Marketing & Finance

Year 2 – Unit I
3. Market Segmentation

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Session Objectives

¾ By the end of the session you will be able to:

• Describe the different variables of market segment
• Understand the requirements for effective segment
• Evaluate the market segment

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Topics Covered

¾ Market Segment
¾ Levels of Market Segmentation
¾ Market Segmentation Variables
¾ Requirement for Effective Segmentation
¾ Evaluating Market Segments

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Market Segmentation

¾ Dividing a market into smaller groups of

buyers with distinct needs, characteristics, or
behaviours, who might require separate
products or marketing mixes
¾ The key is their response to a different
marketing mix
¾ If all consumers respond the same way, then
there should be no need to segment a market

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Levels of Market Segmentation

Mass marketing Treats all customers the same

Segment marketing Isolating broad segments &

adapting marketing to match 1+
segment

Niche marketing Focusing on sub-segments that

may seek a special combination of
benefits

Tailoring products & market

Micromarketing programs to specific individuals &
local groups

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Market Segmentation Variables
¾ Geographic
• Dividing a market into
different geographical units,
such as national, regional,
local, city size, density of
population, and climate
¾ Demographic
• Dividing the market into
groups based on
demographic variables such
as age, sex, family size/ life
cycle, income, occupation,
education, religion, and
ethnic origin
As a Technical Collaborator of
¾ Psychographic
• Dividing a market into
different groups based on
social class, lifestyle, or
personality characteristics
¾ Behavioural
• Dividing a market into
groups based on purchase
occasion, benefits sought,
user status, usage rate,
loyalty status, readiness
state, and attitude towards
the product
for B. Sc. Degree in
Catering Science & Hospitality Management
 Requirement for Effective Segmentation

¾ Measurability
¾ Accessibility
¾ Substantiality
¾ Actionability

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Evaluating Market Segments

¾ Segment size & growth

¾ Segment structural attractiveness
¾ Company objective and resources

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Criteria for Effective Segmentation

¾ Market segmentation cannot be used in all

cases. To be effective, segmentation must
meet the following basic requirements.
• The market segments must be measurable in terms of
both purchasing power and size
• Marketers must be able to effectively promote to and
serve a market segment
• Market segments must be sufficiently large to be
potentially profitable
• The number of segments must match the firm’s
capabilities
for B. Sc. Degree in
As a Technical Collaborator of
Catering Science & Hospitality Management
 Segmenting Consumer Markets

¾ Geographic Segmentation
• Dividing an overall market into homogeneous groups
on the basis of their locations
• Does not ensure that all consumers in a location will
make the same buying decision
• Help in identifying some general patterns

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Market Segmentation Strategies
Undifferentiated Strategy

One
Mass
Marketing Rs.
Market
Mix
(one product) (everyone)
(one demand) Q
curve

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Undifferentiated Strategy

Advantages Disadvantages
Cost Economies Hyper competition
Majority - Fallacy
Imprecise - Inefficient

… a mass marketing effort, Offer one product to

the total market (everybody) E.g., Coca-Cola

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Concentrated Strategy

One Marketing Segment 1

Mix Segment 2
(one or more) and
products subdivision 2A, 2B
Segment 3

Rs. Rs.

Q Q
for B. Sc. Degree in
As a Technical Collaborator of
Catering Science & Hospitality Management
 Concentrated Strategy
… Choose & focus on one segment… E.g., Mercedes, VW
Advantages Disadvantages

Precise - Efficient High Risk

(Knowledge of Consumer) One Market Segment
Cost Economies
(80-20 principle)

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Differentiated Strategy
Stimuli Target Audience Responses
Black Box Rs

Marketing Mix 1 Q
Segment 1 demand curve 1
(Product 1)

Marketing Mix 2 Rs
Segment 2 Q
(Product 2)
demand curve 2
Marketing Mix 3
Segment 3 Rs
(Product 3) Q
demand curve 3
for B. Sc. Degree in
As a Technical Collaborator of
Catering Science & Hospitality Management
 Differentiated Strategy

Target two or more segments with one or more brands.

Potential Advantages:
- Precision - Efficiency Sales Increase
Potential Disadvantages:
- Cost Diseconomies
Potential Social Issue:
- Product Proliferation

Cross segments: Offer same product

across different segments.
E.g., Dupont’s Teflon
for B. Sc. Degree in
As a Technical Collaborator of
Catering Science & Hospitality Management
 Custom Marketing
¾ One-to-one marketing
¾ Uses data based-marketing
and information technology
¾ For example... GATEWAY,
DELL
As a Technical Collaborator of
FOR REPEAT HOTEL GUESTS
•Your name
•Room preferences
•Special requests
•Smoking or non smoking
•Credit card number
•Frequent hotel user discount
for B. Sc. Degree in
Catering Science & Hospitality Management
 Retrenching - Another Approach to
Segmentation

¾ Counter segmentation:
Consolidate several
segments and launch or
reposition a product to
cover all segments.
• E.g., Nissan and Toyota

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management
 Recap

¾ Now ! you are able to:

• Describe the different variables of market segment
• Understand the requirements for effective segment
• Evaluate the market segment

for B. Sc. Degree in

As a Technical Collaborator of
Catering Science & Hospitality Management