Market Segmentation

Segmenation

Market Segmentation

Market segmentation is the division of a market into distinct groups of buyers who might require different products or marketing mixes (Kotler et al, 1994). It is the division of a heterogeneous market consisting of buyers with different needs and wants, into homogeneous segments of buyers with similar needs and wants. Therefore, the segments are heterogeneous between (ie. all the segments are different, eg. one segment all males, one segment all females) themselves, but homogeneous within (eg. within the male segment, all buyers are male; within the female segment, all buyers are female).

Segmentation is important as buyers have unique needs and wants. In segmenting a market, marketers look for broad classes of buyers who differ in their needs. There is no one right way of segmenting markets. A marketer has several bases available to him/her for the segmentation of markets.

Bases for Segmenting Consumer Markets

1. Geographical segmentation

Segmenting markets on the basis of geography involves dividing the market into different geographical units, eg. states, regions, countries, where the company pays attention to geographical differences in needs and wants. For example, there may be a greater need for T-shirts in the Northern part of Australia all year round rather than in the Southern part.

2. Demographic segmentation

Demographic segmentation involves dividing the market into groups based on demographic variables such as age, family size and life cycle, occupation, etc. It is the most popular bases for segmenting consumer markets because consumer needs often vary closely with demographic variables, an also because of the ease of measurement of the variables. Even when other bases are used for segmentation, demographic variables are still used in the description of the segments. For example, you may divide a country into Northern, southern, Eastern and Western regions. But, you may still describe each of the regions in terms of the demographics of the buyers living there eg. age, income, sex, occupation, race, etc.

3. Psychographic segmentation

Using psychographics to segment markets divides buyers into groups based on socioeconomic status, lifestyle or personality characteristics. Example, dividing the Australian market into leisure-seekers, work-oriented...

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...ld you predict this type of market - who would you target the product to? These problems seem easy in retrospect, but at that time, they would have been quite difficult to overcome.

One of the initial decisions that needs to be made in terms of forecasting is the time period over which you are attempting to forecast. Sometimes it is important to have long range forecasts so that you can set up factories; in other cases production amounts may be able to be altered at relatively small cost and little inconvenience.

When you consider predicting demand you also need to think about whether the demand will be the same all through the year. If you launch a new ice-cream you could probably predict that demand would be highest when the weather was hottest. How would this affect your forecast?

You also need to consider whether you are going to try and estimate what the demand for a product will be now, under the current circumstances, and what demand may be in the future. Estimating the future demand for a product may involve also estimating what the likelihood of competitors entering the market will be, or what the reactions of current competitors is likely to be.