2. • Definition
• Why Segmentation?
• Objectives of Segmentation
• Market Matching Strategy
• Levels of Segmentation
• Bases and methods for Segmentation
• Criteria which segments should meet
• Benefits and Limitations of Segmentation
• A traditional example of Segmentation
• Segmentation and Customer Relationship Management
(CRM)
• Example: Credit Card
• Example: Banking products

3. • What is Segmentation?
Segmentation is defined as, “The subdividing of a
market into distinct subsets of customers, where
any subsets may conceivably be selected as a
target market to be reached with a distinct
marketing mix.” – Philip Kotler, Professor of
International Marketing at Northwestern University.

4. • Market segmentation is dividing the market
into smaller groups of consumers or
organisations in which each consumer has a
common characteristic such as a need or
want.
• It involves building up or breaking down of
potential buyers into groups called market
segments. These segments will allow
marketers to understand their target audience
and thereby make marketing more effective.

5. • Who are the best customers?
• What products and services do they need?
• When will they need them?
• How do they want to interact with us?
• Why do they behave the way they do?

6. • Breaking down of mass market into groups of
consumers that have clearly expressed common
needs.
• Group customers with similar needs and buying
behavior into segments .
• Satisfy requirements of different customer segments
.
• Increase efficiency and effectiveness of marketing
initiatives by identifying strategic marketing goals.

7. • In mass marketing: marketing of a product is
done to a wide audience. Typically, things which
are perceived to be necessary to the consumer
such as toothpaste, automobiles, computers,
medicine, soft drinks, etc. are subject to mass
marketing.
• Segmentation: defining the customer’s needs
and wants by placing them in specialised groups
that receive different attention.

8. Market
Matching
Segmentation Targeting Positioning

9. • Same product to all consumers
• No segmentationMass Marketing
• Different products to one or more
segments
• Some segmentation
Segment
Marketing
• Different products to subgroups
within segments
• More segmentation
Niche Marketing
• Products to suit the tastes of
individuals or locations
• Complete segmentation
Micromarketing

10. The bases available for segmenting are nearly
unlimited and there is no perfect way of
segmenting consumers since customers’
characteristic are spread over several
variables.
Basically we have four types of segmentation
bases which are:- Demographic
- Psychographic
- Geographic
- Behavioral

11. It consists of dividing the market
into groups based on variables
such as: Age, gender, family size,
family life cycle, income,
occupation, education, generation,
religion.

12. • Very simple to apply and use, as government
statistical data is readily available in most
countries.
• Suitable data can be obtained quite quickly and
cheaply.
• Easy for everybody to understand, from
management, to sales and customer service
staff, it can be more easily built into an internal
marketing plan.

13. 1. Cosmetics and perfumes firms could effectively
use a variety of segmentation variables. For
example, males and females would have
different needs, as would younger and older
consumers.
2. As people age their needs and wants change,
some organizations develop specific products
aimed at particular age groups for
example nappies for babies, toys for children,
clothes for teenagers and so on.

14. Psychographics segmentation groups
consumers according to their life-
style, buying psychology, social
class, individual
personality, attitudes, interests.

15. • Gives a much better insight into the consumer as
a person, which more likely lead to the
identification of underlying needs and motives.
• Should deliver a much better understanding of
the consumer, which in turn which should create
more valid and responsive segments and
subsequent marketing programs.

16. 1. Segmenting by social class makes sense for
this product category, as cars are often a
reflection of a consumer’s lifestyle and used as
a social symbol of success.

17. Common used by multinational and global business,
which alter their marketing mix according to the
differing needs of consumers based on each
geographic segment they operate within. These
includes; region, population density, climate
conditions.

18. • Quite a valuable approach for a large company that
operates across many countries, as geographic
segmentation would allow them to consider cultural
differences.
• Effective approach for small firms, with limited resources
that often need to operate in a defined geographic area
for efficiency purposes.
• Tends to work well in cities/countries where there are
significant differences in socio-economic status in
different geographic areas, or where there is significant
changes in lifestyle across regions.

19. 1. McDonalds globally, sell burgers aimed at local
markets, for example, burgers are made from lamb in
India rather then beef because of religious issues. In
Mexico more chilli sauce is added and so on.

20. Divides the market intro groups based on their
behaviour, knowledge, attitudes, usage and the way
they respond to the product. Factors which usually
affect behaviour are: occasions, benefits, loyalty
status, user status, buyer readiness and level of
usage.

21. • Often used in mature markets, where the firm is looking
to understand: how to activate a non-user, target
switchers, convert a medium user to a heavy user and so
on.

22. • Occasions
For example, cereals have traditionally been marketed as a
breakfast-related product. Kelloggs have always encouraged
consumers to eat breakfast cereals on the "occasion" of getting
up. More recently, they have tried to extend the consumption of
cereals by promoting the product as an ideal, anytime snack
food.
• Usage
Some markets can be segmented into light, medium and heavy
user groups.
• Loyalty
Loyal consumers - those who buy one brand all or most of the
time - are valuable customers. Many companies try to segment
their markets into those where loyal customers can be found
and retained compared with segments where customers rarely
display any product loyalty.

23. Measurable
Accessible
Substantial
Differential
Actionable
• Size, purchasing power, profiles
of segments can be measured
• Segments must be effectively
reached and served
• Segments must be large or
profitable enough to serve
• Segments must respond
differently to different marketing
mix elements and actions
• Must be able to attract and serve
the segments

24. • Improve understanding of customer needs
• More appropriate resource allocation
• Clearer identification of marketing
opportunities
• Focus on the company
Better focus  Better returns
• Increase in competition

25. • Market Expansion
- Geographic segmentation  Where expansion is
immediately possible
- You cannot expand in a market where you have
no idea of which segment of customers you will be
meeting.
• Customer Retention
- It is encouraged through the life cycle
segments, i.e. a product is available to any
customer whatever his age or budget.

26. • Better Communications
- Know your market segmentation  form a
communication message.
• Increases in profitability
- Segmentation increases competitiveness, brand
recall, brand equity, customer retention and improve
in communication. Therefore increasing profitability.
- Focus sales  More profits

27. • Segments are too small
• Consumers are misinterpreted
• Costing is not taken into consideration
• There are too many brands
• Consumers are confused
• Product is completely new

28. • Demographic segmentation- give customers chance to
select their own wants ( income, gender age)
• BMW- most preferred by men > 35 years and income >
$75,000
• BMW retail stores located in upper classes’
neighborhoods (geographic segmentation)
• X-series are used by different types of customers:

29. • Females prefer X3
• Families prefer X5
• As sport car, X6 takes the
first rank

30. Segmentation and Customer Relationship
Management

31. • Financial organisations also segment existing
customer accounts based on extent of
customer’s relationship with the company.
• Defined as: the marketing activities/processes
that an organisation has in place so as to
maintain its communication and repeated
transactions with existing customers.
• These existing customers who have longer
stream of transactions are offered special
treatment and care.

32. • Marketer has information on the characteristics of a
particular segment, which comes from a database of
customer’s preferences and purchasing habits.
• CRM marketers use the information from the databases
and create promotions designed to meet customer
wants and needs. This further segmentation helps
retain customers, since customer retention is vital for
profitability.
• Promotions can include:
1) Customer Loyalty programs,
2) Ability to customise the product to suit exact needs of
the customer.

33. Market
Segmentatio
n
Tailor
services to
segments
Retain
loyal and
profitable
customers

34. Type of Credit
card
Key benefits sought by Target Segment
1. Basic Transaction Processing  purchasing a product of interest at
retail location.
2. Loyalty Rewards such as airline miles or discounts  rewards are
linked to the amount of usage of the card.
3. Premium Predefined benefits  serve a higher tier of the market.
Membership fees are charged with privileges and membership
benefits granted in return, e.g. access to entertainment events
such as concerts.
4. Small Business Rewards, Transaction processing  Customers are attracted to
the unique credit card features needed to run a small business.
5. Super Elite Unique benefits, personal concierge and high spending limit 
e.g. American Express, Visa’s stratus card. They serve as a
• Credit Card market can be broken into different
segments, based on individuals’ specific needs.
• The different cards available reflect consumer
needs.

35. Fast Trackers
• Young technology enthusiasts: make and spend money; always
online
Young Aspirationals
• Curious about technology; budget conscious; need help saving
money
Middle of the Roaders
• Like to spend money despite moderate incomes
Value Seekers
• Older and financially stable consumers; frequently use credit
card
Simplifiers
• Older, lower-income consumers with simple banking needs; not
too interested in technology
Conventional Stalwarts
• Older, traditional-minded referring to pay by cash and cheque;
often visit the bank; use technology lightly
• The consumer segments and characteristics are as follows:

36. Consumer
Segments
Implication for Financial Institutions
Fast Trackers • Provide service through email and mobile and
promotion of online banking services.
• Guidance in investments and financial options.
• Encourage them by offering rewards.
Young Aspirationals • Offer products and services that recognise loyalty, e.g.
offering discounts.
• Guidance in managing finance and building credit.
• Promotion of online banking services.
Middle-of-the-
roaders
• Help in managing their money through online systems.
• Provide tips in money management.
Value Seekers • Offer rewards on products and provide investment tools,
specially retirement portfolio.
Simplifiers • Promote an online bill payment.
• Migration from paper to eStatement.
• Promote an element of trust.
Conventional • Impacts of regulation in terms of additional fees.

38. • Market segmentation is clearly a crucial marketing strategy. It
enables the marketing manager to divide total demand into
relatively homogeneous segments identified by geographic,
demographic, psychographic and behavioural variables.
• Once a segment has been identified, it is possible to develop a
product or service to meet the needs of the segment. A
marketing mix can then be devised to reach the segment
identified efficiently.
• Market segmentation is an important aspect of modern
marketing management and the financial services marketing is
to no exception.
• Segmentation-based strategies are a wise approach to the