PM Unit II - Topic 7

Course: ACTCC512 Paper: Principles of Marketing Semester V Unit II
Unit II
7. What do you mean by Market Segmentation? What are its importance and bases?
Introduction
Market segmentation is one of the most efficient tools for marketers to cater to their target group.
It makes it easier for them to personalise their campaigns, focus on what’s necessary, and group
similar consumers to target them in an effective manner.
The process is being practised by marketers since the late 1900s. Simple though it may be, it is of
vital use to forming any marketing plan.
Meaning of Market Segmentation

Market segmentation is a process of dividing the market of potential customers into smaller and
more defined segments on the basis of certain shared characteristics like demographics, interests,
needs, or location.
The member of these groups share similar characteristics and usually have one or more than one
aspect common among them which makes it easier for the marketer to craft marketing
communication messages for the entire group.
There are many reasons as to why market segmentation is done. One of the major reasons
marketers segment market is because they can create a custom marketing mix for each segment and
cater them accordingly.
Definition
 Philip Kotler: “Market segmentation is the sub-dividing of a market into homogeneous subsets
of customers, where any sub-set may be a distinct marketing mix.”
 Alan A. Robert: “Market segmentation is the strategy of dividing markets in order to conquer
them.” – British Policy – ‘divide and rule’
 William J. Stanton: “Market segmentation consists of taking the total heterogeneous market for
a product and dividing it into several sub-markets or segments, each of which tends to be
homogeneous in all significant aspects.”
Importance of Market Segmentation

i) Advantage over competitors: With deep study of product, policies, strategies of competitors in
different market segments, we can develop a product which is different from our competitors and
satisfy the needs of consumers.
ii) Opportunity to expand market: With market segmentation, marketer is able to create a new
market opportunity within the existing one.
iii) Discovery of marketing opportunity: Market segmentation provides the opportunity to create
and study a deep segment from the existing target markets. With extensive research, marketers
are able to create a different marketing strategy for different segment.
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iv) Awareness of consumer needs: With market segmentation, the marketers are already aware of
why the customer wants to purchase the product. All marketing activities are directed towards
customer satisfaction. With the help of segmentation, it becomes easy to measure the level of
segmentation of each segment and also to make improvement in the segmentation level. A
marketing manager can easily get to know why customer do or do not buy certain products or
services. All marketing activities are directed towards the customers’ needs.
v) Adjustments in products: Due to market segmentation, marketing manager can easily make
adjustments in the product as per the needs of concerned segment.
vi) Effective advertising: The advertising appeal is designed to create a positive impact in the
buyer's mind. The message conveyed through advertisement influences the purchasing decisions
of different buyer groups which are recognized with the help of market segmentation.
Bases of Market Segmentation

Segmenting is dividing a group into subgroups according to some set bases. These bases range
from age, gender, etc. to psychographic factors like attitude, interest, values, etc. Some of them are:
i) Gender: Gender is one of the simplest 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.
ii) Age Group: Segmenting 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.
iii) 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.
iv) 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.
v) 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.
vi) 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.
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vii) 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.
Examples of Market Segmentation

Market segmentation is a common practice among all the industries. It is not possible for a
marketer to address the mass with same marketing strategy. Here are some examples of market
segmentation to prove this point.
(a) Beauty Products: While marketing beauty products, marketers often segment the target market
according to the age of the users, the skin type, and also the occasion. A perfect example of this is
Olay.
The company developed its ‘Age Defying’ product range to cater to mature adults and
‘Clearly Clean’ range to cater to young adults and teens.
(b) Fast Food: Fast food chains like McDonald’s often segment their target audience into kids and
working adults and develop different marketing plans for both. Marketing efforts like distributing
a toy with every meal works well for kids and providing the food within 10 minutes, free WiFi,
and unlimited refills work well for working adults.
(c) Sports: Sports brands like Nike, Adidas, Reebok, etc. often segment the market based on the
sports they play which help them market the sports-specific products to the right audience.

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Course: ACTCC512 Paper: Principles of Marketing Semester V Unit II

Meaning of Market Segmentation

Importance of Market Segmentation

Bases of Market Segmentation

Examples of Market Segmentation

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