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L 16. MARKETING MANAGEMENT – MARKET SEGMENTATION AND

MARKETING MIX

Definition
Market segmentation is a method of dividing a large market into smaller
groupings of consumers or organisations in which each segment has a common
characteristic such as needs or behaviour.
Market segmentation is the sub-dividing of market into homogeneous sub-
sections of customers, where any sub-section may conceivably be selected as a
market target to be reached with a distinct marketing mix.
-Philip Kotler
Market segmentation consists of taking the total heterogeneous market for a
product and dividing it into several submarkets or segments, each of which
tends to be homogeneous in all significant aspects.
W.J. Stanton
BASES FOR MARKET SEGMENTATION
Markets may be segmented on the basis of geographic, demographic, socio-
economic, psychographic and buyer behaviour variables. The common bases of marketing
segmentation are as follows:
 Geographic Segmentation
 Demographic Segmentation
 Economic Segmentation
 Psychographic Segmentation
 Buyer Behaviour Segmentation
 Volume Segmentation
 Benefit Segmentation
(i) Geographic Segmentation
Here, a marketer divides the target market into different geographical units such as
nations, states and regions. He may decide to operate in one or more than one geographical
areas. Example: A particular brand may be popular only in North India, then the North
Indian market can be divided on the bases of zones, villages, cities, climate, etc. A
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classic example of geographic segmentation is Amul which was initially marketed

only in Gujarat.
(ii) Demographic Segmentation
In demographic segmentation, a marketer divides the market on the bases
of demographic factors like age, sex, family size, marital status, religion and
language. For example: Cosmetic manufacturers and food manufacturers
particularly keep in mind the age-categories.
(iii) Economic Segmentation
Market segmentation on the basis of income levels is used by most of the
marketers of consumer goods. Most of marketing research activities and studies of
consumer behaviour are also based on the income levels of the consumers.
Example: Proctor & Gamble and HLL Products.
(iv) Psychographic Segmentation
It involves developing sub-group identification on the basis of
psychological characteristics. For example, perceptions, attitudes, opinions, interests
or a combination of these.

(v) Buyer Behaviour Segmentation

In the case of buyer behaviour segmentation, the market is divided on the basis of
purchase decisions made by various groups.

(vi) Volume Segmentation

In the case of volume segmentation, quantity purchased is the basis for

segmentation. For example, bulk buyers, small-scale buyers, regular buyers and one-time
buyers.
(vii) Benefit Segmentation
Benefit segmentation involves classifying buyers according to the benefits they get
from the product.

Market Targeting
Once the firm has identified its market-segment opportunities, it has to decide
how many and which ones to target.
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Evaluating and Selecting the Market Segments

In evaluating different market segments, the firm must look at two factors: the
segment's overall attractiveness and the company's objectives and resources. Does a potential
segment have characteristics that make it generally attractive, such as size, growth,
profitability, scale economies, and low risk? Does investing in the segment make sense given
the firm's objectives, competencies, and resources? Some attractive segments may not mesh
with the company's long-run objectives, or the company may lack one or more necessary
competencies to offer superior value.
Having evaluated different segments, the company can consider five patterns of tar-
get market selection.

SINGLE-SEGMENT CONCENTRATION

Volkswagen concentrates on the small-car market and Porsche on the sports car
market. Through concentrated marketing, the firm gains a strong knowledge of the segment's
needs and achieves a strong market presence. Furthermore, the firm enjoys operating
economies through specializing its production, distribution, and promotion. If it captures
segment leadership, the firm can earn a high return on its investment.
However, concentrated marketing involves risks. A particular market segment can
turn sour. When young women suddenly stopped buying sportswear, Bobbie Brooks's
earnings fell sharply; or a competitor may invade the segment. For these reasons, many
companies prefer to operate in more than one segment.
SELECTIVE SPECIALIZATION
The firm selects a number of segments, each objectively attractive and
appropriate. There may be little or no synergy among the segments, but each promises to
be a moneymaker. This multisegment strategy has the advantage of diversifying the firm's
risk.
Consider a radio broadcaster that wants to appeal to both younger and older listeners.
Emmis Broadcasting owns New York's KISS-FM, which describes itself as "smooth R&B
[Rhythm and blues] and classic soul" and appeals to older listeners, and WQHT-FM ("Hot
97”), which plays hip-hop (urban street music) for listeners in the under-25 crowd.'
PRODUCT SPECIALIZATION
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The firm makes a certain product that it sells to several segments. An example
would be a microscope manufacturer who sells to university, government, and commercial
laboratories. The firm makes different microscopes for the different customer groups and
builds a strong reputation in the specific product area. The downside risk is that the product
may be supplanted by an entirely new technology.
MARKET SPECIALIZATION
The firm concentrates on serving many needs of a particular customer group. An
example would be a firm that sells an assortment of products only to university laboratories.
The firm gains a strong reputation in serving this customer group and becomes a channel for
additional products the customer group can use. The downside risk is that the customer
group may suffer budget cuts.
FULL MARKET COVERAGE
The firm attempts to serve all customer groups with all products they might need.
Only very large firms such as IBM (computer market), General Motors (vehicle market),
and Coca-Cola (drink market) can undertake a full market coverage strategy. Large firms
can cover a whole market in two broad ways: through undifferentiated marketing or
differentiated marketing.
In undifferentiated marketing, the firm ignores segment differences and goes
after the whole market with one offer. It designs a product and a marketing program that
will appeal to the broadest number of buyers. It relies on mass-distribution and mass-
advertising. It aims to endow the product with a superior image in people’s minds.
Undifferentiated marketing is "the marketing counterpart to standardization and mass
production in manufacturing." The narrow product line keeps down cost of research and
development, production, inventory, transportation, marketing research, advertising,
and product management. The undifferentiated advertising program keeps down
advertising costs. Presumably, the company can turn its lower costs into lower prices to
win the price-sensitive segment of the market.
In differentiated marketing, the firm operates in several market segments and designs
different products for each segment. General Motors does this when it says that it produces a
car for every "purse, purpose, and personality." IBM offers many hardware and software
packages for different segments in the computer market.
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Single segment concentration Selective Specialisation

M1 M2 M3 M1 M2 M3

P1 P1
*** ***
*** ***
P2 *** P2 ***
*** ***
Product Specialisation
P3 P3 ***
Market ***
Specialisation
M1 M2 M3 M1 M2 M3

P1 P1
*** *** *** ***
*** *** *** ***
P2 P2 ***
***

P3 P3 ***
***

Full Market Coverage

M1 M2 M3
P1
*** *** ***
*** *** ***
P2 *** *** ***
*** *** ***

P3 *** *** ***

*** *** ***

ADVANTAGES OF SEGMENTATION
The main advantage of market segmentation lies in a better understanding of
the consumer needs and behaviour so that a marketer can plan accordingly. In brief, market
segmentation helps:
1. Understand potential customers;
2. Pay proper attention to particular areas;
3. Formulate marketing programmes;
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4. Select channels of distribution;

5. Understand competition;
6. Use marketing resources efficiently;
7. Advertise the products and launch sales promotion programmes; and
8. Design marketing mix-product, price, place and promotion.

Flow Chart of Segmentation Process

Analyse the needs of customers

Analyse the characteristics of consumers

Disaggregate the consumers into suitable segments

Formulate different marketing mix for different segments

Feed back of various segments

Select the higher potential segments

Target Marketing
]

Consists of a set of buyers who share common needs or characteristics that the company
decides to serve
Positioning
 The place the product occupies in consumers’ minds relative to competing
products.
 Involves implementing the brand’s unique benefits and differentiation in
the customer’s mind.
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MARKETING MIX
The marketing mix is one of the most famous marketing terms. The marketing mix is the
tactical or operational part of a marketing plan. The marketing mix is also called the 4Ps
and the 7Ps. The 4Ps are price, place, product and promotion. The services marketing mix
is also called the 7Ps and includes the addition of process, people and physical evidence.
The marketing mix is . . . The set of controllable tactical marketing tools – product, price,
place, and promotion – that the firm blends to produce the response it wants in the target
market.
- Kotler and Armstrong (2010).
The concept is simple. Think about another common mix – a cake mix. All cakes contain
eggs, milk, flour, and sugar. However, you can alter the final cake by altering the
amounts of mix elements contained in it. So for a sweet cake add more sugar!
It is the same with the marketing mix. The offer you make to your customer can be
altered by varying the mix elements. So for a high profile brand, increase the focus on
promotion and desensitize the weight given to price.
Another way to think about the marketing mix is to use the image of an artist’s palette.
The marketer mixes the prime colours (mix elements) in different quantities to deliver a
particular final colour. Every hand painted picture is original in some way, as is every
marketing mix.
Price
Price is the amount the consumer must exchange to receive the offering.
- Solomon et al (2009).
The company’s goal in terms of price is really to reduce costs through improving
manufacturing and efficiency, and most importantly the marketer needs to increase the
perceived value of the benefits of its products and services to the buyer or consumer.
There are many ways to price a product. Let’s have a look at some of them and try to
understand the best policy/strategy in various situations.
Place
Place includes company activities that make the product available to target consumers.
- Kotler and Armstrong (2010).
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Place is also known as channel, distribution, or intermediary. It is the mechanism through

which goods and/or services are moved from the manufacturer/ service provider to the
user or consumer.
Product
Product means the goods-and-services combination the company offers to the target
market.
- Kotler and Armstrong (2010).
For many, a product is simply the tangible, physical item that we buy or sell. You can
also think of the product as intangible i.e. a service.
In order to actively explore the nature of a product further, let’s consider it as three
different products – the CORE product, the ACTUAL product, and finally the
AUGMENTED product.
The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a
seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts
down roots as it becomes an adult (maturity); after a long period as an adult the plant
begins to shrink and die out (decline).
The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle
(PLC). However, CLC focuses upon the creation and delivery of lifetime value to the
customer i.e. looks at the products or services that customers NEED throughout their
lives.
Promotion
Promotion includes all of the activities marketers undertake to inform consumers about
their products and to encourage potential customers to buy these products.
- Solomon et al (2009).
Promotion includes all of the tools available to the marketer for marketing
communication. As with Neil H. Borden’s marketing mix, marketing communications
has its own promotions mix. Whilst there is no absolute agreement on the specific content
of a marketing communications mix, there are many promotions elements that are often
included such as sales, advertising, sales promotion, public relations, direct marketing,
online communications and personal selling.
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Physical Evidence
(Physical evidence is) . . . The environment in which the service is delivered, and where
the firm and customer interact, and any tangible components that facilitate performance
or communication of the service.
- Zeithaml et al (2008)
Physical Evidence is the material part of a service. Strictly speaking there are no physical
attributes to a service, so a consumer tends to rely on material cues. There are many
examples of physical evidence, including some of the following buildings, equipment,
signs and logos, annual accounts and business reports, brochures, your website, and even
your business cards.
People
(People are) . . . All human actors who play a part in service delivery and thus influence
the buyers’ perceptions; namely, the firm’s personnel, the customer, and other customers
in the service environment.
- Zeithaml et al (2008).
People are the most important element of any service or experience. Services tend to be
produced and consumed at the same moment, and aspects of the customer experience are
altered to meet the individual needs of the person consuming it.
Process
Process is) . . . The actual procedures, mechanisms, and flow of activities by which the
service is delivered – this service delivery and operating systems.
- Zeithaml et al (2008).
There are a number of perceptions of the concept of process within the business and
marketing literature. Some see processes as a means to achieve an outcome, for example
– to achieve a 30% market share a company implements a marketing planning process.
However in reality it is more about the customer interface between the business and
consumer and how they deal with each other in a series of steps in stages, i.e. throughout
the process.