Quick Study Notes for Market Segmentation

Quick Study Notes for Market segmentation

Definition of market segmentation

  • The process of splitting a market into smaller groups with similar product needs or identifiable characteristics, for the purpose of selecting appropriate target markets.

What are segmentation bases?

  • A definable characteristic, identity or behavior of an individual consumer that can be utilized to classify consumers into related groups.

Why Use Market Segmentation?

  • Identify attract target markets
  • Greater market understanding
  • Help develop marketing mix
  • Gain stronger competitive position
  • Identify market gaps and competitive opportunities
  • Develop marketing strategies based on a stronger market understanding
  • Think differently about the market
  • Successfully compete as a niche marketer
  • Avoid being a mass-marketer
  • Have more product offerings in the same market

Main segmentation bases/variables with quick examples

Geographic: Where a consumer lives. Examples: Country, region, climate
Demographic: The consumer’s demographic profile. Examples: Age, occupation, marital status
Psychographic: A consumer’s lifestyle and interests. Examples: Values, activities, hobbies
Benefits sought: The reason for needing the product. Examples: Safety, esteem, convenience
Behavioral: The consumer’s product interaction. Examples: User status, occasion, brand familiarity

Study Tip

To remember the different segmentation bases, simply describe yourself as consumer for a particular product category. That is, your age (demographic), country (geographic), interests (psychographic), brand knowledge (behavioral), and why you want the product (benefits sought).

Why use different segmentation bases?

  • Gain a competitive advantage
  • Identify unmet market needs
  • Deeper market understanding
  • Meet strategic goals (such as growth or innovation)
  • Ability to access to data and undertake data mining
  • Need to fragment the market to decrease competitive rivalry