Topic 2

Market Segmentation

Introduction

The first thing that every entrepreneur and businessman should consider before
engaging a business is to know the market. For in a marketing program to work two
interrelated components – the target market and the marketing mix, should be given
ample consideration and focus.

If an inspiring fashion designer wanted to make a mark in the industry, she

should consider what specific type of woman she wants to dress. Now this specific kind
of woman can be based on her size, income, lifestyle or even behaviour. So by
knowing the specific market, the fashion designer will know what specific clothes to
prepare hom she should sell the clothes.

Knowing your target market is a start. Once an entrepreneur is able to pin point
their market, the entrepreneur is on the right lane to a successful business. Knowing
your market may appear easy however, there are more things to consider before
assuming that one has identified the market. This topic will be a good guide for
discovering who the markets are and why entrepreneurs need to spot them.

At the end of the topic, the students are expected too:

▪ Identify the different ways in doing market segmentation;

▪ Compare the diverse methods in market segmentation;
▪ Use the market segmentation strategy in different ways;
▪ Categorize market segmentation method in making a marketing program;
▪ Plan marketing strategy using market segmentation methods; and
▪ Develop a market segmentation strategy for business.

Market Segmentation: Defined

Being the most basic and the primary business strategy, there are several
definition of market segmentation. Go (2010), defines market segmentation as the
process of dividing the total market into smaller groups seeking similar needs and
wants from a product or service. To be effective, these two important features must be
present:
 1. The needs and wants of each segment must be strongly defined especially how
each segment differ.
2. The firm must be capable of serving these different needs and wants.

This strategy can be very helpful just to focus on the customer that is most likely
to become happy clients of the business or enthusiastic consumer of one’s content. To
segment a market, one split it up unto groups having the same characteristics, basing
on one or several qualities or features. Splitting up an audience in ways like this will
allow more specific targeted market and personalized content.

Go (2010), mentioned several examples of companies utilizing segmentation to

combat competitors and to survived in business. Listed below are some examples:

Toyota, has entered several market segments:

● Camry for upscale users looking for both quality and prestige
● Hi-Ace for big families
● Vios for more price-conscious

Procter and Gamble has four types of toilet soaps:

● Olay Beauty Bar which addresses the younger looking skin need for women
● Safeguard as the family health soap with superior skin germs protections
● Zest for active and on the go young adults
● Ivory in the mild soap/sensitive skin category

The approach market segmentation has is the polarity of the mass marketing or
the Total Market Approach. The latter assumes that all clients have the same needs
and wants, and will search for the same product or services.

Market Segmentation: It’s Function

Through market segmentation the firm is empowered to develop a positioning

and strategies that can fill a smaller, more specific ranged of client’s needs and wants
when the right opportunities are identified. The more specific is also known as niche.
With these the result will enable the firm to a direction where a more efficient utilization
of resources especially in the aspect of communication and distribution (Go; 2010).
Furthermore, competitive pressure is reduced due to the fact that the firm is more
focused on its niche or a combination of the different niche seeking similar benefits.
Market Segmentation: It’s Types

Using market segmentation as a strategy can be done through different manner

and the firm has the liberty to choose their manner of doing so. The following are the
most common ways in segmenting a market.

1. By needs and want (or benefits)

2. By socio-demographic
3. By psychographic
4. By consumer behavior

Need Segmentation

Need based segmentation is one of the major way to segment a market. With
this approach, one will divide the market up into smaller group of people who have
more or less the same basic need. It was assumed in the past that consumer
behaviour was determined by constant personality traits but today the complexity of
one’s personality is considered specially cause a person has various needs playing a role
and differing greatly depending on a given situation.
Though needs identification, the firm can be confident to offer customers the
right product in the right manner. Need based segmentation enables the firm to take a
differentiated marketing tactic to customer segments, leading to:
a. Awareness that clients have different requirements and a better and clearer
understanding of the market;
b. Ensuring the products meets consumer needs through propositions made
specifically for individual segments;
c. More tailored communication (message, Tone voice) leading to greater
impact;
d. Higher conversion rates by targeting specific segments

Go (2010), illustrates how this kind of segmentation can be used in the restaurant
business.
● For fine dining with classy ambiance, Prince Albert at the Intercom Hotel, the
Tivoli at the Mandarin Oriental and Aubergine at the Fort.
● Quick dining with “value meal” prices can be found infast foods like Jollibee and
McDonald’s
● Price – conscious eaters go to Manong Pepe and Burger Machine
● Regional food specialists abound like Saika (Japanese), Kamayan (Filipino), Thai
at Silk (Thai) and Gloriamaris (Chinese).
 ● Spealist for specific food chicken (mang inasal), Pizza (yellow cab) seafoods
(tuna Terminal)
● For restaurants who are targeting with tight budget, Alva’s is the perfect place
for them.

Socio-Demographic Segmentation

The most common forms pf market segmentation is through demographics. It

splits up audience s based on observable and tangible, people –based differences.
Segmenting a market according to this method is the most basic. Combining this
method with other ways of segmenting market can narrow down the market even
more.
According to Go (2010), demographic segmentation deals with questions such as
“who you are” and “how much do you earn” and is commonly used in allocating selling
efforts. Table 2.1 below will give you clearer examples for this segmentation strategy,

Demographics Segmentation Variables

VARIABLES Examples
1. Age Infant, toddler, tween, teenager, work
beginner, yuppies, middle age, matured,
retirees
2. Gender Male, Female, In between, LGBTQ
3. Civil Status Legitimate, married, divorced, single,
single parent, widow/er, separated
4. Income A, B, C, D, E
5. Education Illiterate, Grade School, High School,
College, Post Graduates, Vocational
6. Profession Unemployed, white collar worker,
executives, professional, housewife,
mother, students, blue collar worker
7. Religion Catholic, INC, Born Again, Muslims,
Protestants
8. Nationality Filipino, Japanese, Korean, Chinese,
American
9. Climate Hot, Cold, rainy
Psychographics Segmentation

This form of segmentation is close to the demographic segmentation however, it

deals with features that are more mental and emotional. These characteristics may
not be easily observed as the demographics, but motivation, preference and needs of
the client may serve as valuable insights to the audience. Understanding these aspects
can help create advertising content that attracts to the audience more effectively.
Examples of these segmentation includes personality traits, interests, beliefs, values,
attitudes and lifestyles.

According to Go (2010), this approached is more concerned with answers to

questions such as “what you do” (instead of “who you are”) and “how you spend your
money” (instead of “how much you earn”) and often used for creating advertising
message. If members of the demographic segment are responding contrary to what is
expected, marketers might add in some psychographic information. While demographic
provides the basic facts about who your audience is, psychographics give marketers
insight into why people decide to patronize or not patronize your product, click on or
ignore the ad and otherwise interact with you.

Listed below are psychographic segmentation of the Philippine Consumer. This

data is taken from Go’s Fundamentals of Marketing in the Philippine Setting.

THE SMOOTH SAILERS (34%)

They are highly sociable, secure and active but conservative. They have a
positive self-concept and are security – conscious and prefer the simple and the
essential, abhorring complications. They have a relative high purchasing power among
the five segments. They have a great propensity to buy things, but are not known to
be choosy about clothes. Price does not seem to be very important factor in their
buying decisions. About 57% of smooth sailers are below 30 years old and are from
class ABC household.

THE HIGH SPIRITS (31%)

They are the most vibrant and fun loving. They would like to maintain a high
social profile, and appears to be the trendsetter among the five groups, but are a rather
self-centered group of consumers. Typically image-conscious, they make purchasing
decisions which are based on the image projected or the reputation of certain name
brand. They are not generally health conscious, but if they happen to be, it might
probably be the improvement of their appearance or to be “in” with the crowd. They
think positively and do not seem to be the homebody type. They would rather go out
with friends than stay at home.

THE TIGHT GUARDS (26%)

They have the strongest feeling of inadequacy and uncertainty compared to the
others. The great majority in this group may occasionally face financial constraints,
and this is understandable since 74% of them belong to class D households. Members
of this group lack life-goals and seldom take risks for fear of failure. They also seem to
put a lot of importance on trust, which is manifested in the factors that influence them
to buy the things they want – they rely more on information about brands from their
friends. They are health conscious and are meticulous about personal and family
cleanliness. They are slightly more females than males in the group, and over half of
them are married. 55% of household heads among this group have a college
education.

THE HOMEMAKERS (5%)

These are the most upscale among the five lifestyle groups. Comprised mainly
of women, they espouse traditional values, even with regard to their roles in the family
and society. They are proud to be homebodies or house – proud types. Being
relatively more upscale than other segment, they seem to be relaxed , perhaps even
content, with their status, images, and material possession. They tend to be a very
optimistic group, and relate well with people. They study the value of things first
before purchasing them. Their choice of a brand may not always be influenced by ads.
The homemakers have the highest percentage of college degree holders, and slightly
more than half of this group belongs to class ABC households.

THE BYSTANDER (4%)

These segments are rather passive people, usually “painfully shy” and not to
inclined to socialize. They are not driven to achieve anything, and as their name
implies, would rather placidly look on as the world passes them by. They go for
external appearance, status and style, and material possessions. However, they may
not have the purchasing power to satisfy their whims. They are bargain hunters and
opt to buy cheap goods with multiple uses. Although conscious of style, they do not
mind paying more for prestigious brands but would not mind buying luxury premium
goods if these were sold cheaply. They may buy “tingi”. About 9 out of 10 bystanders
belong to the lower income household. They also appear to be the oldest of the five
lifestyle groups.

Consumer Behaviour/ Behavioural Segmentation

This approach of segmenting the market starts with dividing the consumers
according to behaviour patterns as they mingle with the firm. By its name alsone, this
category of segmentation observes the behavioural trait s of consumers – their
knowledge of, attitude towards, use of, likes and dislikes of, feedback to a product,
service, promotion or brand. The objectives of these segmentation methods are the
following:
▪ To understand how to address the specific needs and desire of customer groups;
▪ To tailor your product or service to meet those needs and desires;
▪ To discover opportunities to optimize the buyer’s journey;
▪ To quantify their potential worth to the business; and
▪ To improve a marketing strategy to develop and expand the customer base.

It is important to note that it doesn’t exist independently from other types of

segmentation. Characteristics such as a customer’s age, gender, location, income and
occupation frequently correlate to behavioural data. Data can often be used to confirm
certain conclusions about other segmentation data. Dividing the market into smaller
niche, each with similar variables or features, allows brands to use valuable time and
resources more efficiently. By knowing the market better, and grouping them
accordingly, the firm can utilize advertising personalization to ensure their needs are
delivered. These kind of segmentation has four main advantages, these are:
● Personalization - Understanding how to target different groups of customers with
different offers — at the most appropriate times, through their preferred
channels — increases personalization, allowing you to nurture them further along
their buying journey
● Predictive - Historical behavioral patterns help predict and influence future
customer behaviors and outcomes
● Prioritization - Identifying high-value prospects with the greatest potential
business impact enables you to make smarter decisions on how to best allocate
time, budget, and resources.
● Performance -  Monitoring growth patterns and change in segments over time
helps gauge business health, and track performance against goals.
The following are examples of the segment:
1. Purchasing Behaviour.
2. Benefit Sought.
3. Buyer Journey Stage
4. Usage
5. Occasion or timing
6. Customer Loyalty
7. User Status
(https://instapage.com/blog/behavioral-segmentation) for further rreading.

Profitability is the key for there is is no single way to segment a market. All
angles must be considered once segmentation is to be used. What is relevant is not
the quantity sold but what quantity has been sold at a profit.

MARKET MEASUREMENT
A market is composed of customers and competition. It composed of actual and
potential buyers with the same needs and wants interacting with sellers offering
different product or services to satisfy those needs and wants. There are two criteria
for attractiveness:
✔ Market size – dependent on the number of qualified customers and the
frequency of purchase.
✔ Market growth

NPA for qualified customers, who are they?

Need - those who needs the product.
Pay – those who are willing to pay for the product and has the capacity to buy it.
Authority and Availability – those who have no legal impediment to purchase the item.

Activity 1. Research what a pantomime is. Perform a pantomime using the different
psychographic segmentation of the Philippine consumer. Each psychographic segment
should be perform in 30 seconds maximum. This could be done via video recording and
to be submitted in my messenger account. Deadline will be discussed.

Activity 2. Activity 2. (SSSSSSSHHHHHHH) Victoria Court (VC) Drive-in Hotel and

Restaurant is a group of full-service motels supplying to the very rich people market
segment. Traditionally, drive-in hotels and motels primary market are lovers who avail
of one of the different unique designed “theme” rooms (Japanese, jungle, oval office,
game room etch.) for three hours (Now called wash – up time). In the early 1990s,
Victoria Court Boarded on an aggressive campaign to capture two extra segment of the
market: the husband and wife market and the partygoer market. Their purpose was to
steadily and slowly change their image by informing the public that their establishments
could be used predominantly for legitimate purposes like resting, or for group social
occasions. They have bought Hotel La Corona affiliated with the Best Western
International Hotel Group.
a. Identify the needs and wants of each of the three market segments targeted by
VC.
b. Who are the main competitors of each market segment?

Target Market Needs Wants Competition

Couples
Husband and wife
Partygoer

c. Knowing that drive in hotel has a kinky reputation, do you agree with strategy
made by VC? Defend your answer.
You may research further what victoria court is in the world wide web.