Market Segmentation
There are many different kinds of people, and they display about as many different buying patterns. A market segmentation of people or organisations sharing one or more characteristics that cause them to have similar product and/or service needs. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts.
Market segmenting is the process that a company divides the market into distinct of groups who have distinct needs, wants, behaviour or who might want different products and services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets.
Variables Used for Segmentation
Customers or markets can be segmented on the basis of geographic, demographic, psychographic, behavioural or technographic variables.
Geographic variables
Region of the world or country, East, West, South, North, Central, coastal, hilly, etc.
Country size/country size : Metropolitan Cities, small cities, towns.
Density of Area Urban, Semi-urban, Rural.
Climate Hot, Cold, Humid, Rainy.
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Demographic variables
Age
Gender Male and Female
Family size
Family life cycle
Education Primary, High School, Secondary, College, Universities.
Income
Occupation
Socioeconomic status
Religion
Nationality/race (ethnic marketing)
Language
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Psychographic variables
Personality
Life style
Value
Attitude
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Behavioral variables
Benefit sought
Product usage rate
Brand loyalty
Product end use
Readiness-to-buy stage
Decision making unit
Profitability
Income status
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Technographic variables
Motivations
Usage patterns
Attitudes about technology
Fundamental values
Lifestyle perspective
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When numerous variables are combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile.
Benefits of segmentation
Segmenting your customers into groups according to their needs has a number of advantages. It can help you to:
Identify your most and least profitable customers
Focus your marketing on the customers who will be most likely to buy your products or services
Avoid the markets which will not be profitable for you
Build loyal relationships with customers by developing and offering them the products and services they want
Improve customer service
Get ahead of the competition in specific parts of the market
Use your resources wisely
Identify new products
Improve products to meet customer needs
Increase profit potential by keeping costs down, and in some areas enabling you to charge a higher price for your products and services
Group your customers by factors such as geographical location, size and type of organisation, type and lifestyle of consumers, attitudes and behaviour
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Next week watch out for what each of these terminologies mean and how are they relevant to marketing!