December 21, 2011

MB0046 [Marketing Management] Set1 Q6

Q6. Explain briefly the important bases for segmenting markets and then identify the bases for these products by giving appropriate reasons:

i) A digital wrist watch ii) Sunglasses iii) Air-cooler iv) Dictionary


1) Geographic segmentation: In this type of segmentation, the market is divided into different geographical units such as nations, states, regions, cities or neighborhoods. The company can operate in one or a few Geographic areas or operate in all but pay attention to local variations. For example, Bennett, Coleman and Co. Ltd divided markets according to geographical units for their tabloids. In Bangalore, the tabloid is known as Bangalore Mirror where as it is Mumbai Mirror in Mumbai.

2) Demographic Segmentation: In demographic segmentation the market is divided into groups based on variables such as age, family size, family life-cycle, gender, income, occupation, education, religion, race, generation, nationality and social class. Demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumers’ wants, preferences and usage rates are often associated with demographic variables. Demographic variables are easy to measure.

Even when the target market is described in non-demographic terms, the link back to demographic characteristics is needed in order to estimate the size of the target market and appropriate media that should be used to reach it efficiently. Some of the demographic variables used are:
  • Age and Life-Cycle Stage: Consumers’ wants and abilities change with age. On the basis of age, a market can be divided into four parts viz., children, young, adults and old. For the consumers belonging to the different age groups, different types of products are produced. For instance, different types of ready-made garments are produced for consumers of different age groups. A successful marketing manager should understand the age group for which the product would be most suited and determine a suitable marketing policy, pricing policy, advertising policy etc. For example, HUL launched, Pepsodent kids’ toothpaste for small children.
  • Gender: Gender segmentation has long been applied in clothing, hair-styling, cosmetics and magazines. For example, Emami segmented its personal care products on the basis of gender i.e. Emami Naturally Fair for women and Fair and Handsome for men.
  • Income: Segmentation based on Income is a traditional practice followed in product categories such as automobiles, clothing, cosmetics and travel. However, income does not always determine the best customers for a given product. For example, Baja Auto limited, a leading automobile company, manufactures different bikes for different commuters on the basis of the Income levels. For entry level (income less than Rs 35000) it is Bajaj CT 100, for mid segment (income greater than Rs 35000 but less than Rs. 60000) it is Pulsar and for the upper segment (income greater than Rs 60000) Avenger and Eliminator are positioned respectively.

3) Psychographic Segmentation: In Psychographic segmentation, buyers are classified into different groups on the basis of life-style or personality and values. People within the same demographic group can exhibit very different psychographic profiles.

a) Life-style: People have different life-styles and products they consume express their life-styles. Many companies seek opportunities in life-style segmentation. But life-style segmentation does not always work.
One of the most used psychographic profiling schemes is called VALSTM. Developed by SRI International, Inc., its first version, groups the entire U.S. population into eight groups, based on the identities they seek and implement via marketplace behaviors.

The Eight VALSTM Group: Using the self-orientation and resources dimensions, VALS defines eight segments of adult consumers who have different attitudes, exhibit distinctive behavior and decision making patterns. These segments are Innovators Thinkers, Achievers, Experiencers, Believers, Strivers, Makers and Survivors.

Innovators are successful, sophisticated, active, take-charge people with high self-esteem and abundant resources. They are leaders in business and government and are interested in growth, innovation, and change. They seek to develop, explore and express themselves in a variety of ways, sometimes guided by principles and sometimes by a desire to have an effect or to make a change. They seek to develop, explore and express themselves in a variety of ways. Image is important to them, not as evidence of status or power but as an expression of their taste, independence, and character. They possess a wide range of interests, are concerned with social issues, and show a cultivated taste for the finer things in life. For example, CEO’s of MNC’s, Entrepreneurs belong to this category.

Thinkers are mature, satisfied, comfortable, reflective people who value order, knowledge, and responsibility. Most are well educated and in (or recently retired from) professional occupations, content with their career, families, and tend to center around the home. Thinkers have a moderate respect for the status quo institution, but they are open minded to new ideas and social changes. They tend to base their decision on firmly held principles and consequently appear calm and self-assured. Thinkers are conservative, practical consumers who value performance, service, and price more than personal values (e.g., social and emotional values). For example: Senior professionals, Politicians can make up this segment.

Achievers are successful career or work oriented people who like to feel that they are in control of their lives. They value predictability and stability over risk. They are deeply committed to work and family. Work provides them with a sense of duty, material rewards, and prestige. Their social lives are centered on family, religion and career. Achievers follow conventional lives, are conservative in nature, and respect authority and status quo. Image is important to them. They favor established prestige products and services that show success to their peers. For example, Successful professionals like Doctors, Lawyers belong to this segment.

Experiencers are young, enthusiastic, impulsive, and rebellious. They seek variety and excitement, savoring the new, the offsets, and the risky. They are still in the process of formulating life values and behavior patterns and quickly become enthusiastic about new possibilities but are equally cool also. At this stage in their lives they are politically uncommitted, uninformed, and highly unsure about what they believe. Their energy finds an outlet in exercise, sports, outdoor recreation, and social activities. Experiences are avid consumers and spend much of their income on clothing, fast food, music and movies For example; Young IT professionals belong in this category.

Believers are conservative, conventional people with commitment to family, religion, community, and the nation. Living by a moral code is very important to them. As consumers, Believers are conservative and predictable and favor domestic products and established brands. Their income, education, and energy levels are modest but sufficient to meet their needs. For example, Middle income groups belong to this category.

Strivers seek motivation, self-definition and approval from the world around them. They strive to find a secure place in life, and may lack economic, social, and psychological resources. Strivers are concerned about the opinions and approval of others. Money defines success for them and they often feel that life has given them a raw deal as they find they don’t have enough money. Strivers are impressed by possessions, but what they wish to obtain is often beyond their reach. For example, low income groups are a part of this market segment.

Makers are practical people who have constructive skills and value self-sufficiency. They live within a traditional context of family, practical work and physical recreation and have little interest in what lies outside that context. Makers experience the world by working in it, building a house, raising children, fixing a car, or canning vegetables and have enough skills, income and energy to carry out their projects successfully. Makers are politically conservative, suspicious of new ideas, respectful of government authority and organized labor, but resentful of government intrusion on individual rights. They are unimpressed by material possessions other than those with a practical or functional purpose such as tools, utility vehicles, and fishing equipment. For example, Trade Union leaders, Human activists may belong in this segment.

Survivors tend to be chronically poor, ill-educated, low skilled, elderly and concerned about their health. Preoccupied with the urgent needs of the present moment, they do not show a strong self-orientation. Their chief concerns are security and safety. Survivors are cautious consumers. They represent a very modest market for most products and services but they are loyal to favorite brands. For example, Retired employees, senior citizens can easily belong to this segment.

b) Personality: When Marketers use personality variables to segment the markets, they endow their products with brand personality that corresponds to consumer personalities. For example, Raymond advertises its fabrics with the tag ‘The Complete Man’.

c) Social Class: It has a strong influence on the consumer preferences and the products they buy or consume. For example, when buying cars, clothing, home furnishings, leisure activities, reading habits etc., Social class becomes the key factor. Many companies design products and services for specific social classes. For example, TATA Nano was introduced in the market as a One-Lakh Car that could be affordable by middle and lower income groups.

4) Behavioral Segmentation or Consumer Response Segmentation:
In behavioral segmentation, buyers are divided into groups on the basis of their knowledge or attitude towards the use of, or response to a product. Some marketers believe that behavioral variables are the ideal primary factors for creating market segments. Some of the behavioral factors are:

a) Occasions: According to the occasions, buyers develop a need, purchase a product or use a product. It can help firms expand product usage. A company can consider critical life events to see whether they are accompanied by certain needs. For example, Tanishq a TATA enterprise offers gold schemes and promotions for Akshaya Thrutiya (auspicious day to purchase jewellery)

b) Benefits: Buyers can be classified according to the benefits they seek from the products. For example, Peter England, a Madhura garment brand positioned its wrinkle free trousers on the basis of benefits.

c) User Status: Markets can be segmented into non-users, potential users, first time users and regular users of a product. Each market segment requires a different marketing strategy. The company’s market position will also influence its focus. Market leaders will focus on attracting potential users, whereas smaller firms will try to attract current users away from the market leader. For example, Kishkinda resort near Hampi classifies its customers according to this characteristic. Resort believes that locals falls into non- user category, affluent class come to Hampi as potential users, foreigners as first time users, rich people near Hampi who frequently come there as regular users.

d) Usage Rate: Markets can be segmented into light, medium and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. Marketers prefer to attract one heavy user rather than several light users and so, they vary their promotional efforts accordingly.  For example, Alan Paine textile brand, offered 4 cotton trousers for Rs. 999. Here, the Company is interested in getting profits from sales volume rather than its selling price.

e) Loyal Status: Consumers have varying degrees of loyalty to specific brands, stores and other entities. Buyers can be divided into four groups according to brand loyalty status.
a)    Hard-core Loyals: Consumers who buy one brand all the time. For example, customer may be using only BSNL cellular services though there are different options available.
b)    Split Loyals: Consumers who are loyal to two or three brands. For example, consumer may go for tax savings schemes of post offices and Life Insurance Corporation of India
c)    Shifting Loyals: Consumers who shift from one brand to another. For example, consumer who used Nokia cell phones starts buying Sony- Ericsson mobiles.
d)    Switchers: Consumers who show no loyalty to any brand. When there is a low involvement and few significant perceived brand differences consumer try to purchase different brands in the category. For example, a customer who bought Cinthol wants to try Medimix, Mysore Sandal, Himalaya, Santoor, Chandrika etc…

A company can identify its product’s strengths by studying its Hard-core Loyal. By studying its Split Loyal, the company can pinpoint which brands are most competitive with its own. By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses and attempt to correct them.

f) Buyer-Readiness Stage: A market consists of people in different stages of readiness to buy a product. Some are unaware of the product, some are aware, some are informed, some are interested, some desire the product and some intend to buy. The relative number makes a big difference in designing a marketing program. For example, People may be aware of Aqua guard but don’t know much about it.

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