Market Segmentation — Methods, Requirements & Levels: Study Pack Summary & Study Notes

🌍 Methods of Market Segmentation

Overview: This source outlines the main bases or methods of market segmentation used by marketers to divide heterogeneous markets into meaningful groups. The primary bases covered include geographic, demographic, socio-economic, product, psychographic, benefit, behavioural, volume, and marketing-factor segmentation.

Geographic Segmentation: Divide markets by location (nations, states, regions, cities). Useful for planning and aligning with government statistics; purchasing habits and product needs differ by location (e.g., metro vs small towns).

Demographic Segmentation: Groups consumers by age, gender, family life cycle, income, generation, social class and educational level. This is widely used across industries since demographics often predict product needs and purchasing power.

Socio-economic & Product Segmentation: Socio-economic groups (working class, middle class, etc.) help assess buying ability. Product segmentation classifies products by the utilities they satisfy (prestige, maturity, status, anxiety, functional).

Psychographic Segmentation: Segments based on personality, lifestyle, interests, and values; brands are positioned to match consumer life-styles and identities.

Benefit Segmentation: Consumers are grouped by the specific benefits they seek from a product (primary/generic vs secondary/evolved utilities), discovered through interviews and usage studies.

Behavioural Segmentation: Based on purchase occasions, readiness status, user status, usage rate, and loyalty level. Behavioural variables directly relate to how customers interact with a product.

Volume & Marketing-factor Segmentation: Volume segmentation groups buyers by purchase size (bulk, medium, single-unit). Marketing-factor segmentation groups buyers by responsiveness to marketing activities like price, quality, advertising, and promotions.

🧭 Concept, Requirements & Benefits of Market Segmentation

Concept: Market segmentation is the process of dividing a heterogeneous market into several homogeneous submarkets (segments) that share common characteristics, enabling tailored marketing mixes for each group.

Requirements of Effective Segmentation:

• Substantiality: Segments must be large and profitable enough to merit separate marketing. Small segments may be uneconomical.
• Measurability: Segments should be quantifiable so marketers can measure changes and size (e.g., motives for buying a car).
• Accessibility: Segments must be reachable via distribution channels and media (if you cannot reach them, segmentation is ineffective).
• Representability: Each segment should be identifiable and distinct with its own characteristics.
• Nature of Demand: Segments should differ in consumption rates; segmentation is useful if demand patterns vary meaningfully.
• Responsiveness: Segments must respond differently to marketing variables; if all segments react the same (e.g., everyone responds to the same price cut), separate mixes are unnecessary.

Benefits: Segmentation helps identify marketing potential, allocate resources efficiently, design targeted promotion and product timing, pick suitable target markets, and concentrate efforts on profitable or underserved segments.

Limitations: Segmentation does not guarantee exclusivity of purchases, can be costly to produce multiple offerings, and consumers may buy across segments.

🎯 Levels of Market Segmentation Strategies

Overview: This source explains segmentation strategies based on intensity and the firm's targeting approach: Undifferentiated (Mass) Marketing, Differentiated Marketing, and Concentrated Marketing.

Undifferentiated (Mass) Marketing: A single marketing mix for the entire market. Appropriate for standardized products or where differentiation is unnecessary or infeasible (example: Ford Model T). Advantages include economies of scale and lower unit costs.

Differentiated Marketing: The firm targets several segments with distinct marketing programs for each. Useful when consumer demand diversifies (e.g., shampoos for dry, oily, normal hair). It builds closer producer-consumer relationships but is costlier.

Concentrated Marketing: The firm focuses on one or a few niche segments with a tailored plan. Suitable for firms with limited resources or when specialization yields a better position in target niches. Often used in test marketing or when geographic/transport constraints exist.

Strategic Implications: Choose a level based on product standardization, market diversity, company resources, and distribution/communication infrastructure.