Market Segmentation

This chapter is devoted to two inter-related themes – market segmentation and brand positioning. Over the years, these have become important areas in marketing research. A proper understanding of these concepts and the procedures involved in identifying market segments and positioning of the product or brand in the target segment is of profound importance to marketing management. It enables the company to design most suitable strategies to improve its market share and earnings.

Market segmentation is the process by which the total heterogeneous market for a product is divided into several sub-markets or segments. Each segment is homogeneous in all major aspects and is different from the other. In economic terminology it can be said that though there is only one demand schedule for the total market, if it is divided into different segments, each segment would have a separate demand schedule.

The need for market segmentation arises because a company with its limited resources cannot cater to the demand of the total market. In view of this, it has to identify the segments where its product would be most suitable and market that would be most profitable.

There are several benefits of market segmentation. It helps in designing products that match with the market demand. A company could determine the most effective promotional strategy and position its promotional efforts to synchronise with the period when the consumer’s response is likely to be the maximum.

While the concept of market segmentation is simple, the problem arises when a company has to identify suitable market segments for its product or service. It has to identify segments in such a way that they are different from each other but have homogeneity within the segment. This is an extremely complex problem to be faced while segmenting the market.

Bases for Market Segmentation: There are several ways by which a company can segment its market. The methods may vary from one product to another.

An important way of segmenting the entire Indian market is to divide it into (i) ultimate consumers and (ii) industrial users. The ultimate consumers buy and/or use products or services for their own use. In contrast, industrial users are industrial, business or institutional organizations which buy products and services in order to manufacture their own products. Since the two markets buy the products or services very differently, this division of the entire market into two, i.e. consumer market and industrial market, is extremely relevant and important from the viewpoint of marketing. An illustrative list of bases for segmenting consumer markets is given in Table 23.1.

Table 23.1 Bases for Segmenting Consumer Markets

Demographic Bases	Psychographics   Bases	Behaviouristic Bases	Brand-related   Attitudes
Region	Life style	User status	Brand   perceptions
Districts		Benefits sought
City size
Density
Climate
Age
Sex
Family size
Income
Occupation
Education
Religion
Social Status

Demographic Segmentation: Market segmentation can be effected on the basis of demographic characteristics of the respondents. Demographic characteristics or bases are factors such as age, sex, race, nationality, religion, family size, urbanisation, income, occupation, etc. These measures are commonly used while segmenting the market. Studies using demographic bases normally relate to large samples. They use structured and underguised questionnaires for collecting primary data from the sample respondents. In addition to the demographic characteristics, the respondents are questioned on their purchasing power of a particular brand and their consumption rate of each brand.

It is said that in many cases, demographic segmentation is unable to discriminate perfectly between heavy and light users or between users and non-users. All the same, such a measure as rural-urban population or male-female respondents will show significant differences in usage rates of consumer goods. In view of this, demographic segmentation cannot be ignored. It is relatively easy to use demographic characteristics in a research study. In addition, it is easier to understand their impact on the level of consumption or usage. Such an understanding will no doubt, be quite useful to advertising agencies to identify the media suited to get the desired results.

Psychographics Segmentation: Like demographic bases, the purpose of psychographic bases is the same, i.e. to identify various market segments. Psychographic bases are used to classify respondents with respect to their attitudes, beliefs, opinions and activities.

Several steps are involved in order to obtain psychographic data. First, a number of statements are framed. Second, the statements are listed in random order in a questionnaire. Third, it is desirable to have several statements in a questionnaire for each activity, attitude, belief etc., which is to be measured by the researcher. Finally, the respondents are asked to indicate to what extent they agree or disagree with each of the statements, say, on a ten-point scale. Respondents are asked to report their consumption of the given brand/product and of various advertising media. On the basis of these responses, the researcher has (i) to identify groups of respondents having different activities, interests, attitudes and opinions; and (ii) to ascertain how these groups differ with regard to their product, brand and media usage.

For example, let us consider a psychographic study done by Pathfinders, a marketing research agency. Pathfinders conducted personal interviews of 10,303 working and non-working women, aged between 18 and 45 years, with family income of more than Rs.350 per month, in 36 towns and cities across the country.

The study known as P: SNAP analysed the data collected from the interviews, conducted over a period of three-and-a-half months, and came up with eight identifiable types of Indian housewives.

• The gregarious hedonist: Found predominantly in the east, she is most likely to speak Bengali and is intensely extrovert and liberal. She does not believe in sacrificing her life just to keep her family happy.
• The gregarious hedonist: She is on the threshold of change. While she has not given up many traditional values, she aspires for modernity and is least likely to be living in north India. She feels the need to do something more meaningful besides housekeeping. She is fashion-conscious.
• The affluent sophisticate: She lives mainly in the west zone. She is the highest user of all kinds of consumer products. She is comfortable talking to men outside her family circle, and would not mind if her children marry outside the community.
• The right-fisted traditionalist: Leading a sheltered life, she prefers to follow the film stars in her dress habits but is particular about prices. She restricts her circle of friends within her community. A majority live in north India.
• The troubled home-body: Neither a leader nor an emulator, she is largely illiterate nor is the least exposed to the media. Fashion takes a back seat and the future, according to her, is written in the stars.
• The anxious rebel: Less likely to be found in the south, she would much rather be working than staying at home. She is anxious, thrifty but discerning in her shopping, though quite willing to try out new products.
• The archetypal provider: Living overwhelmingly in the south, she is satisfied being a housewife. She sees TV much less than the average viewer, and is disinclined towards fashion. But she is ever willing to try out new food recipes, and loves to spend on her children and guests.
• The contented conservative: She is extremely confident out probably the most efficiency householder of all. She is a great optimist, is very conscious of the family’s health and is, by and large, the advertising man’s dream as she believes that ads are a great source of information.

The study observes that although the first three modern types represent more than 35 per cent of Indian housewives, life-style patterns outside the house remain largely traditional. As regards the housewives in different zones, it is the housewife in the east who emerges as the most modern and socially integrated. The housewife in the west is more confident of her ability to achieve something in life. The southern housewife emerges closest to the conception of conservative. The housewife in the north is introvert, the least hospitable and the most dominated by her husband. While the survey concludes that the Indian housewife sees herself basically as a traditional provider, all the same, a growing number of urban women are beginning to see themselves in a more modern context.