Market Segmentation

1. Market Segmentation • How would you define the market as agribusiness manager? • What are the different dimensions of the market? • Process of Segmentation • Benefits of Segmentation • Thumb rules

2. Market Segmentation • A market can be viewed as a composite of three basic components: - physical attributes - behavioral characteristics - qualitative factors • One can define the market based on series of dimensions within each of these three components

3. Physical Attributes Components • Dimension 1: Size - Number of units sold - Rupees sales volume - % market share • Dimension 2: Geographical location - Physical boundaries - Rupees sales by region, district, area - Location attributes

4. Physical Attributes Components • Dimension 3: Demographic features - Income - Sex - Age - Education - main occupation (farming, dairy) - Land holding status (small or large) - Irrigation potential

5. Physical Attributes Components • Examples of each of the three dimensional factor suggest a high degree of quantification • There is no role of subjective judgments in describing these dimensions • Agribusiness managers feel most comfortable in viewing market exclusively within this context

6. Behavioral Characteristics Component • Dimension 1: When purchases are made? - Month, Week, Season • Dimension 2: How purchases are made? - Impulse - Brand loyalty - Direct request - Frequency of purchases - Scale of each purchase

7. Behavioral Characteristics Component • Dimension 3: Purchasing Influences - Who use product - Who buys product - Who influences - Buying decisions

8. Behavioral Characteristics Component • Dimension 4: Reasons for purchasing - Utility value - Status - Collective Compulsion - Interlinking with other transactions - convenience - ease of application

9. Qualitative Factors • Dimensions 1. Risk takers or risk averters 2. Favorable versus unfavorable attitude towards brand 3. Firm versus indefinite intention to purchase soon • These factors are largely based on subjective measures and expressed in relative term • These dimensions suggest attitudinal characteristics of customers

10. Market Segmentation - process • Segmentation involves identification of groups (segments) of buyers that differ in their requirements, in terms of satisfying their needs • The members of each of the groups have similar requirements, and therefore, each segment is homogenous.

11. Market Segmentation - process • Assumptions and pre-requisite for segmentation are: - markets are not homogenous in terms of needs - most company are not in a position to cater to all the needs of all the markets

12. Market Segmentation - process • Steps involved in segmentation - segments need to be described on the basis of some dimensions which have impact on marketing strategy - Potential size of each market segment - How well these segments are being served by other companies and products?

13. Market Segmentation - process • Segment should be large or profitable enough to consider differentiated marketing strategy to serve its need • It should be possible to reach the members of the segment with available means – accessibility (information is either available or can be collected on segmenting characteristics)

14. Varieties of market segmentation • The first variety to emerge was that process linked to geographic segmentation • Mainly by smaller agribusiness companies with limited investment capital and were not capable of supporting nationwide distribution channel • Later to emerge was demographic segmentation • However, age, occupation, income have become less valid as predictors of consumer behavior in the 1980’s.

15. Varieties of market segmentation • Later on a third variety of segmentation has arisen as volume segmentation. • Basically “heavy-half theory” • In most agribusiness product categories one half of the customers account about 80 percent of the consumption. • Concentrate on that segment of the total market comprised of high-volume consumers

16. Varieties of market segmentation • Each of these three varieties of market segmentation rests on ex-post facto analysis of the kinds of prospective customers • Each relies on descriptive factor rather than causal factors • They are no longer accurate for predicting future buying behavior

17. Varieties of market segmentation • Recent attempt to segment the market is based on the basic reason a person spends money to buy a product, i.e., the benefits a person expects to receive from the purchase • It is known as Benefit Segmentation • Benefits sought by farmers more fully determine their behavior as consumer than do their physical attributes, their demographic characteristics or their volume of consumption

18. Varieties of market segmentation • The benefit segmentation approach is based on some ability to measure farmers’ value systems. • Here multivariate attitude measuring techniques play an important role • It is the total configuration of the benefits sought which differentiates the segment, one from the other, rather than the fact that one segment seeks one specific benefits while another segment seeks a quite different one. • Relative importance farmers attach to benefits sought become the effective lever in segmenting the agriculture input market.

19. Varieties of market segmentation • Product potency is high on list of desired result - emphasize the advertising program on chemical test results, guaranteed germination rates • Reliability is to be a priority benefit - sales campaign might focus on maintenance-free service records, longstanding and stable yield performance

20. Varieties of market segmentation • Reduced surface soil erosion became the desired benefit - need for developing minimum-till seeding equipment • Ease of application was identified as a desired benefit - water soluble means of fertilizer application via sprinklers found a rapid acceptance.

21. Segmentation – Some Thumb Rules • It is easier to take advantage of market segments that already exist than to attempt to create new ones. • No brand, label or logo will appeal to all potential customers. To cover a market, one must understand the divergent benefits sought by all its occupants. • New and old products should, if possible, be designed and promoted to fit the particular benefits hierarchy of some market segment. • Marketers who adopts a benefits segmentation approach strategy have a measurable competitive edge over their counterparts. • An understanding of the benefits segments which exist in a market can be used effectively in the design of a new product or the preparation of a sales program for an existing product.