Bases of market segmentation


Advantages of Market Segmentation

* Helps distinguish one customer group from another within a given market.
* Facilitates proper choice of target market
* Facilitates effective tapping of the market.
* Helps ‘divide the markets and conquer them’
* Helps crystallize the needs of the target buyers and elicit more predictable responses from them; develop marketing programs on a more predictable base; develop marketing offers that are most suited to each group.
* Helps achieve the specialization required in product distribution, promotion and pricing for matching the customer group and develop marketing offers and appeals that match the needs of such group.
* Makes the marketing effort more efficient and economic.
* Concentrate efforts on the most productive and profitable segments, instead of frittering them over irrelevant, or unproductive, or unprofitable segments.
* Helps spot the less satisfied segments and succeed by satisfying such segments.
* Brings benefits not only to the marketer but to the customer as well.

When segmentation attains sophistication, customers and companies can choose each other and stay together.

Markets can be segmented using several Bases

Markets can be segmented using several relevant bases. For example, demographic characteristics of consumers, such as age, sex, income/purchasing capacity, education level, etc form one base for segmentation. Geographic characteristics constitute another; and buying behavior of the consumers form yet another base. The above lists the major bases that can be used for segmentation.

Geographic Segmentation:

Segmentation of consumers based on geographic factors like climatic zone, region, state district and urban/rural area, constitute geographic segmentation.

Demographic Segmentation:

Segmentation of consumers based on demographic factors like age, sex, marital status, family size, race, religion, community, language, occupation, income/purchasing capacity, educational level, social status and income/purchasing capacity constitutes demographic segmentation.

Among Demographics, Purchasing Capacity and Price Preferences form a Major Base.

Of the several elements of demographics, purchasing capacity forms one of the more significant bases of segmentation. It manifests through buyers’ preference in the matter of price.

Segmentation based on Price Preference—Passenger car Buyer

Let us take the passenger car market of India and see how it can be segmented based on purchasing capacity of buyers/their price preference and the benefits they seek in the product.

Passenger car firms in the country have segmented the car market into five segments as shown below using purchasing capacity of buyers/their price preference and the benefits they seek in the product as the base.

* Budget car segment.
* Compact car segment.
* Family car segment.
* Premium car segment.
* Super luxury saloon segment.

Sometimes, budget car and compact car segments are treated as a single segment and referred to as the small car segment. In reality, they are two distinct segments.

In segmentation, it is the consumers, who are classified, not products. A clarification is required at this stage on the crux of market segmentation. Sometimes, marketers equate market segments with product segments and price segments (product segmented on the basis of price). This is the result of a mistaken understanding of the process of market segmentation.

Actually in market segmentation, it is the consumers, who are classified, not products. Again, it is not the price of the product, but the consumer characteristic of purchasing capacity/price preference that is used as the base for the segmentation. Differentiated product offers in specific price slots is the response resulting from the segmentation of the consumers. The marketers offer products that match the price preferences of the different segments of consumers. Going back to example, it is not the product (car) that is segmented here, but it is the consumers of cars that are segmented. Buyers of cars are segmented into groups, with price preference as the base. It is not a case of segmentation of cars with price as the base.

Psychographic Segmentation:

In psychographic segmentation, elements like personality traits, attitude, lifestyle, and value system form the base. It was the marketing researcher Emanuel Demby who coined the terms psychographics. Psychographics consist of psychological, sociological, and anthropological factors as well as self-concept and life style. And psychographic segmentation implies segmenting a given market using these factors. Since differences among consumer groups are not confined to geographic and demographic, but extend to personality traits, lifestyle and attitude, psychographics often serve as a valuable base for segmenting and explaining markets. And, among the various elements of psychographics, life style and attitude are the core ones from the segmentation angle. Due to this fact, psychographic segmentation is sometimes referred to as lifestyle and attitude segmentation.

In this article on Buyer behavior, we saw that buying behavior varies depending on the buyer’s psychographic characteristics. Psychographic segmentation facilitates grouping of consumers in such a manner that those included in a group en masse in a particular way to a particular emotional appeal and share a common buying behavioral pattern. In the case of certain products, buying behavior predominantly depends on lifestyle and attitude characteristics. Psychographic segmentation will be particularly relevant in this situation.

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