Bases of Market segmentation
It is a mirror through which the population of customers in an industry are divided. Thus it is
an art. The variables on which segmentation can be done are numerous. To define customers
who they are, they are segmented on the basis of demography; to define where they are, they
are segmented on the basis of geography; and how they behave, they are segmented on the
basis of behaviour; and to segment differently we have to go in for innovative segmentation.
Types of Segmentation:
1. Geographic/ Demographics Segmentation. Geography and Demographics, if
clubbed it is known as geo demographics. It consists of defining customers according
to:
(a) Their country of birth and their location, dividing a country into regions, states.
Location does not mean that all consumers in a location will behave the same way,
but the approach helps identify certain general patterns.
(b) Important variables according to Geography may be global, global regional,
national, National regional, city/state,i
neighbourhood/ local,
topography, and climate.
(c) In case of large companies these regions may be further subdivided into sizes –small,
medium, and large.
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(d) In case of international marketing or global business different countries might be
taken up as different market segments.
e) Another basis may be geographical density – urban, suburban, and rural. It may
be a good basis as the low-density markets require different price, promotion and
distribution strategies. India’s urban population may be further divided on the basis
of cities – Tier I (8 cities: 8% India’s population), Tier II (26 cities: 4% of India’s
population), Tier III (33 cities: 7% population), and Tier IV (5094 cities: 11%
population). The rest 70% is the rural population residing in India’s 6,38,000 villages
across India.
f) Next basis may be climate – warm, cold, and rainy.
g) The next base may be locality.
In case of Indian Railways, they have Northern Railway, Southern Railway, Eastern Railway,
Western Railway, North-Eastern Railway, and Central Railway and so on and so
forth. Customers in different regions may have different cultures and may require
marketing differently. India is a country of diversities. In terms of types of commerce
(Tourist, local worker, residents, businesses), retail establishments (downtown shopping
districts, shopping malls), competition (underdeveloped, saturated), legislation (stringent,
lax), and cost of living /operation (low/moderate/high) are the other bases of geographical
demographics).
Demographic segmentation is good to guide the media plan and help the creative agencies to
understand how to bring the segment to life.
2. Personal Demographics segmentation. Populations are often broken down into
categories on the basis of age, gender, ethnic origin, education, income, occupation,
Religion, Family size, Stage of family life cycle, social status/class, etc. In
Demographic segmentation, market is divided into segments on the basis of readily
observable personal characteristics such as age, gender, ethnicity, etc. It offers a wide
variety of bases for segmentation.
Age: Today virtually every age band from life to death is the focus of a marketing
campaign. The requirements are different in different age groups. In case of readymade
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garments, it may be for new borne babies, children, teens, youth, middle age people, old
people. All of them have different needs. Young people like to make use of credit cards.
Older people use cash. Children consume more of carbonated drinks. That is why –
Youngistan and ‘YehDil Mange More”. People at 50 and above are referred to ‘grey’ market
or ‘third age’ group. The ‘grey’ market is itself categorised further according to lifestyle and
other criteria. This market offers opportunities to personal care (hair dying, anti-ageing
creams), pharmacy, telemarketing, nursing industries. Indian Clothing League Private Ltd. ,
manufacturing clothes for pre-teen children aged 6 to 18, is now targeting to tap infants
from 0-2 under brand name ‘Baby League’ to fuel its growth strategy.
Segmentation by age can be done like- School age children and College going children,
Preteens and Teens, Generation X, Generation Y, Baby boomers, and seniors.
Generation Y or the millennial generation, generally defined as people born after 1980, has
an approach towards life that is distinct – much different from what we have witnessed till
now. They are also a generation that is not afraid to embraces change, and that puts them at
an advantage, given the dynamic environment we are working in. This is also a generation
that has grown up with information at its fingertips, and isn’t afraid to use – or share – it, to
influence and be influenced on where to direct their spending. According to a recent report by
IBM, the millennial workforce is slated to represent 50 per cent of the global workforce by
2015, and about 76 per cent by 2020. It is, therefore, imperative to understand this
generation’s approach as they redefine businesses and organisational structures. As
individuals, millennials are increasingly relying on technology to engage and serve them
better as they look for solutions that help and broadcast who they are.
In 2013, Star India is planning to launch a new English general entertainment channel, Star
World Premiere, to cater to the 20-35-year-olds.
Gender: In case of clothes, it may be male and female, In case of fashionable clothes the two
segments vary a lot. Women prefer scooties, and boys use motorcycles. By 2015, India will
have 80 million working women in the age group of 18-44 year age band. The roles are
changing because of womenfolk joining working groups. Now males do many jobs earlier
performed by women folk, thus blurring the lines.
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There are products where targeting may be at women, but we Indian males, being not
individualists, use soaps, shampoos, talcs, skin creams and moisturisers targeted largely at
women. Thus, Indian males act as surrogate users. At the same time, a section of women are
using male deodorants. Hindustan Unilever Limited has Axe for male and Lux deodorants for
women.
Family Structure: The family life cycle concept charts the progress of family development
from birth to death. People at different stages of different life cycle have needs different from
each other.A family may be in bachelor stage (young and single people), newly married
couple -marriage alters the needs. Married couples need white goods and durable goods to
begin with, Full Nest I (young married couple with dependent children – once a child is born,
they would require baby food, baby clothes, toys, etc.), Full Nest II (older married couples
with dependent children), Empty Nest (older married couples with no children living with
them) and solitary survivor (older single People). Wells and Gubar (1996) have put forward
an internationally recognised classification.
Race: The ethnic background is a good base for segmentation. Hindus celebrate Diwali, and
Chinese celebrate their New Year differently and the two are good segments.
Politics: Different political party members have their liking for different members and
commodities. For example Congress party members in India prefer white caps, Samajwadi
Party goes for red cap, BSP members want a blue cap, whereas BJP members wear a
saffron colour cap.
Family Size – Two segments may be small family and the large family segments. Smaller the
family small size packs would be preferred, and larger the family larger packs would be
needed.
The Psychological Life cycle: Here the chronological age may not necessarily be the factor
of greatest importance in determining consumption patterns. Rather it is the transformation of
attitudes and expectations that becomes a more important factor. The emergence of’ ‘kid
adults’, and old younsters represent the psychological lives.
Segacity: It is a refinement of the family life cycle grouping system, showing different
behavioural patterns and aspirations to people as they proceed through life. These stages may
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be Dependent, Pre-family, Family, and Late. The family and late may be further classified
into Better off and worse off and these two bases may be further classified on the basis of
occupation as White Collar and Blue Collar.
Type of neighbourhood and dwelling: Geo demography may also be used for segmentation
by focusing on local neighbourhood geography. The proposition is that the neighbourhood
area in which a consumer lives will be reflected in one’s professional status, income, lifestage and behaviour. People living in different localities or different types of dwellings have
different needs, but in one kind of dwelling situated in one locality they have similarity of
needs. This basis of segmentation uses the house or locality as the basis of segmentation,
rather than the individuals. It is popularly known as ACORN (A Classification of Residential
Neighbourhood).