Unit 6: Customer Profiling

Lesson 2: Market Segmentation and

Aggregation

Contents
Engage 1
Introduction 1
Objectives 1

Explore 2

Explain and Elaborate 3

Market Segmentation 3
Common Bases for Segmentation 4
Market Aggregation 5
Key Differences between Market Segmentation and Market Aggregation 7

Extend 8
Activity 8

Evaluate 9

Wrap Up 11

Bibliography 12
Unit 6.2: Market Segmentation and Aggregation

Engage

Introduction

Fig. 1. Researching the target market

Know your target market very well. It is a golden marketing maxim. This is not something
that merely helps the marketing team, but it is something that affects the entire
performance of a business. Often, businesses fail to segment the customers that share
similar characteristics, not knowing that doing this will bring them positive consequences.
This lesson will explain the key advantages of serving a group of customers who share
identical attributes, as well as the advantages of adopting a mass marketing approach.

Objectives
In this lesson, you should be able to do the following:
● Recognize the importance of market segmentation.
● Understand the differences between market segmentation and market aggregation.

DepEd Competency
Determine who the customers are in terms of target market, customer requirements, and
market size. (CS_EP11/12ENTREP-0d-8)

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Explore

10 minutes
Guide Questions
Answer the following questions briefly and coherently:

1. What comes to your mind when you hear the word “segmentation”?

2. What do you think is the significance of knowing the target market of a business?

3. Do you believe that marketing products to the general public would be more
profitable than marketing only to a specific group of people? Why or why not?

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Explain and Elaborate

Market Segmentation

Fig. 2. Geographics for market segmentation

Alongside target market profiling is the application of market segmentation that will help
the business in directing its products to a specified group of people. Market segmentation
refers to the act of forming prospective buyers into particular groups that share one or
more similar characteristics and who will respond similarly to their product needs.

Segmentation primarily requires significant market research that can really be costly. It is an
act that is usually adopted by huge businesses and companies that offer differentiated
product lines or those that are catering to large markets. In most scenarios, businesses
realize that due to the fact that no two individuals are exactly identical, it is unlikely that they
will be able to draw the attention of all customers in a market with just one product. They
also think that it is not viable to come up with a different product for each and every
customer. Hence, these businesses will get stuck with dividing the overall market into
different customer segments.

Without proper segmentation, any target market will only be deemed as a general
population. Businesses will not be able to determine the people to whom they have to sell
and the products that they have to offer. Market segmentation is beneficial for it increases
the focus of the business. If a business has better focus, then it is obvious that it will obtain

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Unit 6.2: Market Segmentation and Aggregation
better returns in exchange. Apart from this, brand recall and brand loyalty might increase if
a business will focus on targeting specific segments, and the chances of a prospective
competitor entering the market might be low.

Tip
Market segmentation is otherwise known as “differentiated
marketing.”

Common Bases for Segmentation

In the effective implementation of a successful market segmentation strategy, a business
must perform some market research techniques to be able to spot the similarities that exist
among customers in a market. Segmenting a market is one of the important strategies that
a business must learn to perform. Through this, newly-developed products may be
appreciated by the customers well. On the other hand, improper segmentation can lead to
high costs and will only yield nothing. The three common bases for market segmentation
are the following:

1. Descriptive bases
Descriptive bases include information that is measurable and identifiable and
information that serves as strong indicators of the needs and preferences of the
consumers. These bases often describe the demographic and geographic situations
of the consumers that might include age, gender, religion, country, city of residence,
and climate.

2. Behavioral bases
Behavioral bases, compared to the descriptive ones, are generally more difficult to
measure because they include information that cannot be gathered through simple
market research methodologies. They are focused on information relating to the
purchasing decisions, buying behavior, and spending patterns of the consumers. In
addition, behavioral bases also include variables that pertain to the degree of brand
loyalty of a consumer toward a product.

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3. Benefit bases
Benefit bases refer to information or data that help the businesses in identifying
what the consumers seek in purchasing a certain product. This market segmentation
approach is performed because of the belief that consumers have varied preferences
and needs toward a product.

Do you know other factors that can serve as the

bases for market segmentation?

Market Aggregation
Market aggregation pertains to the approach of marketing a product or service to a huge
number of consumers sharing identical needs and demands and thus, allowing for more
exposure to the product or service. It is likewise commonly known as “mass marketing.”

In this type of marketing strategy, the products or services of a business are marketed to a
mass number of people having similar needs and wants. Market aggregation is used in
different fields or sectors. A lot of products and services in the market are needed by the
consumers for their everyday use and are highly demanded by a broad segment of the
demographics.

Example: Market Aggregation

The following are examples of products and services that are marketed daily through the
use of market aggregation or mass marketing strategy:

Products Services

sugar laundry

toothpaste telecommunication

canned goods banks and financial services

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Unit 6.2: Market Segmentation and Aggregation

bread water delivery

Remember
Undifferentiated marketing is generally represented by market
aggregation.

There is a definite reason why marketing aggregation works in these sectors. This is because
the products and services aforementioned are perceived by a large number of consumers in
the same manner, regardless of the brand or the company that manufactures them. The
idea behind why market aggregation is known as mass marketing is because, despite the
fact that only a particular sector of the entire demographics is targeted, the sub-segments
are huge and consist of a lot of people who will likely buy the same kind of products or
services.

Why do businesses adopt the market aggregation strategy? It is due to the benefits that they
derive from this approach, such as the following:

1. Reduced costs
Market aggregation typically reduces both production and marketing costs involved
since products and services are marketed to a mass number of people.

2. Lower prices
One vital benefit of market aggregation is that products are sold at lower prices as a
result of the reduction in production and marketing costs. Because of this,
consumers will be able to purchase the products at lower prices, which in turn will
allow the business to earn higher margins.

3. Product differentiation
Through market aggregation, products are differentiated from the others, allowing
them to stand out from the competition. This consequently leads to having an
established relationship with their existing customers and effectively increasing

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customer loyalty.

Review
This following are some advantages of market aggregation:
● Reduced costs
● Lower prices
● Product differentiation

Key Differences between Market Segmentation and Market

Aggregation

For a more detailed comparison, the table below shows the key differences between market
segmentation and market aggregation:

Differences Market Segmentation Market Aggregation

1. Nomenclature Market segmentation is Market aggregation is otherwise

otherwise known as known as undifferentiated
differentiated marketing, marketing, aggregate marketing,
differentiated segmentation, or mass marketing.
or micromarketing.

2. Assumptions It assumes that the It assumes that the consumers

on the needs consumers have different have similar needs and want
and wants of needs and wants toward a toward a product or service, and
the consumers product or service. their needs can be satisfied by a
standardized product or service
offering.

3. Marketing Products and services are Products and services are

approach designed according to the produced and distributed through

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Unit 6.2: Market Segmentation and Aggregation

preferences of the segments. a single marketing approach to a

mass number of consumers.

Differences Market Segmentation Market Aggregation

4. Product pricing Products and services are Products and services are sold at
sold at higher prices to the lower prices due to reduced
consumers. production and marketing costs.

Extend

Activity
Summarize the concepts of market segmentation and market aggregation in three to five
phrases or sentences.

1. Market segmentation:

2. Market aggregation:

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Guide
● Your answers should be based on your own understanding of the lesson discussed
above.
● Take into consideration the essential factors discussed in defining the said concepts.

Evaluate

A. Answer the following questions briefly and coherently:

1. What is the concept of market segmentation?

2. How would you describe mass marketing?

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3. What is the consequence of adopting market segmentation?

4. What is product differentiation?

5. What is the importance of segmenting the market?

B. Read the situation below, then follow the given

instructions.

A health and wellness store that distributes nutrition-related products, including vitamins,
supplements, sports nutrition, healthy food products, and light workout essentials, is
creating strategies to market them to different customer segments.

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Identify the products that they should offer to the customers according to the three
demographic classifications listed below. Then, provide a short explanation of your decision
of its classification.

Ages 5-17 Ages 18-59 Ages 60 and up

Justifications

Wrap Up
___________________________________________________________________________________________

● Market segmentation refers to the act of forming prospective buyers into particular
groups that share one or more similar characteristics and who will respond similarly
to their product needs.

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Unit 6.2: Market Segmentation and Aggregation
● Market aggregation pertains to the approach of marketing a product or service to a
huge number of consumers, sharing identical needs and demands and thus, allowing
for more exposure to the product or service.

Common Bases in Market Segmentation

___________________________________________________________________________________________

Bibliography
Goyat, Sulekha. “The basis of market segmentation: a critical review of literature.” European
Journal of Business and Management 3 (2011): 45-54.

Longenecker, Justin G., and Carlos W. Moore. Small Business Management: An Entrepreneurial
Emphasis. Cincinnati: College Division, South-Western Pub, 1991.

McDaniel, Bruce A. Entrepreneurship and Innovation: An Economic Approach. Armonk, N.Y.:

M.E. Sharpe, 2002.

McDonald, Malcolm. “Market Segmentation - The Bedrock of Successful Marketing.” Market

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Segmentation, 2015. https://doi.org/10.1002/9781119207863.ch1.

Piperopoulos, Panos G. Entrepreneurship, Innovation and Business Clusters. Burlington, VT:

Gower, 2011.

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