mk0012-slm-unit-08
TRANSCRIPT
Retail Marketing Unit 8
Sikkim Manipal University Page No. 149
Unit 8 Retail Market Segmentation
Structure
8.1 Introduction
Objectives
8.2 Importance of Market Segmentation in Retail
8.3 Criteria for Effective Segmentation
8.4 Dimensions of Segmentation
Geographic segmentation
Geo-demographic segmentation
Demographic segmentation
Psychographics segmentation
Behaviouristic segmentation
Demographic-psychographics segmentation (Hybrid approach)
8.5 Limitations of Market Segmentation
8.6 Summary
8.7 Terminal Questions
8.8 Answers
8.1 Introduction
The retail marketing strategies and retail promotions, which you have
already studied, are directed towards specific group of customers, known as
market segments. The concept of market segmentation emerged as an
extension of the marketing concept in the latter part of 1950s. It is based on
the simple observation that all the existing and potential consumers are not
alike: there are significant differences in their needs, wants, tastes,
background, income, education and experience, etc., and these
characteristics change over time with lifestyle changes. Had they been alike,
it would have eliminated the need to have different variations of the same
basic product and one promotional campaign is all that would have been
needed. For example, there would have been only one type of soap, one
detergent, one car, one computer, one washing machine and so on.
Objectives
After studying this unit, you should be able to:
Explain the importance of market segmentation
Discuss the criteria for effective segmentation
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Identify the dimensions for market segmentation
State the limitations of market segmentation
8.2 Importance of Market Segmentation in Retail
A market segment is a portion of a larger market in which the individuals,
groups, or organisations share one or more characteristics that cause them
to have relatively similar product needs.
Segmentation studies are used to uncover needs and wants of specific
groups of consumers for whom the marketer develops especially suitable
products and services to satisfy their needs.
Marketers also use these studies to guide them in redesigning,
repositioning, or targeting new segments for the existing product. For
example, the heavy user adult market has been targeted for Johnson baby
shampoo. For sensitive skins, Dove has come out with a variant, Dove
Gentle Exfoliating Bar (it has a pH range of 6.5 - 7.5, almost neutral, neither
acidic nor alkaline).
Segmentation studies help in identifying the most appropriate media for
promotional messages. Almost all media vehicles use segmentation studies
to determine the characteristics of their audience and publish their findings
to attract marketers seeking a similar audience.
Segmentation is an important input to marketing planning because it can be
used to formulate company "product-market" objectives, by which the
enterprise may: define its markets, position ranges of brands and product
varieties, identify gaps which offer significant opportunities for expansion or
new product positioning and rationalize policies for existing brands, products
and mixes.
Market segmentation plays a dual role, namely as a marketing tool, and as a
basic input to business planning. There are three main reasons for the
importance of market segmentation. These are:
Market fragmentation: it is caused by demographic and lifestyle
changes, new product and process developments and intense market
competition/some markets, which once had a homogeneous character,
has now split into a variety of consumer groups, each with different
tastes and preferences.
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The development of retailer power: with this, the relative advantage
obtained from bulk buying, the use of retailers' brands, and policy
limitations on the merchandise stocked, all combined to put the
manufacturer or supplier at a disadvantage. At the same time
concentration has occurred amongst retail companies, leaving a small
number of very large companies as well as a large number of smaller
retailers.
The volume trap: this situation occurs when suppliers who are capable
of volume production and distribution to retail multiple chains dominate
the markets for commodity type products (like plant-baked bread). But to
avoid this situation, marketers can use segmentation. For example,
value-added or non-standard items are now frequently targeted on
customer segments which seek to avoid the purchase of standardized
products, whether these are foodstuffs, clothes, computers or industrial
machinery. Alternatively, production arrangements may be designed to
be flexible enough to supply target markets in a large number of
relatively small and specialized niches, such as in the market for
industrial or aviation control systems.
8.2.1 Marketing complex
Marketing departments use segmentation so they can target their products
more accurately. It affects each of the 4Ps in their marketing mix. If the
product is effectively segmented a company will be able to promote the right
product, at the right price and use the right distribution to reach the place
where the consumers are. Now look at the way the 4Ps are used in market
segmentation.
Product
Companies produce a wide range of products or variations that is meant for
different groups or segments. For example, a car manufacturer will often
have a range that includes a family model, an executive model and a sports
model. Lifestyle segmentation will be used to develop their product line and
to target their products.
Price
There are obvoius linkages between price and quality, but not all customers
can afford to buy the most expensive goods. There is a large range of
televisions on the market, for example, each with slightly different features.
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Within this range of products, there will also be a range of prices to cater for
varying disposable incomes.
Promotion
Studying how a product is advertised can reveal its target market. Recently
Nokia, a leading mobile phone company, used advertising campaigns that
varied for men and women. The male phone was pictured in black and
white, and all its features and business applications described. The female
phone was in bright colors, and was pictured as a matching accessory to go
with a woman's lipstick and handbag. You may not agree with this
stereotyping, but it is a good example of gender segmentation.
Place
It is very important for firm to know where its target market is. A producer of
automobile parts needs to identify areas where automobile companies are
located. The firm would have to consider how best to get its product to these
areas.
Self Assessment Questions
1. Segmentation often plays a dual role, one as a marketing tool and
another as a basic input to ____________ .
2. Market fragmentation is usually caused by _________ and __________
changes.
8.3 Criteria for Effective Segmentation
Marketing managers should ensure that the segmentation passes through
six criteria based acid tests. As a student of marketing, you need to
understand what makes a good segmentation so that in the event of doing
segmentation in your workplace, you can test your decisions on these
grounds. These six criteria include identity; accessibility, responsiveness,
size, measurability and nature of demand.
1. Identity: The marketing manager must have some means of identifying
members of the segment – i.e. some basis for classifying an individual
as being or not being a member of the segment. There must be clear
differences between segments. Members of such segments can be
readily identified by common characteristics, and display similar
behavior.
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2. Accessibility: It must be possible to reach the different segments in
regard to both promotion and distribution. In other words, the
organization must be able to focus its marketing efforts on the chosen
segment. Segments must be accessible in two senses. First, firms must
be able to make them aware of products or services. Second, they must
get these products to them through the distribution system at a
reasonable cost.
3. Responsiveness: A clearly defined segment must react to changes in
any of the elements of the marketing mix. For example, if a particular
segment is defined as being cost-conscious, it should react negatively to
price rises. If it does not, this is an indication that the segment needs to
be redefined.
4. Size: The segment must be reasonably large to be a profitable target. It
depends upon the number of people in it and their purchasing power.
For example, makers of luxury goods may appeal to small but wealthy
target markets whereas makers of cheap consumption goods may sell to
the large number of persons who are relatively poor. The idea is that
enough potential buyers must exist to cover the costs of production and
marketing required in that segment. This is often called as substantiality.
5. Nature of Demand: It refers to the different quantities demanded by
various segments. Segmentation is required only if there are market
differentiation in terms of demand. The marketing manager should not
only be able to find out the total demand but also the differences in
demand patterns in each of these segments.
6. Measurability: The purpose of segmentation is to measure the
changing behavioral pattern of consumers. For example, the segment of
a market for a car is determined by a number of considerations, such as
economy, status, quality, safety, comforts etc.
Activity 1:
‘Is it really important for the retailers to segment the market or they can
also do well without it’. Put down your thoughts.
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Self Assessment Questions
3. The members of a particular segment should posses some _________
features.
4. A segments accessibility is defined in terms of _________ and
_________.
8.4 Dimensions of Segmentation
Markets are complex entities that can be segmented in a variety of ways. It
is an important issue to find an appropriate segmentation scheme that will
facilitate target-marketing, product positioning, and developing successful
marketing strategies and action programmes.
A segmentation variable is a characteristic of individuals, groups or
organisations that marketers use to divide and create segments of the total
market. One approach to segmentation is on “a priority” basis. In this case,
the marketer may assume that differences must exist among heavy users
and light or medium users of a product category. Segmentation descriptors
fall under four major categories and include geographic variables,
demographic variables, psychographic variables, and behaviouristic
variables.
Geographic variables focus on where the customers are located.
Demographic variables identify who the target customers are.
Psychographic variables refer to lifestyle and values.
Behaviouristic variables identify benefits customers seek, and product
usage rates.
Before collecting any data on the market, the basis for segmentation is
analysed. The marketer can also assume that dual-income households are
growing in urban areas and then develop a programme for this segment.
Selecting the right segmentation variable is critical. For example, small car
producers might segment the market on the basis of income but they
probably would not segment it on the basis of political beliefs or religion
because political leanings or religious beliefs do not normally influence
consumers’ automobile needs. Segmentation variable must also be
measurable to segment the market accurately. For example, segmenting the
market on the basis of intelligence would be difficult because this
characteristic cannot be measured accurately. Marketers can use one or
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more variables to segment the market. Different variables are used to
segment consumer markets. Broadly speaking, segmentation variables fall
under two categories: consumer characteristics or consumer responses.
The most popular bases for market segmentation include geographic
factors, demographic factors, psychological characteristics, social/cultural
variables; use related factors, use situation variables, benefits sought and
combination of several segmentation bases called hybrid formats, such as
demographic/psychographic profiles, geo-demographic variables, values
and lifestyles. Table 8.1 lists the variables that can be used to segment the
market.
Table 8.1: Segmentation Variables
Geographic Variables Demographic Variables
Region Nation Urban, Rural State City size Climate Terrain Market Density
Gender Family size Age Occupation Race Family life cycle Religion Income Social class Education
Psychographic Variables Behaviouristic variables
Personality attributes Motives Lifestyles
Usage volume, Occasion End use Benefits sought Brand loyalty Price sensitivity
The subsequent sub-sections discuss various bases for market
segmentation.
8.4.1 Geographic segmentation
Geographic segmentation focuses on dividing markets into different
geographic units, such as regions, nations, states, urban, rural, etc.
Customers located in different geographic areas vary in terms of climates,
terrain, natural resources, population density, culture, service needs, sales
potential, growth rates, competitive structure of the market, frequency of
purchases for a variety of goods and services. For example, Jeeps are more
popular in rural areas in India than in urban areas. Shopping malls are
located only in larger cities in India, and raincoats are sold more in rainy
areas. Geographic segmentation is used both in consumer and
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organisational markets, particularly where customers are not willing to travel
far to acquire goods and services.
8.4.2 Geo-demographic segmentation
Many segmentation approaches involve both geographic and demographic
descriptors.
This approach is based on the premise that people who live close to one
another are likely to have similar economic status, tastes, preferences,
lifestyles and consumption behaviour. Geo-demographic segmentation is
particularly useful when a marketer is capable of isolating its prospects with
similar personalities, goals, interests, and in terms of where they live. For
products, and services used by a wide cross-section of society, this
approach may not be suitable. For example, some retailers who propose to
open new stores are interested in knowing something about the people who
live within a defined area whom they aim to attract.
8.4.3 Demographic segmentation
Demographic characteristics are commonly used to segment the market.
Factors such as age, sex, education, income, marital status, household life
cycle, family size, social class, etc., are used singly, or in a combination, to
segment a market. Shaving products for women are based on the
demographic variable of gender. Toy manufacturers such as Funskool and
Mattel Toys segment the market on the basis of age of children. Auto
manufacturers segment the market by considering income as an important
variable. Producers of refrigerators, washing machines, microwave ovens
etc., take income and family size as important variables in segmenting the
market. Ready-to-wear garment producers often segment the market on the
basis of social class. Examples are Chirag Din, Arrow, Van Heusen, Louis
Philippe, Levis and others. In general, the social class can represent lower,
middle and upper class depending on education, income, status, etc. For
example, an engineer and a clerk are considered as members of different
social classes. Figure 8.1 depicts the classification of the Indian population
in a pyramid form
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Figure 8.1 Socio-economic Pyramid of Indian Population
8.4.4 Psychographics segmentation
When segmentation is based on personality or lifestyle characteristics, it is
called psychographic segmentation. Consumers have a certain self-image
and this describes their personality. There are people who are ambitious,
confident, aggressive, impulsive, conservative, modern, gregarious, loners,
extrovert, introvert, etc. Some motorcycle manufacturers segment the
market on the basis of personality variables such as macho image,
independent and impulsive. Some producers of liquor, cigarettes, apparel,
etc., segment the market on the basis of personality and self-image.
Marketers, are often not concerned about measuring how many people
have the characteristic as they assume that a substantial number of
consumers in the market either have the characteristic or want to have it.
Lifestyle: It is an indicator of how people live and spend their time and
money. What people do in their spare time is often a good indicator of their
lifestyle. For example, John L. Lastovicka, John P. Murray, Erich A.
Joachimsthaler, Gaurav Bhalla and Jim Sheurich in their study, were
identified two lifestyle segments that were most likely to drink and drive:
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good timers and problem kids. Good timers are partygoers, macho and high
on sensation seeking. Problem Kids frequently display troublesome
behaviours. According to Morris B. Holbrook, people who have an affinity for
nostalgia, or the desire for old things, also represent a lifestyle segment and
can be a key market for old movies, antiques and books. Surfing on the
Internet has also created a new type of lifestyle. Another study by Rebecca
Piirto of fashion consumers found six major groups: yesteryears (older
consumers), power purchasers (married households with college degree),
fashion foregoers, social strivers, dutifuls (highly practical) and progressive
patrons (high-income/quality buyers). Consumers in different countries and
cultures may have characteristic lifestyles. For example, Indian women are
home focused, less likely to visit restaurants, more price-sensitive, spend
time preparing meals at home and fond of movies.
AIO inventories are useful additions to demographic data but marketers
have found the original AIO inventories as being too narrow. Now,
psychographics or lifestyle studies generally include the following:
Attitudes include evaluative statements about people, products, ideas,
places, etc.
Values refer to widely held beliefs about what is
right/acceptable/desirable, etc.
Activities and interests cover behaviours with respect to activities other
than occupation to which consumers devote time and effort, such as
hobbies, interests, social service, etc.
Demographics cover gender, age, education, occupation, income, family
size, geographic location, etc.
Media preferences describe which specific media the consumers prefer
to use.
Usage rate focuses on measurements of consumption level within a
particular product category and is generally recorded as heavy, medium,
light, or non-user.
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Table 8.2 lists various lifestyle dimensions that are of interest to the
marketers.
Table 8.2: Lifestyle Dimensions
Activities Interests Opinions Demographics
Work
Hobbies
Social events
Vacation
Entertainment
Club membership
Community
Shopping
Sports
Family
Home
Job
Community
Recreation
Fashion
Food
Media
Achievements
Themselves
Social issues
Politics
Business
Economics
Education
Products
Future
Culture
Age
Education
Income
Occupation
Family size
Dwelling
Geography
City size
Stage in life cycle
The sample size is often 500 or more individuals who provide this
information and are placed in groups whose members have similar
response patterns. According to F. W. Gilbert and W. E. Warren, most
studies use the first two or three dimensions mentioned above to group
individuals. The use of other dimensions provides more complete profiling of
each group.
Generally, the AIO measurements are product or activity specific. For
example, W. A. Kamakura and M. Wedel have reported a study related to
fashion clothing which included 40 statements and respondents reported
their degree of agreement or disagreement. Five of the statements are
mentioned here:
I like parties with music and chatting.
I like clothes with a touch of sensuality.
I choose clothes that match my age.
No matter where I go, I dress the way I want to.
I think I spend more time than I should on fashion.
In this study, statements relevant to activities and demographics were also
included. General lifestyle studies can be used to spot new product
opportunities, while product specific lifestyle analysis may help repositioning
decisions regarding existing brands.
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The VALS (Values and Lifestyles)
Stanford Research Institute (SRI) developed a popular approach to
psychographics segmentation called VALS (Values and Lifestyles). This
segmented consumers according to their values and lifestyles in USA.
Researchers faced some problems with this method and SRI developed the
VALS2 programme in 1978 and significantly revised it in 1989. VALS2 puts
less emphasis on activities and interests and more on a psychological base
to tap relatively enduring attitudes and values. To measure it, respondents
are given 42 statements with which they are required to state a degree of
agreement or disagreement. Some examples of the statements are:
I am often interested in theories.
I often crave excitement.
I liked most of the subjects I studied in school.
I like working with carpentry and mechanical tools.
I must admit that I like to show off.
I have little desire to see the world.
I like being in charge of a group.
I hate getting grease and oil on my hands.
VALS2 has two dimensions. The first dimension, self-orientation, determines
the type of goals and behaviours that individuals will pursue, and refers to
pattern of attitudes and activities which help individuals reinforce, sustain, or
modify their social self-image. This is a fundamental human need. The
second dimension – resources – reflects the ability of individuals to pursue
their dominant self-orientation that includes the full range of physical,
psychological, demographic and material means such as self-confidence,
interpersonal skills, inventiveness, intelligence, eagerness to buy, money,
position, education, etc. The questions above are designed to classify
respondents based on their self-orientation. Stanford Research Institute
(SRI) has identified three basic self-orientations:
Principle-oriented individuals are guided in their choices by their beliefs
and principles and not by feelings, desires and events.
Status-oriented individuals are heavily influenced by actions, approval
and opinions of others.
Action-oriented individuals desire physical and social activity, variety and
risk taking. Based on the concepts of self-orientation and resources,
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Values and Lifestyle typology breaks consumers into eight groups.
VALS2 suggests that a consumer purchases certain products and
services because the individual is a specific type of person. The
purchase is believed to reflect a consumer’s lifestyle, which is a function
of self-orientation and resources. People with most resources are at the
top and the ones with least resources are at the bottom of this typology.
Each of the eight groups exhibits a distinctive behaviour, decision-
making approach and product or media usage attributes. VALS2
represents an interconnected network of segments, which means that
adjoining segments have many similar characteristics and can be
combined to suit particular marketing objectives.
8.4.5 Behaviouristic segmentation
Dividing the market on the basis of such variables as use occasion, benefits
sought, user status, usage rate, loyalty status, buyer readiness stage and
attitude is termed as behaviouristic segmentation.
Buyers can be identified according to the use occasion when they develop a
need and purchase or use a product. For example, Archies greeting cards
are used on many different occasions. User status, such as non-users,
potential users, or first time users can be used to segment the market.
Markets can also be segmented into light, medium, or heavy users of a
product. Brand loyalty of varying degree can be presented among different
groups of consumers and may become the basis to segment the market.
There are consumers, who are very loyal to cigarette brands, beer and even
toothpaste. Markets may also be divided on an imaginary Likert-type scale
by considering level of product awareness such as unaware of the product,
aware, interested, desirous, or contemplating to purchase the product.
Based on attitude, consumers may be enthusiastic, indifferent, or hostile
towards the product, and these differences can be used to segment the
market.
Benefit Segmentation: By purchasing and using products, consumers are
trying to satisfy specific needs and wants. In essence, they look for products
that provide specific benefits to them. Identifying consumer groups looking
for specific benefits from the use of a product or service is known as benefit
segmentation and is widely used by marketers. For example, there are
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distinct groups of auto buyers. One group might be more interested in
economy, the other in safety and still other in status.
Segmentation bases, such as demographics are descriptive. These
variables are useful but do not consider why consumers buy a product.
Benefit segmentation has the potential to divide markets according to why
consumers buy a product. Benefits sought by consumers are more likely to
determine purchase behaviour than are descriptive characteristics.
Marketers should also appreciate that many benefits sought by consumers
are subject to change with changing technologies, changing social values
and competitive offers. This requires that marketers must constantly
reassess benefit segments. The present scenario in the computer market is
an example. With the introduction of faster and better products, the benefits
consumers seek, are constantly changing. Benefit segmentation can be
seen in the toothpaste market; fresh breath, decay prevention and whiter
teeth are some examples and the leading brands involved are Colgate
Total, Close-Up and Promise. Table 8.3 presents the benefit segmentation
of the toothpaste market.
Table 8.3: Benefit Segmentation of Toothpaste Market
Principal Benefit Sought
Psychographic Characteristics
Behavioural Characteristics
Demographic Characteristics
Brands Much Favoured
Brightness of teeth (cosmetic)
Outgoing, active fun-loving, high sociability
Smokers Teenagers, youngsters
Close-Up, Promise, Aquafresh
Decay prevention (medicinal)
Health conscious
Heavy users Large families Pepsodent, Colgate Total, Forhans
Taste (good taste, flavour)
Self-indulgent, hedonistic
Mint lovers Children Aquafresh, Colgate
Low price (economy)
Price-conscious, independent
Heavy users, deal prone
Men, traditional Neem, Babool, Vicco Vajradanti
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8.4.6 Demographic-psychographics segmentation (Hybrid pproach)
Demographic and psychographic profiles work best when combined
together because combined characteristics reveal very important
information about target markets. Demographic-psychographics information
is particularly useful in creating consumer profiles and audience profiles.
Combined demographic-psychographic profiles reveal important information
for segmenting mass markets, provide meaningful direction as to which type
of promotional appeals are best suited and selecting the right kind of
advertising media that is most likely to reach the target market.
Activity 2:
Study the market segmentation pattern of Indian retail giants like Reliance
Retail, Aditya Birla Retail and Pantaloons Retail.
Self Assessment Questions
5. ___________ variables of market segmentation focuses on lifestyle
and values of the customers.
6. ___________ segmentation can be used effectively when the
marketers can identify the prospects in terms of the goals and interests
and their location.
7. What people do in their past time and how they live their life can be
good indicators while segmenting the markets based on behavior.
(True/False)
8. The evaluative statements about a product, place or idea reflects the
attitude of the person. (True/False)
9. Principal-oriented individuals are guided by the rational benefits and
not by feelings and desire. (True/False)
10. Benefit segmentation is a descriptive method of market segmentation.
(True/False)
8.5 Limitations of Market Segmentation
Market segmentation has certain limitations too. Some of them are as
follows:
Targeting multiple segments increases marketing costs.
Segmentation can lead to proliferation of products.
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Narrowly segmenting a market can hamper the development of broad-
brand equity.
Self assessment questions
11. Segmenting a market is always a good option. (True/False)
12. Wrong segmentation has adverse effects on store’s brand equity.
(True/False)
8.6 Summary
The concept of market segmentation is based on the fact that all consumers
are not alike. They differ in their needs, wants, desires, income, education,
lifestyles and so on.
Market segmentation is the process of dividing the heterogeneous market
into relatively homogenous sub-groups of consumers with somewhat similar
characteristics.
When a marketer selects one of more segments and develops a distinct
marketing programme to accomplish marketing objectives, it is called target
marketing. There are certain conditions that must exist for segmentation to
be meaningful. Many approaches are used for segmenting the market.
Some of the popular bases for segmentation are geographic, demographic,
psychographic and behavioural. Other specific approaches have been used
and found to be quite effective, such as segmentation based on lifestyles.
Lifestyle approach is based on studying how consumers spend their spare
time, what they consider important in their surroundings, what are their
beliefs on broad issues and their self image. Such data is generally
combined with demographic variables to furnish a clearer picture about
consumers.
The marketer generally has options either to adopt undifferentiated
marketing, differentiated marketing, or concentrated marketing.
Glossary
Market Segmentation: creating groups or sets of people based on common
characteristics and homogeneous needs
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Market Fragmentation: emergence of new segments (in a previously
homogeneous market) which have their own distinct needs, requirements,
and preferences
Geo-demographic Segmentation: segmentation on the basis of both,
geography and demography of the population
Psychographic Segmentation: segmentation based on personality or
lifestyle characteristics of the customers
Benefit Segmentation: segmentation based on differences in specific
benefits different groups of consumers look-for in a product
8.7 Terminal Questions
1. What is segmentation? What are its benefits?
2. Why has segmentation gained importance in recent years?
3. Discuss the criteria for effective segmentation.
4. When can demographic and benefit segmentation be used to maximum
efficiency?
5. Write a short note on- psychographic segmentation.
8.8 Answers
Answers to Self Assessment Questions
1. Business Planning
2. Demographic, Lifestyle
3. Common
4. Promotion, distribution
5. Psychological
6. Geo-demographic
7. False
8. True
9. True
10. False
11. False
12. True
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Answers to Terminal Questions
1. Refer to 8.2 – Segmentation involves grouping people with similar needs
and characteristics. It plays a dual role- as a marketing tool and as input
in business planning.
2. Refer to 8.2 – In face of growing competition and changing customer
profiles, segmentation helps in promoting the right products to right set
of people.
3. Refer to 8.3 – The criteria for effective segmentation include identity;
accessibility, responsiveness, size, measurability and nature of demand.
4. Refer to 8.4 – Demographic segmentation can be used for any product
and by any company and benefit segmentation can be used when the
product has varied uses or distinctive features.
5. Refer to 8.4 – Psychographic segmentation is based on personality or
lifestyle of the customers.
Mini-case
Divided by Geography
Does Wal-Mart tailor its products to specific geographic markets and
regions, or do they just sell the same stuff all across the country?
They tailor their products to who the consumer is in the region. It is heard
that Wal-Mart in Colorado stock a lot more organic items than they do in
say, in South Carolina. Since there are so many stores all across the
country, it is necessary to do that in order to gain the most profit. You
wouldn’t want to stock 20 snowblowers in Arizona!! But if you did that in
Michigan, it would seem more appropriate.
Sometimes the products (that are the same) at different Wal-Mart stores
within the same region have different prices. In a region, there are two Wal-
Marts in the same county, yet one has generally cheaper prices than the
other because of the different neighborhoods that are located around them.
This is simply another way to target the general demographic in the area the
store is located.
Also, on a side note, Wal-Mart also has stores where it "experiments" to see
if certain products, visual displays, or policies draw customers in. If the
"experiment" is successful, they will expand it to other stores, then
eventually nationwide. An example of this is the new $4 generic prescription
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drug plan. You can learn about this plan on their website. But basically, it
began in larger cities in Florida, then spread to the whole state, and now it
has spread to other select states.
Question
Does Wal-Mart practices too much geographic segmentation?
Hint Answer: Wal-Mart does practice geographic segmentation to a
considerable extent as evident from the case.
Source: maciowa.com