Types of Market Segmentation
The consumer market can be segmented into various segments using different basis. The basis of consumer market segmentation can be broadly divided into four broad categories which are as follows:
1) Geographic Segmentation
This is generally the starting point of all market segmentation strategies. The geographic location of customers does help the companies in planning their marketing offers. This type of segmentation is quite common in dividing the rural and urban consumer markets.
Geographic segmentation refers to segmenting markets by region of a country or the world, market density, market size, or climate. Market density means the number of individuals within a unit of land, such as a census tract.
For example, the Discovery channel telecasts its program in Tamil, Malayalam, Hindi, Telugu etc for reaching Tamilnadu, Kerala, and Andhra regions and their remote areas.
The climate is commonly used for geographic segmentation because of its dramatic impact on residents’ needs and purchasing behaviour, Snow-blowers, clothing, water and snow skis, and air-conditioning and heating systems are products with a different appeal, depending on climate.
2) Demographic Segmentation
The next commonly used basis for market segmentation is the demographic factors of the market. In demographic segmentation, the market is divided into groups based on variables such as family size, age, family life cycle, gender, income, education, occupation, religion, race, generation, nationality and social class. Demographic variables are the most popular factors for distinguishing customer groups.
Some of the demographic variables used are given below:
i) Age and Life-Cycle Stage: Consumers’ wants and liabilities change with time and age. Based on age, a market can be divided into four parts viz., teenagers, children, adults and old. For example, LIC market its services based on the age and lifecycle stage of the people.
ii) Gender and Sexual Orientation: When God created human beings he made Males and Females and gave them distinct survival needs. Gender segmentation is one of the most common forms of segmentation as around the globe men, women and children have always been vocal about their separate needs. For example, Horlicks segmented its market to meet the need of children and women.
iii) Marital Status: The lifestyle of a person depends on whether he is married or not. An unmarried person prefers to enjoy life and his purchase behaviour will show more food and entertainment and less furniture. But a married person will purchase a household’s items, furniture and many more.
iv) Income: Income differs along the population in any country. In India, it is as diverse from a hundred rupees a month to millions a month. In this scenario, the buyers will behave differently in terms of wants as per their income.
v) Social Class: It has a strong influence on preference for cars, home furnishings, clothing, leisure activities, reading habits etc. Many companies design their products and services for specific social classes. For example, many products and services like garments, watches, cosmetics etc segmented their market according to social class.
vi) Family Size: The type and size of the family affect the amount and size of purchases. The consumption pattern of joint families differs from a nuclear family.
vii) Occupation: Various occupations can influence buying behaviour. People in sales, production, finance and academic training will have different purchase behaviour.
viii) Educational Level: The segments of people with the same academic standard segments having the same income i.e. with a similar ability to buy have different likelihoods to buy. differentiate and segment the market.
ix) Religion: Religious rituals, traditions, and cultures differentiate and segment the market.
3) Psychographic Segmentation
Oftentimes, it has been seen that two consumers with the same demographic features may act in an entirely different manner. Even though the two may be of the same age, from the same profession, and with similar education and income, each of the customers may have a different attitude towards risk-taking and new products and stores. This is because of the psychographic variables given below:
i) Life Styles: The lifestyle concept is also considered another important variable determining buyer behaviour. Lifestyle reflects the overall form in which people live and spend time and money. It is a behavioural concept enabling people to grasp and predict buyer behaviour. The lifestyle concept has an interdisciplinary approach as it involves sociology, culture, psychology and demography. The lifestyle concept as a basis for segmentation is quite reasonable and desirable. For example, Fast Track watches target and suits its products young urbanites and their design suits people who want looks and maintain fashion in a new trendy lifestyle.
ii) Personality: Marketers have used personality variables to segment markets. They endow their products with brand personality that matches consumer personalities. Personality characteristics influence the consumer’s buying behaviour and different people have different personality characteristics that lead them to buy a product or service. For example, for many perfume/body sprays, marketers target their customers based on personality characteristics like masculinity/feminity.
iii) Values: Some marketers segment by core values, i.e. belief systems that underlie consumer behaviour and attitudes. Core values go much deeper than behaviour or attitude & determine at a basic level, people’s choices and desires over the long term. Marketers who segment by values believe that by appealing to people’s inner selves it is possible to influence their outer selves and their purchase behaviour.
iv) Beliefs: This is one of the parameters of segmentation used by marketers to sell products. People according to their experiences, situations and upbringing develop their own beliefs. For example, people develop religious beliefs as per their religion. And their purchase behaviours are primarily influenced by their beliefs. Not only during festivals but in normal life also people with different religious beliefs develop different lifestyles and behaviour as consumers.
In general, psychographics refers to information about consumers’ values, attitudes, motivations, and lifestyles as they relate to buying behaviour in a particular product category. Numerous marketing research companies conduct psychographic studies for particular clients.
4) Behavioural Segmentation
In behavioural segmentation, buyers are divided into groups based on their knowledge and attitude towards using or responding to a product. Many marketers believe that behavioural variables occasions, benefits, user status, usage rate, loyalty status, buyers-readiness stage, and attitude are the best starting points for consulting market segments. The major behavioural variables used by marketers to segment the market are given below:
1) Occasions: Buyers can be distinguished according to the occasions on which they develop a need, purchase a product, use a product or when they get the idea to buy. Occasion segmentation helps boost product usage. According to the occasions, buyers develop a need to purchase or use a product. It can help firms expand product usage. A company can consider critical life events to see whether they are accompanied by some needs.
There can be two types of occasions:
a) Regular: Like Holi, Diwali, Eid, Independence Day, Republic Day etc.
b) Special: Marriage, Anniversary, Winning moments etc.
ii) Benefits: Here, the marketer identifies the benefits that a customer looks for when buying a product. This has been a very effective method of segmenting the market for watches that a customer may buy for just knowing the time or durability or as a gift/ an accessory/ a dress item/ a jewellery item.
Customers can be classified according to the benefits they seek. On purchase of the same product, different customers look for additional benefits because of which they buy products from other companies which satisfy their specific needs.
iii) User Status: Markets can be segmented into the following classes depending on the user status. For example, the categories of users using a product say deodorant. The users of deodorant can be divided into different categories:
a) Non-User: A 10-year child or 70-year-old in our country generally does not use deodorant.
b) Potential Users: This is the category where the usage rate is expected to be highest. In the example of fashionable teenagers, corporate people are the potential users of deodorant.
c) First-time Users: The users who use it for the first time. For example, the teenager’s first deodorant may be used in his college days.
d) Regular User: A corporate big-wig always use it at big party or conference, a fashion-conscious lady or a regular corporate and nowadays because of the fall in the price of deodorant students also are regular users.
e) Ex-User: Somebody who stopped using for some reason may be due to allergies or due to switching to some substitutes like perfume are the ex-users of the product.
iv) Quantity Consumed/Usage Rate: The quantity consumed at any given time has also been the basis for segmenting the beverages (tea, coffee), soft drinks, breweries, and cigarette markets. Accordingly, the market segments given below are visible:
a) Light: These are the categories of users who are very infrequent. In the case of cosmetics, an average housewife who is not very fashion-conscious is a light user of cosmetics.
b) Medium: Fashion-conscious teenagers are medium users of cosmetics i.e. they use them very frequently.
Requisites of Effective Market Segmentation
Market segmentation is a complex decision and requires due care while selecting the criteria on which decisions are to be taken. Products and services need to be planned for a particular market. The product being launched should attract the market segment. It should have substantial size and growth potential alongwith the capacity to provide remarkable returns. The market segmentation criteria are discussed below:
Requisites of Effective Market Segmentation
Effective market segmentation usually has the following requirements:
1) Measurable: The size and purchasing power and disposable income of the segment can be measured. The measurement of a segment’s size, purchasing power, and disposable income is important in determining its potential profitability. This information can be obtained through different market research methods, such as surveys and data analysis. Some automobile buyers want high-performance, status, stylish, and luxury model cars but it is important to measure and know the size of such buyers. It is essential that sufficient data or information in terms of customer purchase behaviour and the size of the market so that a new segment can be a business opportunity.
While establishing a market segment, the consumers of the product are counted along with their financial status and characteristics. The number of such consumers should be enough to be measured with ease. These calculations are obtained only after the marketing analysis and research work is done.
2) Substantial: It is the degree to which the proposed segments are large from consumer demand and profitable to the marketer, for considering a separate marketing plan and programme.
The market segment must have customers of similar characteristics like age group, financial status, and culture and should be aware of the different brands of the product. The size of the segment should be substantial so that a suitable marketing strategy can be adapted which is convenient to all. The products should be supplied as per consumer preferences quantity-wise, i.e., in small or big packs.
3) Accessible: It is the degree to which the proposed segment can be effectively reached and served. Whether the distribution system and the promotion can effectively reach them.
The product and market segment should be compatible in price and financial status of the population. The location of the segment should have easy transportation facilities for the smooth flow of the product. The marketing strategy adopted for one consumer group is always different from another consumer group due to differences in their needs. For example, fashion needs may vary based on age groups therefore each group requires different products respectively. The effectiveness of marketing lies in catering to the real needs of customers belonging to different segments.
4) Differentiable: Each segment of the market should be different from others in terms of its needs and wants. Each segment requires different marketing strategies because it responds differently to different strategies. A motorcycle manufacturer can segment the market based on the usage of the product. People buying cars for fuel efficiency are different from people buying them for style and both need different marketing strategies.
The marketing managers should differentiate between the different segments since each segment requires a different strategy for marketing. Consumers react differently to different products, and the advertisements are also designed by consumers of different locations. Various marketing tools are used to take due care of nuances of the local area to attract customers.
5) Actionable: A segmentation variable should help marketers develop effective marketing programs to attract and serve potential customers effectively.
Well-defined market segmentation is always actionable on the part of the consumers, who are captivated by the products, services, advertisements and marketing strategies and as a result, indulge in purchasing activity. The product placed at a reasonable price coupled with marketing efforts is bound to bring favourable returns.