Market Segmentation

The development of the marketing concept provides a focus for a changing producer orientation from one
of unthinking control and dominance of the producer consumer relationship to one of greater
sophistication.
Market segmentation is generally regarded as the essence of the marketing concept. Products like GM
Cars (e.g. the 3 stages of an automobiles life journey) need to be positioned in a product market
positioning are closely aligned with segmentation.
The position of a product reflects how consumers perceive it. The perceived benefits of the product to the
end user will be used as a key part of the promotional strategy.
This implies the marketer will first segment the market and identify to the preferred target. Attempting to
position without segmentation will be pointless. Computers can be enhanced or are now advanced enough
to enable marketers to generate lists of individuals in their target market segment and send them
personalised communication based on their demographics information. This process is called the
Segmentation of One this actually represents a return to the relationship between producer and
consumer before the advent of mass production and mass marketing.
For a segmentation to work there must be a number of constitutions to consider:
Identity - how identifiable and distinguishable from other consumers is a prospective segment and how
easy is it to obtain the necessary information on such people?
Access - how easy is it to reach people in this segment with the marketing communications?
Size does the number of the people in the segment and their purchasing power justify the cost of
marketing to them?
Types of segmentation
Geographic Segmentation - Operates that people living in a given location have similar needs, wants
and preferences that differ from people living in another location.
There are limits e.g. Everyone drinks coke and due to the internet and satellite communication geographic
boundaries are now obsolete.
Micromarketing Is whereby different regions have different tastes. E.g. Campbells soup in the US or
spicer food in California.
Climatic variations will also be applicable to geographic segmentation. E.g. there is greater demand
for swimming pools in Florida than in Glasgow. In the UK water is softer in Scotland than in England, this
has implications for soap, shampoo, etc marketing water softness. From a consumer point of view most
buying behaviour is local, e-commerce and mail order being the exceptions. Localised consumer behaviour
is often expressed through the presence of significantly large cultures or sub cultural group that is
different from the main stream e.g. the spicer nachos in California due to larger Hispanic people there.

Sometimes a local culture maybe marketed more widely like Jewish bagel or Indian food from
Birmingham.
Some locations just have oddities e.g. more sweets eaten per capita in Scotland than England, more Irn
Bru etc. Obviously useful to know form a marketing point of view. Advertising to e.g. a geographic sector
can be a more cost effective way of reaching a target market.
Store specific marketing should also be considered, this takes place in stores.
Demographic segmentation deals with way of categorising statistically the people in the total national
population e.g. age, sex, income, education, occupation, social class, family, size, race and religion. These
are essentially the different ways of viewing the same consumer. Different aspects to our identity will be
relevant at different times e.g. baby food.
Trends that influence most of the industrialized world

The aging population - the grey pound

Baby boom generations are now middle aged
The proportion of young people in the population 15-20 is declining
Household sizes have declined 1 person household
Women have fewer children and when they do they do it later life

Types of demographic segmentation

Age: People of the same age usually have the same needs, wants and interests, people
however perceive themselves from being a different age than they are.
Sex: Some barriers are changing here as society changes e.g. diy kits to girls. Women
still the main buyers of baby products. Men may buy underwear for women on
occasion.
Socio-economic status (SES): Made up of education, income and occupation. Income
is usually considered to be the most important SES variable because it is so easily
measured.
Geo-demographic segmentation: Dividing up markets according to neighbourhood
e.g. London, a different range of products will appeal to people in Millwall than St.
Johns Wood.
PRIZM in the US divides people or households in up to 40 categories. It establishes SES
rating for each neighbourhood e.g. blue blood estate where the most affluent
American families live to Public Assistance inner City. Along the way rural and other
suburban.
ACORN is another similar thing in the UK.
Psychological Lifestyle segmentation
(Consumer Profiles)
Divides consumers into segments based on activities, interests, and opinions. The
American market is divided into 10 categories. Creating broadly defined categories e.g.
Thelma traditional church goer Eleanor socialite with associated habits and

spending patterns.
All life styles/psychological systems are open to criticism; mainly not everyone falls
into ten categories.
Needless to say studies can be good starts to segmentation- there could be tweaking
on a per product basis. Lifestyle, psychographic, psychological, segmentation use
consumer profiles.
Segmentation by usage
This form of segmentation is based on information about volume and frequency of
purchase for a given product.
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It uses Electronic Point of Sale (EPOS) systems to gather information. The market is
divided into users and non users e.g. McDonalds. The 80-20 rule is in effect for most
products. Time and timing is also an important factor e.g. students, offered incentives
to open bank accounts as the back knows they will need mortgages etc later down the
line.
Benefit segmentation
Based on knowledge of the benefits that consumer seeks from a product. Customising
a product by a producer as far as possible is the ultimate aim of Benefit segmentation.
Or customise belt buckles in London.
Summary
Market segmentation begins when producers realise they could no longer sell whatever
they produced but had to begin competing for business. The best market condition for
successful segmentation seems to be based on:
Identifability
Accessibility
Size
Five forms of segmentation were identified:
Geographic
Demographic
Psychological
Segmentation as a benefit
Segmentation by use
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A lot of work has been done on psychological segmentation producing various

attempts at classifying consumers according to personality factors.
There are constantly new products coming onto the market the exact number is
unquantifiable. Estimated failure rates of these new products is also large 80% - 90%.
How new products and innovations are marketed and how consumers respond to them.
Developing New Products
There are more failures than success (+75%) and even the biggest and most successful
companies have them. For example Sony Betamax, Ford Edsel, these companies were
large enough and had enough profitable lines in existence to absorb losses, but many
smaller companies would go bankrupt.
Pressures that lead companies to the development of new products
Declining birth rate in the industrialised world new products have to be sold more
and more therefore to existing customers.
Technological Innovation in all areas of goods and services that companies have to
be aware and adapt to them.
Pressure of organisation - changes is renewal innovation isnt a luxury its universal
necessity.
Total product concept
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