards achieving company goals
 DEFINITIONS OF MARKET
SEGMENTATION
“ Market segmentation is the process of dividing the total
heterogeneous market for a product into several segments, each
of which tends to be homogeneous in all significant aspects” –
WILLIAM J.STANTON
“ Market segmentation is dividend a market unto distinct group
of buyers with different needs characteristics, or behaviour who
might require separate products or marketing mixes” – PHILIP
KOTLER
PATTERNS OF MARKET SEGMENTATION
Homogeneous Preferences: When the customers have relatively the
same kind of preferences in terms of their needs and wants, the market
shows no natural segments.
Diffused Preferences: It is the extreme of the homogeneous preferences,
here the customer’s preferences vary significantly. In such scenario, there are
several brands in the market that try to fill the space and show the real
differences to match the different customer’s preferences.
Clustered Preferences: The clustered preferences, refer to the natural
segments that get created due to the shared preferences of a group of
customers.
BENEFITS OF MARKET SEGMENTATION

1. More customer retention

A personalized connection with your customers will help you to
win satisfied customers.
About 75% of satisfied customers are more likely to remain with
that organization who regularly meet up their needs.
2. Enhances Competitiveness
More customer retention. More will be the revenue generation. And all
of this will enhance your competitiveness in the market. If you segment
up your market, you are well known to your customers & accordingly.
You will work to give them the expected result.
3. Establishes Brand Identity
By segmenting your customers, you can make them well aware of your
brand. Identifying your brand will help your customers to directly
engage with your products. This will increase your goodwill in the
market & a brand value will be established among your other
competitors.
4. Better Customer Relationship
Better Customer segmentation will lead to developing a better
relationship with your prospective customers. This will leave for
developing better relationship for your client base. Communicate
with your customers on their queries & requests. Regular
communication will make you update about the new upcoming
changes & opportunities to be availed of.
5. Leads to Price Optimization
Try to understand the social and financial status of your
customers. This data will assist you to pace up with the price
optimization accordingly.
6. Best economies of scale
Customer segmentation helps in better allocation of resources
which in return helps you to gain economies of scale. Economies
of scale mean when you are able to achieve your desired goal and
that too at most efficient cost. This can be done through customer
segmentation. Therefore, try to focus on a limited number of
resources which will help to serve with resources.
7. Improves Channel of Distribution
Customer segmentation will improve your channel of
distribution. By knowing the right number of customers you can
direct the right channel of distribution. This will remove
confusion among your team members about whom they have to
deliver the product & at what time.
ADVANTAGES OF MARKET SEGMENTATION

1. Proper choice of target market: The market for any product is made
up of several segments. A market is the aggregate of consumers of a given
product. Consumers are not a homogeneous lot. They differ a lot in their
characters and buying behaviour. Thus, many differing segments exist in a
market. Market segmentation helps the marketer divide the heterogeneous
market. It is possible to distinguish one customer group from another.
2. Tapping a particular market: Segmentation enables the
marketer to understand the needs of the customers and serve
them well. Prediction of the likely response from each segment is
possible. With homogeneous responses from each segment,
marketer finds it easy to develop an appropriate marketing
programme. By tailoring the marketing programmes to individual
market segments, marketers perform their tasks effectively.
3. Efficient And Economic Marketing Efforts:
Segmentation makes marketing efforts both efficient and
economic. Marketers segment the market and try to fulfil the
needs of that segment. It helps in designing the kinds of
promotional devices that are effective from the view point of
customers.
4. Benefits To The Customer: Segmentation benefits not only
the marketer but the customer as well. It distinguishes one
customer group from another within a given market. It helps the
marketer concentrate on the fulfilment of the well defined needs
of the specific segment. Now-a-days, segmentation has attained a
high degree of sophistication.
DISADVANTAGES OF MARKET SEGMENTATION

1. Sometimes, market segmentation becomes an expensive

proposition. A marketer experiences considerable difficulties, as
he has to develop different marketing mixes for different
segments. Moreover, mass production is much cheaper than
making a variety of products.
2. Promotional expenses, costs of keeping adequate inventory of
each variety of goods etc., also go up, eroding profitability.
3. Since the marketer has to implement varying marketing
programmes suiting to the different segments, administrative
expenses increase.
BASES FOR MARKET SEGMENTATION
GEOGRAPHIC SEGMENTATION:
Geographic segmentation refers to dividing a market into
different geographical units such as nations, states, regions, cities,
or neighbourhoods. For example, national newspapers are
published and distributed to different cities in different languages
to cater to the needs of the consumers.
Geographic variables such as climate, terrain, natural resources,
and population density also influence consumer product needs.
Companies may divide markets into regions because the
differences in geographic variables can cause consumer needs and
wants to differ from one region to another.
DEMOGRAPHIC SEGMENTATION

The demographic segmentation means dividing the customer

market on the basis of several variables such as age, sex, gender,
occupation, income, education, marital status, family size,
community, social status, etc. Such segmentation is based on the
premise, that customer’s buying behaviour is very much
influenced by his demographics, and moreover, these variables
can be measured easily as compared to the other factors.
 PSYCHOGRAPHIC SEGMENTATION
The psychographic segmentation relates to the personality, lifestyle, and
attitude of the individual. It is believed that the consumer buying behaviour
can be determined by his personality and lifestyle. The personality refers to
the traits, attitudes and habits of an individual and the market is segmented
according to the personal traits such as introvert, extrovert, ambitious,
aggressiveness, etc.
The lifestyle means the way a person lives his life and do the expenditures.
Here the companies segment the market on the basis of interest, activities,
beliefs and opinions of the individuals.
 Behavioural Segmentation:
Here, the marketer segments the market on the basis of the individual’s
knowledge about the product and his attitude towards the usage of the
product. Several behavioural variables are occasions, benefits, user status,
usage rate, buyer readiness stage, loyalty status and the attitude.
The buyers can be classified as those who buy the product or services
occasionally, or who buy only those products from which they derive some
sort of benefits. Also, there are buyers who can be called as ex-users,
potential users, first-time users and regular users; the marketers can
segment the market on this classification. Often, the market is segmented on
the basis of the usage rate of the customers, such as light, medium and heavy
users.
INTRODUCTION OF CONSUMER
BEHAVIOUR
CONSUMER BEHAVIOUR
Consumer behaviour is the study of how individual customers, groups
or organizations select, buy, use, and dispose ideas, goods, and
services to satisfy their needs and wants. It refers to the actions of the
consumers in the marketplace and the underlying motives for those
actions.
Marketers expect that by understanding what causes the consumers to
buy particular goods and services, they will be able to determine—
which products are needed in the marketplace, which are obsolete,
and how best to present the goods to the consumers.
DEFINITIONS OF CONSUMER BEHAVIOUR

According to Engel, Blackwell, and Mansard, ‘consumer

behaviour is the actions and decision processes of people who
purchase goods and services for personal consumption’.
According to Louden and Bitta, ‘consumer behaviour is the
decision process and physical activity, which individuals engage in
when evaluating, acquiring, using or disposing of goods and
services’.
NEED FOR STUDYING CONSUMER BEHAVIOUR

1. To satisfy need of customers

Consumers respond favourably while evaluating the products that best satisfy
their needs. A marketer studies how consumers spend their available
resources on the consumption of related items. It includes the study of what
they buy, when they buy it, where they buy it and how often they use it. So,
a knowledge of consumer behaviour will be of immense help to the
marketer which will help to satisfy their needs.
2.Helps to understand consumer psychology
The study of consumer behaviour enables the marketer to understand the
psychology of consumers. Consumer psychology is based on his knowledge,
attitude, intention and motive.
3. Helps to understand consumer motives
A study of the behaviour of a consumer is essential to understand his/her
buying motives. A motive is an urge for which an individual seeks
satisfaction.
4. Helps to understand consumer choices
It is important for the marketer to understand how consumers make their
choices. Human beings are usually very rational.They make systematic use
of information available to them before they buy. A marketer studies the
behaviour of the customer and accordingly alter his presentation, enticing
the customer to go for the product.
5. Helps to understand consumer preferences
According to Peter F. Drucker ,Adam Smith has stated that consumption is
the sole end and purpose of all production. So, a firm must plan its
production and distribution to suit the needs of consumers. Thus, the extent
of consumer understanding determines the effectiveness of marketing
mechanism.
TYPES OF BUYING BEHAVIOUR
1. Complex buying behaviour
This type of behaviour is encountered when consumers are buying an
expensive, infrequently bought product.They are highly involved in the
purchase process and consumers’ research before committing to invest.
Imagine buying a house or a car; these are an example of a complex buying
behaviour.
2. Dissonance-reducing buying behaviour
The consumer is highly involved in the purchase process but has difficulties
determining the differences between brands. ‘Dissonance’ can occur when
the consumer worries that they will regret their choice. Imagine you are
buying a lawnmower.You will choose one based on price and convenience,
but after the purchase you will seek confirmation that you’ve made the right
choice.
3. Habitual buying behaviour
Habitual purchases are characterized by the fact that the consumer has very
little involvement in the product or brand category. Imagine grocery
shopping: you go to the store and buy your preferred type of bread.You are
exhibiting a habitual pattern, not strong brand loyalty.
4. Variety seeking behaviour
In this situation, a consumer purchases a different product not because they
weren’t satisfied with the previous one, but because they seek variety. Like
when you are trying out new shower gel scents.
TYPES OF BUYING MOTIVES
RATIONAL BUYING MOTIVES
1. Durability
Customers always wish to purchase products that have the longest possible
life span, needing least maintenance. Unless they are satisfied by the quality,
reliability and durability of the product, they would not buy it. The salesman
while appealing to this motive, should emphasize the durability, quality and
reliability factors while selling products like radio, furniture, fan, raincoat,
umbrella, scooter, refrigerator, etc.
2. Suitability
A product is regarded suitable if it suits the needs of the buyers. If product
such as wall clock, emergency light, refrigerator, give him maximum utility,
then they are inclined to purchase it. Thus, the customers are always
conscious about the suitability factor while purchasing.
3. Variety of uses
It is common to find that some customers prefer a product when it can be
used for a variety of purposes. In fact, a rational buyer always takes into
account the additional benefits he will derive out of the article. In other
words, he always wants to get maximum benefits out of minimum spending.
For example, he prefers a sofa-cum-bed instead of an ordinary sofa.
4. Economy
Most customers prefer products that are economical. This is particularly
true in case of durable, staple and routinely used goods. Some economy
minded people visit several shops to purchase the best buy for a limited
amount of money.
5. Safety
People are generally afraid of losing their health and wealth. Further, people
also fear losing their prestige. Man cannot get rid of his fears unless and until
certain precautionary measures are taken.Therefore, the motive of safety
plays an important role in buying articles like medicines, electrical
appliances and services like insurance, savings bank account, hiring lockers
in banks, etc.
6. Convenience
Some customers prefer convenience attached to a product though it may be
slightly expensive. People, therefore, require luxury goods which are
convenient to them and provide comfort and status at the same time. This is
an important buying motive for selling goods like wrist watches, grinders,
washing machines, air conditioners, etc. These goods are popular among
customers because of the motive of convenience.
EMOTIONAL BUYING MOTIVES

1. Pride
People always want to be admired and appreciated by the members of the
society. They want to be respected by others and feel proud of their social
status, activities and achievements. They are always careful about their
dignity and status. Therefore, people purchase expensive luxury goods in
order to prove a point to themselves and others. In fact, this is one of the
strongest buying motives.
2. Fashion or Imitation
Fashion or imitation is closely related to the motive of pride. People
generally try to copy or imitate others, particularly the movie stars,
sportsmen, etc. Imitation takes place when they are impressed by the dress,
behaviour, hair style and other manners like walking, speaking, etc.
3. Attraction towards opposite sex
The appeal of sex and romance plays a very important role in certain
articles. It is, natural that buyers want to love and be loved by the opposite
sex. Appeals to this motive are therefore made to sell a number of products
like perfumes, deodorants, after shave lotions, hair cream, shampoo, face
powder, clothing, sunglasses, shoes and services like beauty parlour, travel,
hair dyeing and so on.
4. Comfort
comfort is a very important motive in connection with sale of luxury
articles. These goods include washing machines, cars, etc. These products
save labour and time. Factors like noise, space, thirst, hunger etc., affect the
concept of comfort. The salesman has to appeal to these factors while selling
comfort articles.
5. Affection for family
Human beings have an inborn urge to always care for their family. Affection
and love for family, society and motherland often drives consumers to buy
certain articles. Affection for children may be responsible for buying things
like baby food, chocolates, toys, dresses, biscuits, etc.
6. Habits
Man is a slave of habits. Habits are easy to cultivate but hard to break. Habits
once made become the basic need. Habits like smoking cigarettes, drinking
tea, coffee, soft drinks, stitching clothes only at a particular shop, buying
ready-made garments from a particular shop, very often provide the
stimulus for the consumer to buy certain articles or services
PATRONAGE BUYING MOTIVE
1. Service motive : service is an important motive which inspires the
customers to purchase the goods. Customers purchase the goods to get the
services, such as credit facility, home delivery facility, free installation, free
repair and maintenance service.
2. Quality : Due to the quality of the goods, customers are motivated to
purchase certain goods or services. If products assure the quality, the
customers are even ready to pay the higher price of such goods.
3. Location: Location also affects to purchase the goods. Customers prefer
to buy those goods which are easily available near their home or locality.
4. Store Loyalty: Store loyalty is another important element which plays
significant role in buying motive. We purchase different goods due to the
loyalty of the store such as attractive appearances, trust in weight, quality,
price etc.
5. Brand Loyalty : If any customers buy only certain brand repeatedly this
called brand Loyalty. This indicates that the consumer is fully satisfied with
the goods or services.
MASLOW'S HIERARCHY OF NEEDS
1: Physiological Needs
Physiological needs are the lowest level of Maslow’s hierarchy of needs. They
are the most essential things a person needs to survive. They include the
need for shelter, water, food, warmth, rest, and health. A person’s
motivation at this level derives from their instinct to survive.
2: Safety Needs
The second level of Maslow’s hierarchy of needs consists of safety needs.
Safety, or security needs, relate to a person’s need to feel safe and secure in
their life and surroundings. Motivation comes from the need for law, order,
and protection from unpredictable and dangerous conditions.
3: Social Needs
The third level of Maslow’s hierarchy of needs is love and belonging needs.
Humans are social creatures that crave interaction with others. This level of
the hierarchy outlines the need for friendship, intimacy, family, and love.
Humans have the need to give and receive love; to feel like they belong in a
group.When deprived of these needs, individuals may experience loneliness
or depression.
4: Esteem Needs
The fourth level of Maslow’s hierarchy of needs is esteem needs. Esteem
needs are related to a person’s need to gain recognition, status, and feel
respected. Once someone has fulfilled their love and belonging needs, they
seek to fulfil their esteem needs.
Maslow broke up esteem needs into two categories: the need for respect
from others and the need for respect from oneself. Respect from others
relates to achieving fame, prestige, and recognition. Respect from oneself
relates to dignity, confidence, competence, independence, and freedom.
5: Self-Actualization Needs
The fifth and final level of Maslow’s hierarchy of needs is self-actualization
needs. Self-actualization relates to the realization of an individual’s full
potential. At this level, people strive to become the best that they possibly
can be.
The need for self-actualization can manifest in different ways, such as:
 Obtaining skills
 Continued education
 Utilizing skills, knowledge, and talents
 Pursuing life dreams
 Seeking happiness
CONSUMER BUYING DECISION PROCESS
Stage 1 − Needs Recognition
It is the first stage of the buying process where the consumer recognizes a
problem or a requirement that needs to be fulfilled.The requirements can
be generated either by internal stimuli or external stimuli. In this stage, the
marketer should study and understand the consumers to find out what kinds
of needs arise, what brought them about, and how they led the consumer
towards a particular product.
Stage 2 − Information Search
In this stage, the consumer seeks more information.The consumer may have
keen attention or may go into active information search. The consumer can
obtain information from any of the several sources. This include personal
sources (family, friends, neighbours, and acquaintances), industrial sources
(advertising, sales people, dealers, packaging), public sources (mass media,
consumer-rating and organization), and experiential sources (handling,
examining, using the product).The relative influence of these information
sources varies with the product and the buyer.
Stage 3 − Evaluation of Alternatives
In this stage, the consumer uses information to evaluate alternative brands
from different alternatives. How consumers go about evaluating purchase
alternatives depends on the individual consumer and the specific buying
situation. In some cases, consumers use logical thinking, whereas in other
cases, consumers do little or no evaluating; instead they buy on aspiration
and rely on intuition. Sometimes consumers make buying decisions on their
own; sometimes they depend on friends, relatives, consumer guides, or sales
persons.
Stage 4 − Purchase Decision
In this stage, the consumer actually buys the product. Generally, a consumer
will buy the most favourite brand, but there can be two factors, i.e.,
purchase intentions and purchase decision. The first factor is the attitude of
others and the second is unforeseen situational factors. The consumer may
form a purchase intention based on factors such as usual income, usual price,
and usual product benefits.
Stage 5 − Post-Purchase Behaviour
In this stage, the consumers take further steps after purchase based on their
satisfaction and dissatisfaction. The satisfaction and dissatisfaction depend on
the relationship between consumer’s expectations and the product’s
performance. If a product is short of expectations, the consumer
is disappointed. On the other hand, if it meets their expectations, the
consumer is satisfied. And if it exceeds their expectations, the consumer
is delighted.
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