Market Segmentation
Content
### Marketing Strategy: Market Segmentation ###
Market segmentation is a marketing strategy which involves dividing a broad target market into
subsets of consumers, businesses, or countries that have, or are perceived to have, common needs,
interests, and priorities, and then designing and implementing strategies to target them.
Market segmentation strategies are generally used to identify and further define the target
customers, and provide supporting data for marketing plan elements such as positioning to achieve
certain marketing plan objectives. Businesses may develop product differentiation strategies, or an
undifferentiated approach, involving specific products or product lines depending on the specific
demand and attributes of the target segment.
Types of market segmentation:
Geographic segmentation: Marketers can segment according to geographic criteria—nations,
states, regions, countries, cities, neighborhoods, or postal codes. The geo-cluster approach
combines demographic data with geographic data to create a more accurate or specific profile. With
respect to region, in rainy regions merchants can sell things like raincoats, umbrellas and gumboots.
In hot regions, one can sell summer clothing. A small business commodity store may target only
customers from the local neighborhood, while a larger department store can target its marketing
towards several neighborhoods in a larger city or area, while ignoring customers in other continents.
Geographic segmentation is important and may be considered the first step to international
marketing, followed by demographic and psychographic segmentation
Demographic segmentation: Segmentation according to demography is based on variables such
as age, sex, generation, religion, occupation and education level or according to perceived benefits
which a product or service may provide. Benefits may be perceived differently depending on a
consumer's stage in the life cycle. Demographic segmentation divides markets into different life
stage groups and allows for messages to be tailored accordingly.
A variant of this approach known as firmographic or feature based segmentation is commonly used
in business-to-business markets (it’s estimated that 81% of B2B marketers use this technique).
Under this approach the target market is segmented based on features such as company size (either
in terms of revenue or number of employees), industry sector or location (country and/or region).
Psychographic segmentation: Psychographic segmentation, which is sometimes called lifestyle,
is measured by studying the activities, interests, and opinions (AIOs) of customers. It considers how
people spend their leisure,[6] and which external influences they are most responsive to and
influenced by. Psychographics are very important to segmentation, because psychographics identify
the personal activities and targeted lifestyle the target subject endures, or the image they are
attempting to project. Mass media has a predominant influence and effect on psychographic
segmentation. Lifestyle products may pertain to high involvement products and purchase decisions,
to speciality or luxury products and purchase decisions.
Behavioral segmentation: Behavioral segmentation divides consumers into groups according to
their knowledge of, attitude towards, usage rate, response. Many marketers believe that behavior
variables are the best starting point for building market segments.
### Consumer Buying Behavior: Henry Assael Model ###
Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to
analyze buying behavior as the buyers’ reactions to a firms marketing strategy has a great impact
on the firm’s success.
1.
Complex buying behavior
Consumers engage in complex buying behavior when they are highly involved in a
purchase and aware of significant differences among brands.
This is usually the case when a product is expensive, bought infrequently, risky, and
highly self –expressive, like automobiles.
2.
The consumers have the potential to be loyal customers.
Dissonance reducing buyer behavior
Consumers are highly involved in the purchase but see little differences in brands.
The high involvement based on the fact that the purchase is expensive, infrequent, and
risky.
In this case the buyers will shop around to learn what is available. If they find quality
differences in the brands, they might go for the higher price. If they find little differences, they might
simply buy as per convenient pricing.
Post Purchase dissatisfaction arises in the customer’s psychology and h/se starts thinking
that that another brand/product could have been a better choice. Example: Carpet, Mobile Phones
etc.
These consumers are difficult to satisfy and hence it is difficult to make them loyal. An
effective and efficient post-purchase customer relationship needs to be cultivated by the marketer to
retain these consumers.
3.
Habitual buying behavior
Many products are bought under conditions of low involvement, on regular basis, and
there is absence of significant brand differences among products; for example: salt, grocery items
etc.
Purchase is mostly of low-price items, frequently purchased products.
Habit of buying is more important than brand loyalty.
4.
Variety seeking buying behavior
Some buying situations are characterized by low involvement but significant brand
differences.
Here consumers often do a lot of brand switching.
Brand switching occurs for the sake of variety rather than dissatisfaction. Example: Fast
Food, Impulse goods etc.
### Stages of the Consumer Buying Process ###
The process of Consumer Buying has been interpreted by many scholars over the years; however,
the five stages framework remains a good way to evaluate the customer’s buying process. John
Dewey first introduced the following five stages in 1910:
1. Problem/need recognition: A purchase cannot take place without the recognition of the need.
The need may have been triggered by internal stimuli (such as hunger or thirst) or external stimuli
(such as advertising or word of mouth).
2. Information search: Having recognised a problem or need, the next step a customer may take
is the information search stage, in order to find out what they feel is the best solution. This is the
buyer’s effort to search internal and external business environments, in order to identify and
evaluate information sources related to the central buying decision. Your customer may rely on print,
visual, online media or word of mouth for obtaining information.
3. Evaluation of alternatives: Individuals evaluate different products or brands at this stage on
the basis of alternative product attributes – those which have the ability to deliver the benefits the
customer is seeking. A factor that heavily influences this stage is the customer’s attitude.
Involvement is another factor that influences the evaluation process. For example, if the
customer’s attitude is positive and involvement is high, then they will evaluate a number of
companies or brands; but if it is low, only one company or brand will be evaluated.
4. Purchase decision: The penultimate stage is where the purchase takes place. Philip Kotler
(2009) states that the final purchase decision may be ‘disrupted’ by two factors: negative feedback
from other customers and the level of motivation to accept the feedback. For example, having gone
through the previous three stages, a customer chooses to buy a new telescope. However, because
his very good friend, a keen astronomer, gives him negative feedback, he will then be bound to
change his preference. Furthermore, the decision may be disrupted due to unforeseen situations
such as a sudden job loss or relocation.
5. Post-purchase behavior: In brief, customers will compare products with their previous
expectations and will be either satisfied or dissatisfied. Therefore, these stages are critical in
retaining customers. This can greatly affect the decision process for similar purchases from the same
company in the future, having a knock-on effect at the information search stage and evaluation of
alternatives stage. If your customer is satisfied, this will result in brand loyalty, and the Information
search and Evaluation of alternative stages will often be fast-tracked or skipped altogether.
On the basis of being either satisfied or dissatisfied, it is common for customers to distribute their
positive or negative feedback about the product. This may be through reviews on website, social
media networks or word of mouth. Companies should be very careful to create positive postpurchase communication, in order to engage customers and make the process as efficient as
possible.
Market segmentation is a marketing strategy which involves dividing a broad target market into
subsets of consumers, businesses, or countries that have, or are perceived to have, common needs,
interests, and priorities, and then designing and implementing strategies to target them.
Market segmentation strategies are generally used to identify and further define the target
customers, and provide supporting data for marketing plan elements such as positioning to achieve
certain marketing plan objectives. Businesses may develop product differentiation strategies, or an
undifferentiated approach, involving specific products or product lines depending on the specific
demand and attributes of the target segment.
Types of market segmentation:
Geographic segmentation: Marketers can segment according to geographic criteria—nations,
states, regions, countries, cities, neighborhoods, or postal codes. The geo-cluster approach
combines demographic data with geographic data to create a more accurate or specific profile. With
respect to region, in rainy regions merchants can sell things like raincoats, umbrellas and gumboots.
In hot regions, one can sell summer clothing. A small business commodity store may target only
customers from the local neighborhood, while a larger department store can target its marketing
towards several neighborhoods in a larger city or area, while ignoring customers in other continents.
Geographic segmentation is important and may be considered the first step to international
marketing, followed by demographic and psychographic segmentation
Demographic segmentation: Segmentation according to demography is based on variables such
as age, sex, generation, religion, occupation and education level or according to perceived benefits
which a product or service may provide. Benefits may be perceived differently depending on a
consumer's stage in the life cycle. Demographic segmentation divides markets into different life
stage groups and allows for messages to be tailored accordingly.
A variant of this approach known as firmographic or feature based segmentation is commonly used
in business-to-business markets (it’s estimated that 81% of B2B marketers use this technique).
Under this approach the target market is segmented based on features such as company size (either
in terms of revenue or number of employees), industry sector or location (country and/or region).
Psychographic segmentation: Psychographic segmentation, which is sometimes called lifestyle,
is measured by studying the activities, interests, and opinions (AIOs) of customers. It considers how
people spend their leisure,[6] and which external influences they are most responsive to and
influenced by. Psychographics are very important to segmentation, because psychographics identify
the personal activities and targeted lifestyle the target subject endures, or the image they are
attempting to project. Mass media has a predominant influence and effect on psychographic
segmentation. Lifestyle products may pertain to high involvement products and purchase decisions,
to speciality or luxury products and purchase decisions.
Behavioral segmentation: Behavioral segmentation divides consumers into groups according to
their knowledge of, attitude towards, usage rate, response. Many marketers believe that behavior
variables are the best starting point for building market segments.
### Consumer Buying Behavior: Henry Assael Model ###
Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to
analyze buying behavior as the buyers’ reactions to a firms marketing strategy has a great impact
on the firm’s success.
1.
Complex buying behavior
Consumers engage in complex buying behavior when they are highly involved in a
purchase and aware of significant differences among brands.
This is usually the case when a product is expensive, bought infrequently, risky, and
highly self –expressive, like automobiles.
2.
The consumers have the potential to be loyal customers.
Dissonance reducing buyer behavior
Consumers are highly involved in the purchase but see little differences in brands.
The high involvement based on the fact that the purchase is expensive, infrequent, and
risky.
In this case the buyers will shop around to learn what is available. If they find quality
differences in the brands, they might go for the higher price. If they find little differences, they might
simply buy as per convenient pricing.
Post Purchase dissatisfaction arises in the customer’s psychology and h/se starts thinking
that that another brand/product could have been a better choice. Example: Carpet, Mobile Phones
etc.
These consumers are difficult to satisfy and hence it is difficult to make them loyal. An
effective and efficient post-purchase customer relationship needs to be cultivated by the marketer to
retain these consumers.
3.
Habitual buying behavior
Many products are bought under conditions of low involvement, on regular basis, and
there is absence of significant brand differences among products; for example: salt, grocery items
etc.
Purchase is mostly of low-price items, frequently purchased products.
Habit of buying is more important than brand loyalty.
4.
Variety seeking buying behavior
Some buying situations are characterized by low involvement but significant brand
differences.
Here consumers often do a lot of brand switching.
Brand switching occurs for the sake of variety rather than dissatisfaction. Example: Fast
Food, Impulse goods etc.
### Stages of the Consumer Buying Process ###
The process of Consumer Buying has been interpreted by many scholars over the years; however,
the five stages framework remains a good way to evaluate the customer’s buying process. John
Dewey first introduced the following five stages in 1910:
1. Problem/need recognition: A purchase cannot take place without the recognition of the need.
The need may have been triggered by internal stimuli (such as hunger or thirst) or external stimuli
(such as advertising or word of mouth).
2. Information search: Having recognised a problem or need, the next step a customer may take
is the information search stage, in order to find out what they feel is the best solution. This is the
buyer’s effort to search internal and external business environments, in order to identify and
evaluate information sources related to the central buying decision. Your customer may rely on print,
visual, online media or word of mouth for obtaining information.
3. Evaluation of alternatives: Individuals evaluate different products or brands at this stage on
the basis of alternative product attributes – those which have the ability to deliver the benefits the
customer is seeking. A factor that heavily influences this stage is the customer’s attitude.
Involvement is another factor that influences the evaluation process. For example, if the
customer’s attitude is positive and involvement is high, then they will evaluate a number of
companies or brands; but if it is low, only one company or brand will be evaluated.
4. Purchase decision: The penultimate stage is where the purchase takes place. Philip Kotler
(2009) states that the final purchase decision may be ‘disrupted’ by two factors: negative feedback
from other customers and the level of motivation to accept the feedback. For example, having gone
through the previous three stages, a customer chooses to buy a new telescope. However, because
his very good friend, a keen astronomer, gives him negative feedback, he will then be bound to
change his preference. Furthermore, the decision may be disrupted due to unforeseen situations
such as a sudden job loss or relocation.
5. Post-purchase behavior: In brief, customers will compare products with their previous
expectations and will be either satisfied or dissatisfied. Therefore, these stages are critical in
retaining customers. This can greatly affect the decision process for similar purchases from the same
company in the future, having a knock-on effect at the information search stage and evaluation of
alternatives stage. If your customer is satisfied, this will result in brand loyalty, and the Information
search and Evaluation of alternative stages will often be fast-tracked or skipped altogether.
On the basis of being either satisfied or dissatisfied, it is common for customers to distribute their
positive or negative feedback about the product. This may be through reviews on website, social
media networks or word of mouth. Companies should be very careful to create positive postpurchase communication, in order to engage customers and make the process as efficient as
possible.
