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Write short notes on: Market segmentation.

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What is Market segmentation?

Marks: 5 / 7

Year: May 2012, Dec 2012

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• Market refers to a group of people with sufficient purchasing power, authority and willingness to buy.

• Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers, who have common needs and priorities, and then designing and implementing strategies to target them.

• Market segmentation strategies may be used to identify the target customers, and provide supporting data for positioning to achieve a marketing plan objective.

An ideal market segment meets all of the following criteria:

• It is possible to measure.

• It must be large enough to earn profit.

• It must be stable enough that it does not vanish after some time.

• It is possible to reach potential customers via the organization's promotion and distribution channel.

• It is internally homogeneous (potential customers in the same segment prefer the same product qualities).

• It is externally heterogeneous (potential customers from different segments have different quality preferences).

• It responds consistently to a given market stimulus.

• It can be reached by market intervention in a cost-effective manner.

• It is useful in deciding on the marketing mix.

• It identifies the target customer(s) (surrogate(s))

• It provides supporting data for a market positioning or sales approach.

Four common bases for segmenting consumer needs are:

• Geographic segmentation:

 It is the division of an overall market into homogeneous groups based on their locations.

• Demographic segmentation

 It is the division of an overall market into homogeneous groups based on variables such as gender, age, income, household size, etc.

• Psychographic segmentation

 It is the division of a population into groups that have similar psychological characteristics, values and life cycles.

• Product-related segmentation

• It is the division of a population into homogeneous groups based on their relationships to the product.

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