CHAPTER 08

Levels of Market Segmentation:

Mass marketing: In Mass marketing, seller engages in mass production of one

product for all customers. Mass Marketing = seller uses mass production, mass
distribution, and mass promotion of one product for all buyers. Ford & Model T
(Model A came in colors)

a. creates the largest potential market,

b. lowest production costs

c. lower prices or higher margins.

d. Problem = increased splintering of market - consumers have more ways to shop -

malls, shops. Superstores, catalogs, home shopping networks, Internet: No More one
size Marketing fits all

Market segment: A market segment consists of a group of customers who share

a similar set of needs and wants.

• A flexible market offering has 2 parts:

– a naked solution – whole segment value,
– discretionary options – some value
• Market segments defined in many ways
• One way - identify preference segments

Basic Market-Preference Patterns

• ice cream attributes -sweetness & creaminess
• Homogeneous preferences
– Figure (a) - all consumers roughly same
preferences - no segments
• Diffused preferences
– Figure (b) - consumers vary greatly in their
preferences
– scattered throughout the mapped space -
great variation in preferences. Several brands
would locate in different areas of the mapped
space and attract different markets
–
• Clustered preferences(Figure (c))
distinct clusters = natural market segments. First co. has
choice of going to center to try to appeal to all segments or
going after one or more segments, each with a specific
formulation
-Increases as number of competition increases
Niche Marketing
A niche market is a focused, targetable portion of a market.
Niche marketing is marketing a product or service in a small portion of a market that is not
being readily served by the main stream product or service markets.
Niche Market Examples:

Sector product Niche

Agriculture Organic vegetables Consumers wanting foods grown without pesticides

Agriculture Pasturized goat milk Consumers allergic to cow milk

A niche is a more narrowly defined customer group seeking a distinctive mix of

benefits. Marketers usually identify niches by dividing a segment into sub
segments.
™ An attractive niche:
– distinct set of needs
– will pay a premium for it
– niche do not attract competitors
– niche gains economies through specialization
– niche has size, profit & growth potential
Niche marketers understand customers’ needs that they willingly pay a premium
for products.

Local Marketing:
Local marketing involves marketing programs tailored (Adjust to a specific
need or market) to the needs and wants of local customer groups - cities,
neighborhoods and even specific stores. It is the customization of
marketing mix variables based on consumer, competitor, and store
characteristics.
¾ Local marketing important in countries with strong regional differences
¾ Reflects trend- grassroots marketing - get as close & personally relevant
to individual customers as possible
Customerization:
"Designing a product according to the individual's requirement is called as
Customerization." Customerization is the customization of products or services
through personal interaction between a company and the customer. A company
is customerized when it is able to dialogue with individual customers and respond
by customizing its products, services, and messages on a one-to-one basis.
Example: Dell Computers which have started selling online has brought this
concept into the picture. It has given customers to design their own PC with their
choice. They can take the Memory, Hard disk, Screen, etc. on their choice. Dell
will design compatibility and makes the customer aware of this product. Then it
depends on the customer whether to go for it or not. But 99.9% feel to go. In this
way it has made the customers to feel happy about their product and service.
Company has gained a boost in their sales by this strategy & also helps
customer satisfaction.
Segmenting Consumer Markets
The major segmentation variables—geographic, demographic, psychographic,
and behavioral segmentation —are summarized in Table 8.1

Geographic Segmentation
Dividing the market into different geographical units such as nations, states, regions,
countries, cities, or neighborhoods. The company can operate in one or a few areas, or
operate in all but pay attention to local variations. For example, Hilton Hotels customizes
rooms and lobbies according to location.

Geographic segmentation can be a useful strategy to segment markets because it:

• provides a quick overview of differences and similarities between consumers

according to geographical unit;
• can identify cultural differences between geographical units;
• takes into consideration climatic differences between geographical units;
• recognizes language differences between geographical units.

Geographic segmentation and profiling are very vital processes of marketing strategy, as
they are formulated after conducting detailed studies of the customers who belong to
different regional units. This type of market segmentation can be beneficial to identify the
preferences and needs of customers in a particular region, as per the weather
conditions, lifestyle, culture, etc. geographic segmentation can make a huge difference
in the success of a global company.

For example, a global business organization which specializes in clothing may divide the
market on the basis of the climate. This geographic segmentation of the market results
in the sale of winter clothes in a country with cold weather, but at the same time may
promote other types of clothing in some other country. Hence, geographic segmentation
variables include regional climate, population density, economic status, etc.

Demographic Segmentation

The market is divided into groups on the basis of variables such as age, family size,
family life cycle, gender, generation, education, occupation, income, religion, race,
nationality, and social class.
Demographic variables are easy to measure and are directly associated with consumer
needs and wants.
The main demographic segmentation variables are summarized below:

Age and Life cycle Stage

The consumer needs and wants change with age. According to the age and life-
cycle segmentation, consumers' age categories are divided into four segments:
child, young adult, adult, and older adult. Some companies offer similar products
in different versions according to the age and life-cycle segmentation. For
example, a vitamin manufacturer may offer a children's formula for ages 4-12, a
vitamin specially formulated for young teenagers, an adult version for adult men
and women, and a high-energy formula for people over age 50. Some marketers
will offer a product designed particularly for one specific segment of the age
cycle, such as a shampoo developed for women over 40 to help with age-related
Hair changes.

Gender

Men & women tend to have different attitudinal & behavioral orientations. Women
have traditionally been the main users of such products as hair coloring and cosmetics,
and men the main users of tools and electronics. The best examples include clothing,
hairdressing, magazines and toiletries and cosmetics.

Income, Education and Occupation: Income has long been an important

variable for distinguishing market segments. Marketers usually are interested in
affluent consumers. The major problem of segmenting the market on the basis of
income alone is that income simply indicates the ability to pay for a product, while
the actual choice may be based on personal lifestyle, taste, and values-variable
which are largely determined by education and occupation. Education,
occupation and income tend to be closely correlated in almost a cause-and -
effect relationship. High-level occupation usually require advanced educational
training.
Generation: Each generation is profoundly influenced by the times in which it
grows up—the music, movies, politics, and defining events of that period.

Social class

Many Marketers believe that a consumers "perceived" social class influences their
preferences for cars, clothes, home furnishings, leisure activities and other products &
services. There is a clear link here with income-based segmentation.

Demographic Segmentation Variables

TABLE 8.1
Major Segmentation Variables for Consumer Markets

Geographic Pacific, Mountain, West North Central, West South

region Central, East North Central, East South Central, South
Atlantic, Middle Atlantic, New England
City or metro Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-
size 100,000;
Density Urban, suburban, rural
Climate Northern, southern
Demographic Under 6, 6-11,12-19, 20-34, 35-49, 50-64, 65+
age
Family size 1-2,3-4,5+
Family life cycle Young, single; young, married, no children; young,
married, youngest child under young, married, youngest
child 6 or over; older, married, with children; older, under
18; older, single; other
Gender Male, female
Income Under $10,000; $10,000-$15,000; $15,000-$20,000;
$20,000-$30,000; $30,000-$50,000; $50,000-3100,000;
$100,000 and over
Occupation Professional and technical; managers, officials, and
proprietors; clerical sales; craftspeople; forepersons;
operatives; farmers; retired; students; homemakers;
unemployed
Education Grade school or less; some high school; high school
graduate; some college; college graduate
Religion Catholic, Protestant, Jewish, Muslim, Hindu, other
Race White, Black, Asian, Hispanic
Generation Baby boomers, Generation Xers
Nationality North American, South American, British, French,
German, Italian, Japanese
Social class Lower lowers, upper lowers, working class, middle class,
upper middles, lower uppers, upper uppers
Psychographic Culture-oriented, sports-oriented, outdoor-oriented
lifestyle
Personality Compulsive, gregarious, authoritarian, ambitious
Behavioral Regular occasion, special occasion
occasions
Benefits Quality, service, economy, speed
User status Nonuser, ex-user, potential user, first-time user, regular
user
Usage rate Light user, medium user, heavy user
Loyalty status None, medium, strong, absolute
Readiness Unaware, aware, informed, interested, desirous, intending
stage to buy
Attitude toward Enthusiastic, positive, indifferent, negative, hostile
product