Segmentation:

Market segmentation also called market segregation is the process of dividing large, heterogeneous(dissimilar) markets into smaller, homogenous (similar) markets. It is also called the process by which an organization attempts to match a total marketing program to the unique manner or needs of one or more customer groups behave in the marketplace.  

Concept of Market:

The place concept: A market can be defined as a place where buyers and sellers meet and function goods and services are offered for sale and transfer of ownership of the title occur.

An area or region concept: A market is an area of potential exchanges that is a group of buyers and sellers interested in negotiating the terms of purchases and sales of goods and services.

The demand concept: The demand concept of the market states as people need to satisfy the money to spend and the will or desire to spend that money to satisfy wants and needs.

Characteristics of Market are:

• A market is a convenient meeting place for exchange purposes.
• Buyers and sellers are the two sides or parties of the market.
• Product or service is an object of the market as if their no product, there will e no selling and buying activities.
• Money acts as the medium of exchange and the price for any product is determined by the mutual understanding of sellers and buyers or by the free play of demand and supply factors.
• Transfer of ownership should take place after the exchange of products and services.

Concept of segmentation:

A market consists of a heterogeneous mix of people or businesses with wants to satisfy, money to spend, and the willingness to spend it. Therefore, while segmenting a market, consumers are divided into different groups on the basis of demographic, economic, socio-cultural, psychological, psychoanalytic, etc. factors. After the classification of consumers into various groups, elements of the marketing mix are designed to match each group of consumers.

With the increasing competition and diversity of consumer preferences, it has become almost impossible for marketers to satisfy aggregated or undifferentiated markets. Therefore, it is necessary for the marketers to segments such as mass or aggregated or undifferentiated markets into many smaller or differentiated markets. Differentiating the market enables marketers to be in a position of satisfying consumer needs even in a competitive environment and achieve the desired goal. 

For example, a marketer is dealing in readymade garments to satisfy people of all age groups. When competition increases in the market, the marketer increasingly feels difficult in the market. Unless additional investment is made to expand its operation or in research and development activities to develop or diversify products to meet competition, s/he may be unable to fulfill the needs of the whole market. Therefore, in these situations, a marketer may be willing to select a particular target group whose needs can be easily fulfilled. For example, s/he may be willing to deal in only adult dresses and avoid producing or marketing for children. They may also focus only on specific urban areas or rural areas.

Objectives of segmentation are listed below in points:

1. Knowledge of attractive marketing opportunities
2. Facilitates selection of target market
3. Facilitates determination of marketing mix which suits the taste of customers
4. Selection of suitable channels
5. Assessment of strengths and weaknesses of the company in terms of their competitors
6. Helps in the design of effective marketing program

Process of Market Segmentation:

• Identification of Market Segments
• Development of Profiles for Each Segment
• Evaluation of potential market segments
• Selection of Target market
• Development of Positioning strategy
• Focusing a Marketing Program like product, place, distribution, promotion. 

The first step is to the identification of potential market segments where a marketer wishes to and has the capability to enter the market. For that, marketers must focus on different factors such as consumers' tastes, needs, preferences, sex, age, consumer size, product characteristics, etc. Here, for that, it needs to collect data to have that information.

After, the identification of market segments, the marketer should analyze each segment to determine their similarities and dissimilarities. One should prepare a separate profile for each segment identified which needs different marketing strategies.

Now, in the evaluation process, each segment is evaluated on different aspects like demand for each component of a product market, the competitive position of the company in each segment, segment size, and profit size, potential corporate goals, and objectives in the market segment. 

After the evaluation,  marketers should select the best segment which offers the greatest opportunities for the company connected with profits, image, meeting the company's goal and objecting, etc.

Once the firm selects a market segment, it must find the attributes and images of each competitors' product and choose a position for its product for making the target market more accessible. So, it must develop a positioning strategy after selecting market segments as they are completely new to the customers. 

After positioning, the company should develop an overall marketing plan and program to communicate to the target customer. Different aspects of the marketing mix are product, distribution, price, promotion. 

Requirement for an Effective Segmentation:

• Differences in customers’ response: respond differently
• Measurable: measured on the basis of data and information
• Accessibility: marketers must be able to reach the segments targeted; promotional tools and distribution channels; adopt the right promotional tools;  
• Large size: able to attract scattered customers
• Stability: stable over a period 

Levels of Marketing Segmentation are described below in brief:

Mass Marketing 

• In this marketing, Seller offers the same product for all the buyers with different needs
• Sellers are engaged in the mass production, mass distribution, and mass promotion of one product for all buyers as the market size is very large.
• Promotion and advertising expenses become generic to attract the entire customer.
• It is a high competition market as there is a lower cost of production and higher profit margin Examples: toothpaste, detergent, etc

Segment Marketing :

• Marketer divides a total market into several segments based on consumers’ buying behavior, purchasing power, demographic factors socio-cultural factors
• Low-cost basic transport 
• Luxurious driving experience
• Performance-based, etc

Niche Marketing :

• This market seeks a distinctive mix of benefits It does require high quality of service and attention. Customers of this type of market have a very specific type of need, need special types of services, and are ready to pay a premium price (high price).  As the market competition is not stiff, marketers can quote a premium price. 
• Rich customer requires high-end service
• Marketers need more skill and specialized knowledge for satisfactory service to the customers.
• E.g insurance policy for football players

Local Marketing:

• The market program is designed as per the need of the local market i.e local customer groups, cities, neighborhoods,s and even specific stores. In that reference, the focus is on the local appeals, local flavors, local usage, etc.
• Local appeals local flavor, local usage
• The cost of production is high due to low production 
• Less competition because the other marketers of other regions may not enter easily on the local market.
• For example; locally manufactured foods and products are being targeted to the same area.

Individual Marketing:

• It focuses on satisfying the needs and wants of individual customers.
• Individual marketing is also called One-to-one marketing or customized marketing and micro marketing.
• It is almost like direct marketing where the marketers target the individual customers through direct communication channels or salespeople.
• It may require proper demonstration to the individual customers and home services and installation
• For example; marketers of water purifiers, most of the sellers.

Bases/variables for Segmenting a Market

Classification of Market:

a. Consumer Market Segmentation Base
b. Industrial or Organizational Market

a. Consumer Market Segmentation Base

Demographic aspects:

• Age              
• Gender
• Income 
• Marital Status
• Ethnic Background 

Psychographic aspects:

• Social Class
• LifeStyle
• Personality

 Behavioral aspects:

• Benefits
• Brand Loyalty 
• Usage Rates

Geographic aspects:

• Area 
• Topograph
• Climate
• Population density

b. Industrial or Organizational Market

• Use of Product
• Buying characteristics
• Customer Size
• Geographical Areas