Marketing management-II

Unit-1- Buyer’s behaviour

Marketing segmentation:-
Market segmentation is a way of aggregating prospective buyers into groups or segments,
based on demographics, geography, behavior, or psychographic factors, in order to better
understand and market to them.

Companies can generally use three criteria to identify different market segments:
1.​ Homogeneity, or common needs within a segment
2.​ Distinction, or being unique from other groups
3.​ Reaction, or a similar response to the market

An athletic footwear company, for example, might have market segments for basketball
players and long-distance runners. As distinct groups, basketball players and long-distance
runners respond to very different advertisements. Understanding these different market
segments enables the athletic footwear company to market its branding appropriately.

Market segmentation is an extension of market research that seeks to identify targeted groups
of consumers to tailor products and branding in a way that is attractive to the group. The
objective of market segmentation is to minimize risk by determining which products have the
best chances of gaining a share of a target market and determining the best way to deliver the
products to the market. This allows the company to increase its overall efficiency by focusing
limited resources on efforts that produce the best return on investment (ROI).

Bases of market segmentation:-

1) Demographic segmentation:-
Dividing a market into groups based on demographic variables such as age, gender, income,
education level, geographic location, etc. With exhaustive data of people profiles businesses
shape their products and marketing strategies to better meet the needs and preferences of
specific groups of consumers. Grouping people with the same attributes provides statistical
data that a company can use to better understand the population.

For example, a company that sells baby products might use demographic segmentation to
target parents with young children, while a company that sells luxury cars might use
demographic segmentation to target high-income individuals. By identifying the demographic
characteristics of their potential customers, companies can more effectively target their
marketing efforts and increase the likelihood of making a sale.

Another example of demographic segmentation might be a clothing retailer that uses

demographic segmentation to understand the fashion preferences of different age groups. By
understanding these preferences, the retailer can design and market its products in a way that
is more appealing to these different groups of consumers.
Demographic segmentation can also be used to improve the customer experience. For
example, a bank might use demographic segmentation to understand the financial needs and
preferences of different age groups. By understanding these needs and preferences, the bank
can design its products and services in a way that is more tailored to the needs of these
different groups of customers. This can help the bank provide a more personalized and
satisfying experience for its customers.

Grouping people in a certain region by their occupation helps identify talents easily. For
example, software engineers in singapore.in any particular field. There is lot more used cases
of demographic segmentation to reach goals.

2) Firmographic segmentation:-
For companies and organizations that target other businesses, the way of firmographic
segmentation help them better with understanding their market opportunities. The market is
grouped based on firmographic variables such as industry, company size, no. of employees
and revenue. This type of segmentation is often used by B2B companies to better understand
the needs and preferences of different types of businesses.

For example, a business that sells office supplies might use firmographic segmentation to
target different industries with different marketing campaigns. They might create a campaign
targeted at law firms with high-end legal pads and pens, and another campaign targeted at
tech companies with ergonomic computer accessories.
Similarly, a business that provides consulting services might use firmographic segmentation
to target different company sizes with different marketing campaigns. They might create a
campaign targeted at small businesses with customized services, and another campaign
targeted at large enterprises with comprehensive solutions.
Overall, firmographic segmentation allows businesses to better understand the needs and
preferences of different types of businesses, and tailor their products and marketing strategies
accordingly.

3) Geographic segmentation :-
It is the process of dividing a market into geographic regions or areas, such as by country,
state, city, or neighborhood. This type of segmentation can help businesses tailor their
products and marketing strategies to better meet the needs of customers in specific
geographic areas.

For example, a restaurant chain might use geographic segmentation to target different regions
with different marketing campaigns. They might create a campaign targeted at customers in
coastal cities with seafood dishes, and another campaign targeted at customers in the Midwest
with meat and potatoes dishes.
Similarly, a retail chain might use geographic segmentation to target different cities with
different marketing campaigns. They might create a campaign targeted at customers in New
York City with high-end fashion items, and another campaign targeted at customers in Los
Angeles with casual and laid-back clothing.
Overall, geographic segmentation allows businesses to better understand the needs and
preferences of customers in different geographic areas, and tailor their products and
marketing strategies accordingly.

4) Psychographic segmentation:-
It is the process of dividing a market into groups based on psychological factors such as
lifestyle, values, attitudes, and interests. This type of segmentation can help businesses better
understand the motivations and preferences of different groups of customers.

For example, a luxury car manufacturer might use psychographic segmentation to target
different lifestyle groups with different marketing campaigns. They might create a campaign
targeted at active and adventurous consumers with rugged off-road vehicles, and another
campaign targeted at upscale and sophisticated consumers with sleek and stylish sedans.

Similarly, a travel company might use psychographic segmentation to target different groups
with different marketing campaigns. They might create a campaign targeted at families with
young children with kid-friendly resorts and activities, and another campaign targeted at
retirees with luxury cruises and exotic destinations or campaigns for art and culture fans by
highlighting events like the Light Festival Boat Tour in Amsterdam and others.

Overall, psychographic segmentation allows businesses to better understand the motivations

and preferences of different groups of customers, and tailor their products and marketing
strategies accordingly.

5) Behavioral segmentation:-
It is the process of dividing a market into groups based on how consumers behave, such as
their purchasing habits, usage patterns, and brand loyalty. This type of segmentation can help
businesses tailor their products and marketing strategies to better meet the needs of different
groups of consumers.

For example, a mobile phone provider might use behavioral segmentation to target different
groups of consumers with different marketing campaigns. They might create a campaign
targeted at heavy phone users with unlimited data plans, and another campaign targeted at
light phone users with more affordable options.

Similarly, a supermarket chain might use behavioral segmentation to target different groups
of consumers with different marketing campaigns. They might create a campaign targeted at
loyal customers with personalized discounts and offers, and another campaign targeted at
infrequent customers with special promotions and deals.

Overall, behavioral segmentation allows businesses to better understand the purchasing habits
and preferences of different groups of consumers, and tailor their products and marketing
strategies accordingly.
6) Need-based segmentation:-
It is the process of dividing a market into groups based on the specific needs and
requirements of different groups of consumers. This type of segmentation can help businesses
better understand the unique needs and preferences of different groups of customers, and
tailor their products and marketing strategies accordingly.

For example, a health insurance company might use need-based segmentation to target
different groups of consumers with different marketing campaigns. They might create a
campaign targeted at families with young children with coverage for pediatric care and
vaccines, and another campaign targeted at seniors with coverage for chronic conditions and
long-term care.

Similarly, a bank might use need-based segmentation to target different groups of consumers
with different marketing campaigns. They might create a campaign targeted at students with
low-interest student loans and financial literacy resources, and another campaign targeted at
small business owners with business loans and financial planning services.
Overall, need-based segmentation allows businesses to better understand the unique needs
and preferences of different groups of customers, and tailor their products and marketing
strategies accordingly.

Process of market segmentation:-

1) Determination of the Need of the Segment:-
The first and foremost step of market segmentation is to determine the needs of the customers
and how can the business then group the customers on the basis of their needs. While
determining the needs of the customers, the marketer has to think about the consumption of
customers or what the customers would like to have.

For example, a region has many regular restaurants, but no restaurants which serve
continental food. So a marketer determined the need of customers for restaurants serving
continental food or cafes in that particular region.

2) Identification of the Segment:-

After determining the need of the customers, it is essential to determine the customers who
will prefer that product or service. For this, a marketer must assess different segments to
ascertain their distinctive features, similarities, and differences after effectively identifying
each target market. A marketer needs to be aware of the unique qualities of each segment. It
is necessary to create a unique profile for each segment. Additionally, each market niche
requires a different marketing plan.

For example: Using the same above example, the target demographic will include children,
teenagers, and middle-aged folks. Elderly people do not generally like continental food and
usually prefer food that is easy to chew. Or there can be psychographic segmentation based
on the lifestyle of people, like people living with high standards preferring continental food,
etc.

3) Deciding which Segment is Most Attractive:-

The market should assess each market segment at this step of the market segmentation
process to determine their value for marketing activities. It means that the marketer will have
to choose the segment, which is most attractive for him. If marketers use psychographic
segmentation, they must target the psychology of their customers, but it requires time. As a
result, marketers can’t expand more quickly. However, if the company’s offer is simple, it can
use demographic segmentation as a foundation and develop considerably faster in
neighbouring regions.

The following factors could be taken into account by a marketer when assessing market
segments:

●​ Accessibility to that market sector.

●​ Cost of entering a new segment.
●​ Consumer’s desire for goods and services.
●​ Firm’s competitive position.
●​ Size of the segment and anticipated profit.
●​ Goals and objectives of a potential company in the target market.
●​ Marketing strategy necessary to target a certain segment.

For example: Considering the preceding example, the marketer notices that he has more
middle-aged and young individuals in the area around him. As a result, he should market his
store at malls, near colleges/universities/offices, etc., where this target audience is likely to
visit. Young people like to eat and try dishes from different countries of the world and then
suggest their parents for the same. So the first target is the young population, and the second
target is the middle-aged. Thus, the marketer has used a combination of geographic (by
determining the need in that region) and demographic (by determining the age group)
segmentation.

4) Determining the Profitability of the Segment:-

In this step, a marketer ultimately chooses the ideal market segment after properly evaluating
each market segment. The market sector that offers the company the most opportunities is
considered to be the most appropriate one. The prospects, in this case, relate to the firm’s
profitability, reputation, ability to achieve its aims and objectives, competitiveness in the
market, sustainability, etc. A company will choose more than one market sector if it believes
there are enough prospects to enter more than one. For each of the target markets, the brand
must employ a different marketing strategy.

For example: Following the same example, the restaurant owner determines that his young
customers are quite profitable; however, the middle-aged customers are not. Most
middle-aged people usually prefer Indian cuisines and feel proper satisfaction after eating that
only. This lowers the profitability of the restaurant.

5) Positioning for the Segment:-

Once the target market is selected, it is important to develop a product positioning strategy.
Product Positioning refers to setting up strategies to ensure that the product resides in the
minds of target market consumers. To make the target market more approachable, the
marketer must determine the characteristics and pictures of each competitor’s product and
establish a position for it. Because the product may be very new to the market or the market
may be very new to the company, the marketer may not reach the market so easily after
choosing a target market. The marketer must create a positioning strategy that is attractive to
potential clients.

For example: In the preceding example, the restaurant owner viewed middle-aged people to
be unprofitable. So, in order to change the mindset of middle-aged people, which has proved
to be unprofitable, the owner can simply offer Indian cuisine along with continental food. By
doing this, the owner has created a mindset among people that even though there are several
good restaurants serving Indian food in the nearby areas, this restaurant offers continental
food along with it. As a result, both the middle-aged and young target groups can have fun.

6) Expanding the Segment:-

Scalability is required for all segments. So once a segment has been discovered, it must be in
a way that the firm may expand with the type of segmentation selected. If the segment is
extremely narrow, the business will eventually fail. As a result, segment expansion is the
second last step in market segmentation.

For example: In the preceding scenario, the owner can open up a Continental restaurant
mixed with an Indian food chain. In the beginning, the marketer was using a blend of
demographic and geographic segmentation. Now, he can consider additional geographic
sectors in other regions where he may use the same approach and build a business. Besides,
with expansion, the owner can earn more profit.

7) Incorporating Segmentation into the Marketing Strategy:-

The final step of marketing segmentation involves understanding the target market and using
the appropriate marketing plan for the target market that will satisfy them and help the firm
achieve its goals. The marketer can use several elements of the marketing mix to readily
engage with the target audience to create an efficient marketing plan and program. Finally, a
marketer may put his positioning plan into action to accomplish organisational goals.
Furthermore, they must assess the effectiveness of the positioning strategy and marketing
plan to determine whether they are performing as expected or not.

For your reference only:-

Process of market segmentation:-

1) Setting Expectations/Objectives:-
What is the purpose or goal of performing market segmentation?
What does the company hope to find out by performing marketing segmentation?
Does the company have any expectations on what market segments may exist?

2) Identify Customer Segments:-

What segments are the company's competitors selling to?
What publicly available information (i.e. U.S. Census Bureau data) is relevant and available
to our market?
What data do we want to collect, and how can we collect it?
How should we segment customers?

3) Evaluate Potential Segments:-

What risks are there that our data is not representative of the true market segments?
Why should we choose to cater to one type of customer over another?
What is the long-term repercussion of choosing one market segment over another?
What is the company's ideal customer profile, and which segments best overlap with this
"perfect customer"?

4) Develop Segment Strategy:-

How can the company test its assumptions on a sample test market?
What defines a successful marketing segment strategy?
How can the company measure whether the strategy is working?

5) Launch and Monitor:-

Who are the key stakeholders that can provide feedback after the market segmentation
strategy has been unveiled?
What barriers to execution exist, and how can they be overcome?
How should the launch of the marketing campaign be communicated internally?