Essay: Definition of segmentation

DEFINITION OF SEGMENTATION:

In general terms, market segmentation is the process of dividing the total market into large homogeneous groups of customers who share similar needs and characteristics.

• Marketing segmentation is the act of identifying and profiling distinct groups of buyer whomight prefer or require varying products and marketing mixes.
• Market segmentation is the process of dividing the total market for a goods or services into several smaller groups, such that the members of each group are similar with respect to the factors that influence demand.
• Market segmentation is naming broad product markets and segmenting these broad product markets in order to select target markets and develop suitable marketing mixes.

SEGMENTATION IMPLIES:

• Division of total market into groups.
• Group should be large enough for marketing purpose.
• Group should be homogeneous with same preferences.
• Customer in a group should have similar needs and characteristics.

  Segmentation finds customer groups for deciding target markets.

Market segmentation should not be based on guesses and hunches. It should be a systematic process consisting of:

• MARKET SURVEY
• SEGMENT IDENTIFICATION
• SEGMENT PROFILING
• SEGMENT SELECTION
• MARKET SURVEY: Segmentation requires a thorough investigation of the total market characteristics. Marketing survey is conducted for this purpose and Information is collected on following aspects:

• customer needs and characteristics
• Desirable product attributes
• Brand awareness and ratings
• Product usage patterns and usages rate
• Customer attitudes towards the product
• Preference patterns, etc.
• SEGMENT IDENTIFICATION: Detailed analysis is done of the information collected from the market survey. Appropriate statistical tools are used to make the analysis.
• SEGMENT PROFILING: The variables for segmentation are identified. They can be geographic, demographic, psychographic and behavioural. They vary according to the market.
• SEGMENT SELECTION: 0rganizations select one or more segments after careful evaluation

• segment attractiveness, in terms of size, profit, competition, risks
• Organizational objectives and resources
• Market coverage desired
• Ethical consideration in terms of environment and social well being.
• Government policies and laws.

Segmentation requires the use of both dependent descriptors as well as independent descriptors. The former derives from the organisations need to segment the market and is referred to as the basis for segmentation. The overall objective of segmentation is flexible to marketing inputs, it is known why the dependent variable would vary according to management s needs. Thus, for e.g. new product decisions are typically concerned with benefits sought, innovativeness, and purchase predispositions, while advertising decision involve the use of such variables as media usage, psychographics, and benefits sought. The independent variables seek to explain the flexibility in the base or dependent variable and are called descriptors.

TYPES OF SEGMENTATION:

1. TARGET MARKETING.                                 2. NICHE MARKETING.

3. LOCAL MARKETIING.                                 4. CUSTOMIZED MARKETIN

1. TARGET MARKETING: The total market is viewed as consisting of heterogeneous customer groups. They have various characteristics. The market is divided into major market segments. One or more of those segments are selected as target. Marketing mix is tailored to each segment. This is based on new marketing concept
2. NICHE MARKETING: A Niche is a more narrowly defined group of customers. It is identified by dividing a segment into sub segments. Marketing mix is tailored to the niche. Niches are fairly small groups whose needs have not been well served. They are willing to pay higher prices.
3. LOCAL MARKETING: The marketing mix is tailored to the needs and wants of local customer groups. They can be localities or stores in local area.This type of market is basically segmented by considering local consumers.
4. CUSTOMIZED MARKETING: The market is viewed as consisting of individuals with distinct needs and characteristics. Marketing mix is tailored
   to each individual. Tailor made cloths and individually designed houses are examples. Business-to-business marketing is largely customized.

Requirements: For an effective segmentation the size, needs, purchasing power, and characteristics of the customers in the segment should be measurable. The segments should be differentiable. There must be clear-cut basis for dividing customers into meaningful homogeneous groups. They should respond differently to different marketing mixes. There should be differences in buyer’s needs, characteristics and behaviour for dividing in groups. The segment should be reached and served. It should be accessible through existing marketing institutions, such as distribution channels, advertising media and sales force. There should be middlemen to distribute the products. The segment should be substantial. It should be large enough in terms of customers and profit potential. It should justify the costs of developing a separate marketing
mix. Organization should be able to design and implement the marketing mix to serve the chosen segment. It should be actionable for marketing purpose.

A market consists of customers with needs to satisfy, money to spend and willingness to buy products. No product can satisfy the needs of all the customers in the market. Customers vary in terms of needs, characteristics, buying behaviour, purchasing power, and preferences.
Markets can be divided as follows:

1. consumer markets.
2. Industrial markets.
3. Institutional markets.
4. Global markets.

Today business became more diversified consists mass marketing which required mass production, mass distribution and mass promotion. One single marketing mix is not enough to satisfy the needs of all the customers. Organization practice micro marketing. Modern marketing views the total one or more segments are selected as target market. Separate marketing mix is designed for each selected segment.

SEGMENTATION VARIABLE OF CONSUMER MARKETS:

Consumer market consists of individuals and households. Segmentation is done according to the, customer needs, product usage, brand loyalty, purchase influence, innovativeness, geographical location, account n clients type and size etc.

• CUSTOMER NEEDS: Consumers vary on what benefits they want as well as on the importance of each. Consumers develop a set of choice criteria to as the ideal brand. e.g. the dentifrice market can be divided into 4 benefit segments-decay, prevention, breath, freshness and tartar removal. Firm have a choice about which benefits they will build into the product and to what extent. Such as brand toothpaste Colgate, Close-up and Pepsodent.
• PRODUCT USAGE: In most markets a small proportion of customers accounts for a substantial part of total purchases, e.g. about half of all us beer drinkers account for 90% of all beer consumed.
• BRAND LOYALTY: Users of a product vary as to their loyalty to a specific
  brand. The task of management is to increase the loyalty of present customers and add new ones.
• PURCHASE INFLUENCE: Often several individuals influence the purchase of a product. Lots of consumer influences from buying behaviour of others e.g. gifts, children products and prescription drugs, several buying influentials are involved.
• INNOVATIVENESS: Potential customers can be divided into 5 groups relating to the speed with which they adopt new products-innovators, early adopters, early majority, late majority and laggards.
• GEOGRAPHICAL LOCATION: IT is often useful to segment markets based on different geographic regions such as mountain, hill and plain, metropolitan, village development committee, winter area, summer area etc.
• ACCOUNT/CLIENTS TYPE AND SIZE: Segmentation by channel type is another important possibility. Consumer goods markets can be segmented into different channels by wholesaler n retailers. e.g. departmental stores, supermarkets etc. In some cases an account may be so large as to constitute a segment in its own rights. E.g., general motors and its purchase of steel.

SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS: Industrial market includes industrial, institutional and resell markets. This market is very large in size and the buyers in this market are well informed and they are mostly guided by logical reasoning. The variables used for segmenting the industrial markets are:

1. GEOGRAPHIC VARIABLES
2. DEMOGRAPHIC VARIABLE
3. PURCHASE RELATED VARIABLE

GEOGRAPHIC VARIABLES: The geographic variables are location of market, topography, climate etc. While segmenting the market, the market can be segmented at local, national, regional, international market under location. They can be segmented into mountains, hills, plain under topography etc.

DEMOGRAPHIC VARIABLE: Under the demographic variable segmentation can be done according to types of business. It includes agriculture, forestry, fishing, mining, transport n communication etc. Segmentation is also doneaccording to the size of customers. Under this variable the bases for market segmentation are cottage and small units, medium size units, small customers medium large customers, very large customers etc..Demographic variable also related with operating variables. It includes technology, usages rate and service requirement of the customer. Under technology, it can be segmented into labour oriented, capital oriented, advance technology etc.

PURCHASE RELATED VARIABLE: It includes purchase structure, documentation and time. Purchase structure means the type of purchase organisation adopted by the customers. They can be individual, purchase committee, department etc.

THE RESEARCH PROCESS FOR SEGMENTATION:

Segmentation studies are among the most difficult ones to undertake regardless of which segmentation model is used. There are difficulties in terms of the sample design, the reliability of the data collection, dada analysis as well as in the interpretation of result.

Finally, segmentation studies involve complex techniques where many hybrid segmentation is applied. One cannot know in advance which basis for segmentation will lead to identification of meaningful segments, segmentation studies should be flexible, allowing diverse analyses aimed at the identification of relevant segments. This need creates special demands for researchers with knowledge of large number of analytical procedures, good conceptual understanding of alternatives and a high level of research.

Reference for the notes.

Definitions are taken from:

Philip kotler*Stanton, Etzel and walker.*Jerome McCarthy.

See Philip kotler marketing management (2003)Govind R.Agrawal(1999 new addition 2008) T.U professor management in NEPAL.

Concept and strategies, Wiliam M.Pride and O.C Ferrel, BOSTON(1989)

Weiers, Ronald M.(1988)marketing research. International editions.

TARGETING is the bone of marketing segmentation. When the market is segmented into various groups, market targeting starts. Targeting the market to supply rite product to rite consumer is the main goal for this process. So Organisation should carefully select the segments n starts targeting strategies. It involves 2 strategies.

1. EVALUATION OF THETARGET MARKET
2. SELECTION OF TARGET MARKET

EVALUATION OF THE TARGET MARKET: Ones the market is segmented it is necessary to evaluate targeting strategies into different coverage patterns.

Single coverage targeting. : A small company want to concentrate one small segment n make a target for its coverage. Some organisations also practice Niche marketing. e.g Rolls Royce has targeted very high income market for cars. Targeting is done according to the segment size and the growth of the market. Large organisation needs large targeting and planning, and small needs small target planning for the market coverage. Targeting must be evaluated from the profitability point of view. In it buyers, suppliers, potential competition all
should be considered. Targeting objectives should be fulfilled using different resources in terms of technology, production capacity, manpower etc.

SELECTION OF TARGET MARKET: Second part of targeting is selecting target market for the full coverage. This strategy needs multi segment market coverage n full market coverage. This strategy allows an organisation to specialize in one market. The organisation can understand the needs and characteristics of different customers. Multi targeting strategy is that under which organisation selects two or more segments into the market. It involves higher cost of designing separate products, different promotional tools and distribution system to deal with different market segment. Product specialization targeting builds product reputation and diversifies risk. Marketing specialization targeting strategy is a strategy of single product and marketing strategy is a single market strategy. So this strategy organisation concentrates on one single market and by being specialized in single market it can understand the needs of market

Paper8 2nd

-understand the needs and characteristics of that market. Full market targeting coverage strategy is very broad base targeting strategy. Under it, the organisation tries to meet the needs overall markets under one category. It will diversify its marketing efforts in all segments. An organisation serves all market segment n make targets to cover full market by the products they need. Various product items in one product line are offered. Coca Cola is using this strategy by offering a variety of soft drinks to all target market.

Notes for the reference: Foxall, Gordon R.(1992)strategic marketing management, LONDON. Croom Helen and John wiley.

Source:Philip kotler(2003), Govind R. Agrawal.(1999).marketing management and marketing research.

Marketing starts with the product since it is what an organization has to offer its target market. After market segmentation and targeting positioning has emerged as a powerful marketing strategy. It is a new thinking in marketing. Positioning deals with the minds of the customers. It is creating a product image which buyers will view in a certain manner relative to competing brands. It is distinct perception of product differentiation by customers, it is done after selecting the target market. The main objective behind positioning a product is to have the brand favourably perceived by the people in the target. In market, we find that different positions are available such as low price position, high price position and advanced technology position etc.

In the words of Philip kotler: “Positioning is the act of designing the company s offering and image so that they occupy a meaningful and distinct competitive position in the target customer, s minds”.(marketing management by Philip kotler,eleventh edition)

William Stanton

defines: “Positioning means developing the image that a product projects in relation to competitive products and to the firmsother products.”(Fundamentals of marketing,7th Edition)

Organizations generally selects one variable for positioning. e.g best quality, services, best value, cheap rate, advance technology, safest, fastest etc. They indicate number1 positioning. E.g Rolex watch, RADO watch, BMW car, Toyota etc has been positioned as high quality high price product.
Generally nature of business, situation and objective of the company determines the positioning strategy of the products. To implement product positioning, different steps should be followed. At first firm should identify differentiation factors of the product. Those are product differentiation, style differentiation, design differentiation, performance differentiation, service differentiation, personal differentiation and image differentiation. At second step, first has to select some differentiating factors that are relevant to product, target market and organisation itself.

Page10 While selecting the position, firm has to consider about consistency with the firm organisations image, competitors positions and their strengths and the cost of creating and defending positions. At last step, firm has to communicate the positioning factors to the target market and marketing mix for a product, including 4ps strategies, which support the position strategy.

There are different types of positioning.

1. ATTRIBUTE POSITIONING.
2. POSITIONING BY PRICE AND QUALITY.
3. POSITIONING BY USAGE OCCASION.
4. POSITIONING FOR USER CATEGORY.
5. COMPETITIVE POSITIONING.
6. POSITIONING RELATING TO TARGET MARKET.

• ATTRIBUTE POSITIONING: When products are positioning on the basis of the important characteristics of the product such as attribute positioning, quality taste, durability etc. These are basis of the positioning. Some firms promote their qualities as being in a desirable class such as made in London or having an attractive attribute, such as low energy consumption.
• POSITIONING BY PRICE AND QUALITY: Certain products and retailers are known for their high quality products and high prices. Generally, in the automotive field, positioning by price and quality is common.
• POSITIONING BY USAGE OCCASION: When product is necessary on a particular occasion or for a specific purpose, that positioning is usage occasion positioning. e.g in case of medicine information such as use 2 or 3 times daily is occasion positioning.

• POSITIONING FOR USER CATEGORY: When products are useful for certain market segment, only then that is user positioning. In this case, products may be targeted at high, middle or low income groups or children, young, middle-aged or old consumers.
• COMPETITIVE POSITIONING: It presents the organization s product as better or superior to the competitor s product. This strategy is especially suitable for a firm that has already a solid differential advantage. e.g, Coke always presents its products as better from each other.
• POSITIONING RELATING TO TARGET MARKET: In this strategy, target market is the focal point in positioning the product. This strategy does not suggest that the other ones ignore target markets.

Inoder to maintain good position of the product in the market organisation should avoidthe following positioning errors.

• UNDERPOSITIONING: Customers lack a clear idea of the brand and its benefits. The brand is seen as one more product.
• OVERPOSITIONING: Customers get a narrow image of the brand. Too many positive claims may lead to customer disbelief.
• CONFUSED POSITIONING: Customers get a confused image of the brand. The positioning is changed too frequently.
• DOUBTFUL POSITIONING: Customers do not believe the brand claim.

  Organisations should avoid positioning errors.

Page11 Positioning involves various strategies in order to satisfy and win not only the hands and mouths of the customers but their eyes and mind as well. In order to make stability in the business and to achieve its target goals, organization should adopt different strategies. Such as

• BRANDING STRATEGIES
• STANDARDIZATION AND ADAPTATION OF PRODUCTS
• PACKAGING STRATEGIES
• LABELLING STRATEGIES
• WARRANTY AND SERVICE POLICE
• PRODUCT PLANNING AND DEVELOPMENT.
• INTERNATION MARKETING STRATEGIES.

BRANDING STRATEGIES: Simply a brand is a name, term, symbol or special design of a product. ACCORDING TO THE AMERICAN ASSOCIATION, “Brand name is a name, term, symbol, mark or design or a combination of them which is intended to identify goods or services of one seller or a group of sellers and to differentiate them from those of competitors.”( (http://www.marketingpower.com/mg-dictionary-view329.php )
Branding plays vital role to identifying the position of a products. It is use to identify the seller or maker of the product. Brands suggest product differences to the customers. They convey attributes, image, values and benefits. e.g branded toothpaste: Pepsodent, Colgate etc, branded watches: RADO,TITAN etc they are in the no1 position in market.

Brand legally protects the interest of the company due to the registration of name under the concerned Act. It helps to identify the market segments due to help in modification, expansion and implementation of marketing program. It build corporative image and help mass production and low cost of production. Brand helps to promote sales through advertising, personal selling, sales promotion etc. through brand names. It help in positioning product because marketers use brand value, brand image and brand personality. Brand makes brand loyalty among the buyers and expand the product line. It provides freedom choice in the market.
Branding is al about building relationships.

BRANDING STRATEGIES ARE:

LINE EXTENSION STRATEGY: Under this strategy existing brand name is extended to new items in the same product line. This strategy is adopted when new features such as new flavours….

…..colors, ingredients, package size, and labels are introduced.*The vast majority of product modifications consist of line extensions. Line extensions have higher chance of survival. But the risk is that the brand name may lose specific meaning.

BRAND EXTENSION STRATEGY: Under this strategy, brand names are extended to new product lines. Honda uses the company name for different product lines.*This strategy gives instant recognition to the new product. Customers respond favourably. Advertising costs can be saved. However, if the customers feel disappointed, other products can get damaged.

MULTI BRANDS STRATEGY: Under this strategy, new brand names are given to items in the same product line. Procter and Gamble has nine different brands of detergents.

This strategy apples to different buying motives. But each brand may get a small market share. Promotion costs are high.

NEW BRANDS STRATEGY: Under this strategy, new brand name is given to a new product line.*Customers perceive the new brand as a new product. But the cost of promoting new brand is high.

CO-BRANDS STRATEGY: Under this strategy, a brand bears two or more well known brand names. e.g Marut, Suziki cars.

This strategy strengths brand preference. New audience can be reached. But customers may not feel convinced to insist on such brands.

IMAGE BUILDING STRATEGY: Under this strategy organisations build corporate image. This in turn helps build brands. Customer credibility increases for the products of high image organisations. e.g SONY,BAJAJ,HULAS.

STANDARDIZATION AND ADAPTATION: For the good positioning of an organisation the organisation should adopt the strategy of standardization and adaptation. Standardization is an act of keeping or making goods of uniform shape, size, colour, quality etc. While adaptation, also known as localization, is an act of making products fit or suit to the market condition. Some marketers adopt standardization strategy while others follow localization strategy for maintaining their position. When the products are standardize, the firm may gain the large-scale production in the long run. which minimize per unit cost of production. Most of the consumers in the world perceive standardized or uniform products as a symbol of quality, and thus, builds up the company and product image in the target market. Products in which technical specifications are critical tend to be uniform internationally. This helps maintaining uniformity internationally. A good positioning is that which can adopt tothe changing market situations. Due to the cultural differences, it becomes difficult for the products to adapt to the divergent markets. However, in long run, the international marketer has to make the products best fit or most suitable to the market conditions. Positioning is done after market segmentation n taking market into the target and maintaining organizations stability. Adaptation is done according to the different demands and conditions of customer and market. e.g customers in hot climate may demand fan and air condition in the car, while customers in cold place may demand heater in the car. Consumer tastes are not identical around the world. People in different culture may have different perceptions. e.g the French, Japanese, British and U.S customers may have differed choices even in the selection of cloths, car, shoes, books etc. Thus high degree of localization helps to maintain good position of organisation in the business world.

PACKAGING STRATEGIES: Packaging may be defined as the general group of activities in the planning of a product positioning and concentration on formulating a design of the package and producing an appropriate and attractive container or wrapper for a product. In another words, it can be defined as the process of designing the container for a product. Package is an invaluable aid to decision making by the customers anda good package endures ultimate success of the product as a commercial venture.

“Philip Kotler says Packaging includes the activities of designing and producing the container or wrapper for a product
According to the W.J.Stanton “Packaging may be difined as all the activities involved in designing and producing the containers or wrappers for a containers or wrappers for a product

Packaging protects commodity from losses, damages and deterioration in quality due to exposure. It keeps the contents pure and clean. It reduces chances of breakage, shrinkage and pilferage in transit. Packaging helps on communication of the product and adds strengthness on promotion due to effective size, color etc.
Good packaging also plays vital role for maintaining good position of a product andincrease good will of organisation. Package should be designed in such a manner that it will be most convenient in handling from one place to another. The design and label on the package, printed matter, picture, layout etc. should be attractive in packaging, which will have positive effect on the mind of consumers.
For maintaining good position in the market packaging strategies can be adopted.

PACKAGE MODIFICATION STRATEGY: Under this strategy, the package is modified by changing its size, colour, label etc. The customers perceive the new package as a new product. This strategy is followed in the short run to defend market share. The maturity stage of the product life cycle is ideal for the use of this strategy.

PRODUCT LINE PACKAGING STRATEGY: Under this strategy

• Identical packages are used for all items in the product line.
• Identical packages are used for all product lines.
• Diverse packages are used for each item in the product line.

REUSABLE PACKAGE STRATEGY: Under this strategy, packages used can be reused or can have multiple uses. They increase consumer value. This strategy is getting popular in consumer package goods.

UNIT PACKAGE STRATEGY: Under this strategy, separate package is used for each product unit. Thishelps for increase in sales.

ENVIRONMENT-FRIENDLY PACKAGE STRATEGY: Under this strategy, biodegradable materials are used for packaging. This strategy builds image of the organization as friendly to environment.

Thus packaging strategies are made for maintaining good and strong position in the market.

Labeling strategies are made for carving the produts n for building communication with the customers by proving information through labeling.

PRODUCT PLANNING AND DEVELOPMENT:Successful marketing presupposes the proper combination of various marketing factors.Product is the most critical and refers not to any product but one designed throughproduct planning.Product planning is critical to marketing success.AMERICAN MARKETING ASSOCIATION has defined product planning as the planning activity of marketing carried out for the purpose of selecting the right products or services and distributing them.For the sucessful implementation of products in international markets,theinternational marketersneed to test,time to time,the product suitability and product adaptation in the international markets.In conclusion positioning is the final step in market targeting.As the segmentation identifies the customer to be targeted,positioning strategy is concerned with
selecting a marketing mix appropriate to eachtarget marketsegment.Thus,positioning of firm s brand is ultimately determind by the buyer relative to the brand s of the firm s key competitors.It refers to certain mental perception of the offering.e.g one brand of toothpaste may be cosidered better for its tests.Generally speaking,it is the way consumers perceive various brands that determine their positions.By physical constitution,two brands of a product may be identical,yet they could be perceived differently.Conversely,two brands may be dissimilar in terms of their physical characteristics yet they could be perceived as similar if their differentiating characteristics are considered unimportant.

LABELLING STATEGIES: In order to maintain the high positiong of a product in the market labeling plays an important role.Label is a part of a product which gives verbal information about the product and the seller.Label may be a simple tag attached to the product or an elaborately designed graphic or pictorial presentation that is the part of the package.A Label may be a means of recognition or indicator of the product.Label identifies the product so it is called as a BRAND LABEL .Label may grade the product so it is called as a GRADE LABEL .Label may describe several things abou the product regarding the manufacturer,place of manufacture,use technique,etc.soit is called as DESCRIPTIVE or PROMOTIONAL LABEL .

BRAND LABELS: The label which describes the brand name of the product and to popularize branding is called brand label.e.g brand label of clothing such as suiting,saris etc.

GRADE LABELS:The label which provides information about the quality or grade
of the products with brand name is grade labels.e.g.this type of labeling is the classification of product into perishable and non-perishable,etc

DESCRIPTIVE LABELS:The label which describes about the product features as well as the uses of the product is known as descriptive label.When a product is difficult to grade and sell this type of labelling is more parctiable.

INFORMATIVE LABELS:This type of label is used to provide adequate information giving guidance and instructions on the use and care of the product.Generally consumers prefer informative labels.This label provides information about brand name,name and address of producer,weigh,measure and count,date of packaging,price,etc.

See Philip Kotler(2003)and Govind R.Agrawal(1999)MARKETING IN NEPAL.AL Ries and Jack Trout(1982):POSITIONING:The battle for your mind,NewYork:Warner Book.PRESCRIBED TEXT BOOK:Philip kotler,Marketing ManagementW.J.Stanton,Fundamentals of marketing.REFERENCE READINGS:McCarthy,Jerome,Essentails of marketing,management n segmentation.Ramaswami and Namakumari for marketing management,JAN CHASTON for marketing strategies.Marketing management,Niraj Mishra and Dr.Govind Ram Agrawal.