4.2.d Market segmentation and customer profile

1. 4.2.d Market segmentation and customer profile • Marketsegmentation is the process of dividing an undefined market into smaller groups of consumers with similar or common needs, characteristics or profile. • A market segment is a group of consumers within a market with common characteristics. • Consumer profiles are the characteristics of consumers such as age, gender, income and purchasing habits. Knowledge of consumer profiles will help to identify segments and the needs of its customers. For example, the consumer profiles of Suzuki bike may be males between 20 – 45.

2. There are many benefits in segmenting a market. • By identifying different segments in a market, a business can better understand its customers. This will allow the firm to vary its products to better serve the needs of the customers. • It allows a business to sell a wider range of products by targeting different segments with different products and therefore increase its profits. Profits can also be maximize by going into the most profitable segments. • There is a better allocation of resources. The right products are promoted to the right segments. • Segmentation allows better identification of opportunities. This can provide guidelines for new product development. • Customers may feel that their needs are better targeted and develop loyalty to the business.

3. There are three main ways by which consumers can be segmented: • Geographically, i.e. by where customers live or buy; • Demographically, i.e. by their gender, social class, age, income, ethnicity or religion; • Psycho-graphically, i.e. by their lifestyles and personality; by how they act, for example some people like high quality products.

4. Segmentation by geographic factors • Geographical segmentation will consider the different regions in a country in terms of ways of living, culture, purchasing power, types of houses and roads, laws etc. • Many businesses in the global market have different products for different countries or areas. For example, Maggi soups are adapted to suit tastes by varying the ingredients from country to country. • A company may price goods differently in different countries, e.g. Coca Cola. • Many businesses segment their market according to climate, e.g. clothes for tropical climate, cold climate etc.

5. Segmentation by demographic factors • Demography is the study of the characteristics of population. Demographic segmentation splits up people into different groups such as: • Age group: For example, 12-18, 19-30, 30-50 and above 50. Many businesses target their products towards certain age group. • Gender: Males and females have different spending habits. Women fashion segment is huge compared to men fashion segment.

6. Social class or income: Wealthy people tend to have different spending from the rest of the population. For example, a Cartier watch is likely to be marketed to high income group. • Race, ethnicity or religion: different races have different cultures and this affect the demand for certain products. Mc Donald target some of its different products according to race or religion. • Family status/size: Certain markets can be segmented according to this status, e.g. the housing market.

7. Segmentation by psychographic factors or behaviour • Psychographic factors are those that consider the emotions or lifestyles of customers and hence their behaviour. • Status. Some people are very concious of social status. They feel good in owning certain assets such as luxury cars and jewelry. A market segment can be created for them. • Values. More and more people are value or ethically conscious in their purchases. Some business have started to cater for them, e.g. the Body Shop.

8. Hobbies and interest. An understanding of the different hobbies and interest can create market opportunities for businesses, e.g. the sports industry