Definition
Segmentation is the process which identifies and evaluates groups of customers who have
distinctive buying behaviour. Essential principle behind the segmentation process is to make
sense of complex markets where there exists a diversity of needs, wants, drives and choices.
Segmentation strategy includes use of product life-cycle analyses, product-market expansion matrices, portfolio analysis, brand mapping.
Segmentation is a focus through positioning on some particular target markets rather rough
and general direction towards a huge market or towards many segments.
Principles of Segmentation:
1. Segment size: Segment may be small to warrant any special marketing effort.
2. Segmentation information: Buying behaviour, product positioning, psychographs, and
demographics.
3. Segment discrimination: Segmentation aggravates customers so that a diverse market
can be understood in terms of distinctive, homogenous segments.
4. Segmentation exercise: Minimize within group variation and maximize between
group variations.
5. Segmentation overlapping: One segment may overlap with other for some similarity.
Segmentation by Geographic:
Standard planning regions
TV regions
Urban/Rural
Segmentation by demographics: age, sex, ethnic group, family size, family life cycle (age, presence of children, income), income, occupation, social grade, education, religion, nationality.
By life style: It is the learned as a consequence of numerous influences including culture, family, social grade, reference groups, and peer groups. Life style has been referred to as patterns in which people live and spend time and money.
Life style is usually measured by AIO framework-activities, interests and opinions. The appeal of life style is that buying behaviour, particularly for high involvement consumer products. The usual problems with life style are that it lacks clarity because the data are elusive or the method of analysis is obscure and involves a degree of subjectivity that is unacceptable. Another problem is stability of life style. An interesting example of life style analysis is the segment identified as ‘Generation X’ which contains young people often enjoying high disposable income for clothes and entertainment. But ‘Generation X’ is not stable as they are highly self-aware and also highly cynical such that traditional marketing activity is seen as transparent and false.
There are two variables- general (customer size, socio-economic condition) and behavioural (buying habit, buying criteria, frequency of purchase, size of purchase). Behavioural variables act more on marketing.
Problem in methodology
Process of segmentation is concerned with identifying and with evaluating. Market segmentation is multidimensional in nature as consumer is multidimensional. So using one or two single variables can have limited success. It is unlikely that a segment can be identified in terms of usage rate and age.
Market Segmentation Research
Step 1: Define the problem and research objectives- Problem should not be too broad or too
narrow. It should be strategic. Problem may focus on three things- descriptive, associative
and predictive.
Step 2: Develop the research plan- It includes decision on cost of project, data sources, research approaches, research instruments, sampling plan and contact methods.
Data Sources: Primary and secondary data. When secondary data are inaccurate, incomplete, unreliable and out dated, primary data are important.
Research approaches: Observational, focus group, survey research, behavioural data,
experimental research (effect of treatment when extraneous variables are controlled).
Research Instruments:
#Questionnaires: There are different types as dichotomous, multiple choice, summated rating
scale, semantic differential, Word Association, Sentence Completion, Story Completion,
Picture, TAT.
#Psychological tools: Rorschach, depth interviewed.
# Mechanical devices: GSR, Eye-movement test by eye camera, audiometer.
#Qualitative measures: Informal interview ----- at a cafe or bar.
Sampling plan:
Sampling unit, sampling size, sampling procedure-Probability (simple, stratified and cluster)
and non-probability sample (convenient sampling, judgment and quota sampling).
Contact method:
Mail questionnaire, personal interviewing, online method.
Collection of data
Analyze the information
Present the findings
Make the decision
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