How to segment the market

The Marketer applies successive variables to sub-divide and arrive at the target market. Lately, marketing research agencies have been devoting a substantial part of their time to identify and study behavior patterns of different market segments. The procedure adopted by them and as mentioned by Kotler and turner is a three stage one.

Survey Stage

This is divided into two parts, viz.

1. Focus on group discussions and in-depth interviews with a view to get an insight into consumer motivation, attitudes and behavior
2. Based on the above insight, developing a questionnaire which is administered to a sample group of consumers.

The objective of this questionnaire is to collect data on:

• Attributes sought in a product and their priority ratings;
• Brand awareness and rating of different brands;
• Product usage patterns;
• Customer attitudes towards the generic product or product category itself.
• Demographics psychographics and media habits of sample respondents.

Analysis Stage

After collecting the data, it is analyzed using factor analysis. This is used to identify factors that differentiate customer groups. Cluster analysis is now used to cluster customers into maximally different groups.

Profiling Stage

In this stage each cluster is profiled in terms of demographics, psychographics, media habits, attitudes and behavior and consumption habits. The marketer can give each segment a name based on a dominant distinguishing characteristic.


In order to be effective, a segment should be attractive. Specifically, here the marketer looks for the following


The segment should be accessible, or otherwise no inroads can be made .A large part of the North East remains inaccessible either because of weather conditions or hostile geographical terrain, or problem of insurgency.


The segment should be measurable. It should be possible to quantify the segment as it would help in estimating its size.


It should be cost effective and profitable for the marketer.

Intensity in competition

Another parameter determining the segment’s attractiveness is the intensity in inter-firm rivalry. The higher the intensity or more the competition the more unattractive the segment will be for the marketer.


Having segmented the market, the firm now has to choose its marketing strategies .There are three strategies to choose from :


In this strategy, the firm offers the same products to different market segments. It uses the same communication, pricing and distribution strategies. The classic example is of soft drink firms like Coke and Pepsi, who retain the same flavor, advertising, packaging, etc. across segments in different geographical areas. The obvious advantage is the economy of scale, which a firm gets- mass production and marketing. Levitt argues the case for standardized products of the world market only because customer needs are getting homogenized globally, primarily because of the developments in transportation and communication .Levitt believes that a standardized global product can make a strong statement in the world market.


This is just the opposite of the above mentioned strategy. Here the firm differentiates its products to suit different segment needs, and expectations. Typically, one has the example of an airline that differentiates its products in three classes—the first class, business class and economy class .Each of these classes is targeted at a specific group whose needs are different from the other.


This is a combination of standardization and differentiation. Here the core strategy remains the same but differentiation is made to take into account specific customer group requirements. For example, the Maruti 800 or 1000 has some basic features and offers specific benefits to its buyers. However, a buyer who is looking for more features like safety belts, air conditioning, power steering and music systems can get the same at an additional price. This way Maruti is able to focus its entire strategy on both economy and premium segments. This strategy helps the firm to enjoy economies of scale and also a higher market penetration and consequently a higher market share. Therefore the marketer has to choose the appropriate strategy in order to achieve higher market penetration in each of his market segments.