Basis for Segmenting Markets

A large number of variables can be used to segment a market. We can classify them into four categories :

(A) Geographic variables. (B) Demographic variables. (C) Psychographic variables. ( D) Buyer- behaviour variables.

On the basis of these variables we can have the following forms of segmentation :

(1) Geographic segmentation. (2) Demographic segmentation. (3) Psychographic segmentation. (4) Benefit segmentation. (5) Volume segmentation. (6) Marketing factor segmentation. (7) Product space segmentation.

(1) Geographic segmentation : In this form of segmentation, sellers distinguish carefully among the regions in which they can operate and choose those in which they can enjoy a comparative advantage. A small retailor may distinguish between neighbourhood customers and more distant customers. A local fertilizer salesman may distinguish between city customers and rural customers. A national manufacturer can classify his customers by sales territory and each state like U.P., M.P. and H.P. may represent one sales territory.

In all these cases, the geographical units become the basis of differentiated marketing effort. (2) Demographic segmentation : In this form of segmentation, sellers attempt to distinguish

different groups on the basis of demographic variables such as age, sex, family, size, income,

occupation, education, family life cycle, region, nationality, or social class. Demographic variables have long been the most popular bases for distinguishing significant groupings in the market. One reason is that these variables correlate well with the sales of many products; another is that they are easier to recognize and measure than most other types of variables.

(3) Psychographic Segmentation : In this form of segmentation, the basic idea is that buyer’s needs may be more differentiated along life-style or personality lines than along straight-forward demographic lines. Thus, there are the swingers, who seek up-to-date foods and fast paced, bedonistic living. Status seekers, who try to buy goods that will get them a high status in society, and plain and simple people, who seek ordinary, untritled goods that do their job—one implication of differentiating buyers along personality is that they can be reached with different marketing programmes, and further the organisational objectives can better be served in the wake of serving their needs with the required attention and care. For example, because of their unique features swingers will respond to costlier goods more favourably than the ordinary people. Various research studies have been conducted in the U.S.A. and other advanced nations to test the validity of this psycho-segmentation. These studies have been directed from time to time at whatever different consumer formalities are attached to different products which have different images. Each product needs to be studied separately  for  the possible strength of personality factors in the purchase behaviour. The theoretical connections between product images and personality types remain to be worked out better.

Even where evidence is found of personality differences in the purchase behaviour, the implications for marketing strategy are far from clear.

(4) Benefit segmentation : In this form of segmentation, buyers are sub-divided in relation to the  various benefits which they expect from a particular product. A sample of consumers are interviewed for this purpose. In the case of toothpaste, for example, there are customers who seek decay prevention, bright teeth, taste or low price. The idea behind benefit segmentation is very simple —the company can choose the benefit it wants to emphasize, create a product that delivers it, and direct a message to the group seeking that benefit. For example in our country, makers of Colgate have repeatedly been emphasizing that 7 out of 10 users of Colgate benefited (avoided tooth decay). At the same time we also find that  Colgate makers have been emphasizing the importance of bright teeth, when they show an advertisement on TV about a young unmarried couple—before use and after use. So the idea is that by choosing different benefits, which potential buyers of a particular product expect from that product, the company in the ultimate analysis can have a larger volume of sales.

(5) Volume segmentation : In this form of segmentation, seller distinguishes the heavy, medium, light and non-users of his product. Then he accepts to determine whether these groups differ in demographic or  psychographic ways. In particular, he is interested in the characteristics of the heavy-user group. But he should give thought to other volume groups also, because they may present different opportunities. So the idea behind this volume segmentations is quite simple, though the actual attempt to identify different volume groups may be a bit complicated and difficult. This is a general remark and can practically be taken for almost every form of segmentation.

An important implication of volume segmentation for marketing management is that by identifying volume groups, the seller can approach each volume group with a distinct marketing programme and thereby increase the total satisfaction provided by his product to different buyers. Needless to say that it will result in increased sales and profits.

(6) Marketing-factor segmentation : In this form of segmentation, the seller attempts to subdivide the market into groups responsive to different marketing factors, such as price and price deals, product quality, retail advertising, and so on. The idea is that if a manufacturer, for example, knows that one identifiable group of his customers was more responsive to changes in advertising expenditures than  others,  he might find it advantageous to increase the amount of advertising expenditures than others, he might find it advantageous to increase the amount of advertising aimed at them. The same sort of tailoring might also not be appropriate if it was found that customers reacted differently to changes in pricing, packaging, product quality and like.

(7) Product space segmentation : In this form of segmentation, buyers are asked to compare existing brands according to their perceived similarity and in relation to their ideal brands. Through non-metric multidimensional scaling, the analyst infers the latest attributes that consumers are using to pcreceive the product class. Next, through cluster analysis, the respondents are classified into different clusters, internally homogeneous but quite different from cluster to cluster. Each cluster of respondents perceives the product in a distinct way or has a distinct ideal brand. Then the analyst sees whether the different clusters have distinctive demographic or psychographic characteristics. If so, he has found ‘natural’ segments based on different product perceptions or preferences.

The main conclusion from this discussion of market segmentation is that the seller may proceed to segment his market in many different ways. His goal is to determine the most decisive mode of segmentation—that is, the differences among buyers that may be the most consequential in choosing among them or marketing to them.

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