Lecture Four: Segmentation

Segmentation is a clever marketing tool which allows marketers to split the whole market into little groups or segments of potential customers with the same or similar interests and needs. The CIM(Chartered Institute of Marketing) defines Marketing Segmentation as:

The division of the market place into distinct subgroups or segments, each characterised by particular tastes and requiring a specific marketing mix.

One key thing to understand is that there are many ways to segment a market because as companies, you can not appeal to every consumer in the same way. There are too many of them, spread too far apart and all with different wants, needs and buying traits. Another major factor which has influenced the use of segmentation by businesses is the change in our economy... it has moved from what was know as a manufacturing economy by where companies employed 'mass marketing' strategies which worked really well. Now however the economy has moved more into a 'service economy' by where all the after sales and after care plays the larger role.

This is mainly because we, as consumers have become more savvy and as a result, more segmented. Companies have to now employ 'target marketing' where there consumer basis is researched and analysed to create focused and targeted advertisements which appeal to the targeted market. Now to find these groups or segments there are various ways to separate the market, these include:

Geographic - Segmenting the market into different geographical groups such as neighbourhoods, cities, counties, countries or nations etc. This is down to the company to decide if they want to focus in one particular area or focus on a selection of areas.

A good example of Geographic Segmentation is the various Tesco stores:

• Tesco Express - Ussually located in and around large neighbourhoods and will have basics like bread, milk, fruit&veg, cheese and toilet roll plus many other basic essentials.


• Tesco Metro - These stores are usually located in busy cities where there is no more room to build a a regular store and in small towns on their high streets. It will be like a mini store with most things that you would find in a regular store, even a Customer Service Desk in some cases.

Then from these you will have your regular superstore and the extra stores. You can see though how Tesco carefully select where to put each type of store by Geographic Segmentation.

Demographic - Segmenting the market on a person's or group of people's personal circumstances such as age, gender, income, family size, race, nationality, religion, family life cycle and education.

Psycographic - Segmenting the market by social-class, lifestyle or personality characteristics. The main reason for Psycographic Segmentation is because:

People in the same Demographic Segment will have different Psycographic make-ups.
(Kotler et al. 2008)

Behavioural - Segmenting the market based on their knowledge, attitudes, uses or responses to a product. From this point though it can be broken down to what is known as 'Occasion Segmentation' by when people are grouped according to when they get the idea to buy, buy a product or when they actually use said product. This is whole provides a good foundation for creating market segments.

Now just take a few minutes to watch this short clip on Segmentation by Market Analysis.



These however are only a few ways to segment a market; the example picture below shows a bunch of random shapes that can all be segmented in some way whether by the actual shape, colour, what side if the page they're on etc. This basically represents the world of consumers and demonstrates how many different ways you can segment them. Have a go anyway and see how many you can come up with.