Market Segmentation

Market segmentation is the process of dividing the total market into several sub-markets (segments) that have similar characteristics.

Market targeting is the process by which an organization decides which market segments to serve.

Market segmentation identifies groups of buyers within a market who share similar needs and demonstrate similar purchasing behaviour.

How can market segmentation be of help to a manager who wants to develop a new product? Every market can be divided into segments or, in other words, into separate groups of consumers.

Market segments are described by demographics and psychographics.

Demographics:

· Age group: (for example 21 – 25)

· Sex: male / female split

· Religion or ethnicity

· Income: how much money a person earns; how affluent, or rich they are

· Life cycle: single, married, with children

Psychographics:

· Education: the highest qualification that a person has, such as a diploma or a degree

· Attitudes and opinions: how a person feels or thinks about issues, people, brands, etc.

· Lifestyle: a way of life that reflects a person’s value and attitudes.

Demographics and psychographics are used to target a segment by using data to build up a customer profile – the image of a typical consumer. People can be targeted as individuals or as a family group that lives together and makes up a household. Marketers use the ABC socio-economic categories to target groups. In the UK this is known as ACORN, which stands for A Classification of Residential Neighborhoods.

Then a product is compared with the goods already established in the market by quality and quantity standards. To be a success you must be ahead of your competitors.

Competition never stops. That is why market segmentation must never stop as well. It should be on a permanent basis. Introduction of a pioneer product can immediately change the consumption and number of a consumer grouping.

For Ukraine competition could be an important incentive. Innovating more effectively at home means finding more to export abroad, more to sell to the West, more hard currency to earn, more jobs to create, a more powerful industrial complex to build.

The fundamental principles for a market are:

· understand the customer (through research)

· understand the grouping (to which the customer or his business belongs)

· create a choice (a difference in price, concept or value that will distinguish your product)

· communicate that choice (through promotion and advertising)

Consumer marketing should be based on understanding consumer values, wants, and needs.

Although every marketing department has its own definitions and names for the market segments they target, there are some common terms. In 1962 Everett Rogers described five market segments in his book “Diffusion of Innovations”:

Innovators create something new and start a new trend. Early adopters identify trends early and like to be associated with the start of a trend. Early majority follow the trends set by the early adopters. Late majority follow the trends that have been tested by the early majority. Laggards are the last group of people to buy a product or brand: indeed they may never buy it.

Market segments may also be divided according to profession, lifestyles or age groups.

Exercise 3. Answer the following questions:

1. What is market segmentation?

2. What is market targeting?

3. How can market segmentation be of help to a manager?

4. How can every market be divided into?

5. How does market segmentation break the total population?

6. What is a product compared with?

7. What can the introduction of a pioneer product change?

8. What are the fundamental principles for a marketer?

9. What should a consumer marketing be based on?

10. What are the five market segments described in the Everett Rogers’ book?

Exercise 4. Give Ukrainian equivalents of the following:

affluent, hard currency, to target a segment, competition never stops, to divide into, to export abroad, early majority, laggards, to distinguish the product, to understand the grouping, demographics and psychographics, to demonstarte purchasing behaviour, separate groups of consumers, to reflect, ACORN, to be ahead of, pioneer product, diffusion of innovations, powerful industrial complex, to create a choice.

Exercise 5. Give English equivalents of the following:

стимул, ставлення і погляди, цільовий пошук ринку, початковий випробувач, гендерний розподіл, домогосподарство, диплом або ступінь, не одружений, заробляти гроші, етнічність, прибуток, соціально-економічна категорія, поняття вартості, бути пов’язаним з, розпізнавати тенденцію, на постійній основі, спосіб життя, справді, відділ маркетингу, розподіляти відповідно до професії, ймовірний покупець продукту.

Exercise 6. Match and learn the synonyms:

A: pioneer product, sub-market, to determine, affluent, to export, common, to demonstrate, similar, lifestyle, to share, category;

B: to sell abroad, to define, new product, usual, the same, a way of life, to show, group, to divide, rich, segment.

Exercise 7. Match and learn the opposites:

A: male, soft currency, early majority, to be a success, separate, to earn money, single, export, the West, to start, to create;

B: to stop, the East, to destroy, female, married, import, total, to spend money, to fail, late majority, hard currency.

Exercise 8. Complete the sentences using the proper words from the list below:

market targeting, qualification, individuals, competition, laggards, consumer value, innovators

1. Market … must never stop. 2. … are the last group of people to buy a product or brand. 3. … is the process by which an organization decides which market segments to serve. 4. Education is the highest … that a person has, such as a diploma or a degree. 5. Consumer marketing should be based on understanding … …, wants, and needs. 6. … create something new and start a new trand. 7. People can be targeted as … or as a family group that lives together and makes up a household.

Exercise 9. Put questions to the bold part of the sentence:

1. Lifestyle is a way of life that reflects a person’s value and attitudes. 2.Innovating more effectively at home means finding more to export abroad. 3. Demographics and psychographics are used to target a segment by using data to build up a customer profile. 4. Every marketing department has its own definitions and names for the market segments they target. 5. Market segments may also be divided according to profession, lifestyles or age groups. 6. In 1962 Everett Rogers described five market segments in his book Diffusion of Innovations. 7. Market segmentation is the process of dividing the total market into several sub-markets that have similar characteristics.

Exercise 10. Match terms in A with their definitions in B:

1) laggards	a) is the process of dividing the total market into several sub-markets (segments) that have similar characteristics.
2) innovator	b) group of people, who follow the trends that have been tested by the early majority.
3) market segmentation	c) the process by which an organization decides which market segments to serve.
4) early adopters	d) the highest qualification that a person has, such as a diploma or a degree.
5) market targeting	e) group of people, who follow the trends set by the early adopters.
6) lifestyle	f) the last group of people to buy a product or brand: indeedthey may never buy it.
7) late majority	g)people, who identify trends early and like to be associated with the start of a trend.
8) education	h) the image of a typical consumer.
9) customer profile	i) a way of life that reflects a person’s value and attitudes.
10) early majority	j)a person, who creates something new and start a new trend.

Exercise 11. Translate into English:

1. Продукт порівнюється з товарами, що вже існують на ринку за стандартами кількості та якості. 2. Прибуток показує скільки грошей заробляє людина, або наскільки вона багата. 3. Сегменти ринку описуються за допомогою демографії та психографії. 4. Кожен маркетинговий відділ має свої власні визначення та назви для сегментів ринку. 5. Сегменти ринку можуть бути класифіковані за професією чи способом життя. 6. Ви повинні випереджати своїх конкурентів, щоб досягти успіху. 7. Інноватори - це люди, що створюють щось нове або започатковують нову тенденцію. 8. Ймовірні покупці – це велика группа людей, які купують продукт або бренд; хоча вони можуть ніколи не купити його. 9. Маркетинг споживчих товарів повинен базуватись на розумінні цінностей споживачів, їх бажань та потреб. 10. Кожний ринок може бути поділений на сегменти або, іншими словами, на окремі групи споживачів.

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