1.

7 Marketing Environment: Competition represents only one force in the

environment in which all marketers operate. The overall marketing environment
consists of the task environment and the broad environment.
The task environment includes the immediate actors involved in producing,
distributing, and promoting the offering, including the company, suppliers, distributors,
dealers, and the target customers. Material suppliers and service suppliers such as
marketing research agencies, advertising agencies, Web site designers, banking and
insurance companies, and transportation and telecommunications companies are
included in the supplier group. Agents, brokers, manufacturer representatives, and
others who facilitate finding and selling to customers are included with distributors
and dealers. The broad environment consists of six components: demographic
environment, economic environment, natural environment, technological
environment, political-legal environment, and social-cultural environment. These
environments contain forces that can have a major impact on the actors in the task
environment, which is why smart marketers track environmental trends and changes
closely.
According to Philip Kotler, “A company’s marketing environment consists of the
internal factors & forces, which affect the company’s ability to develop & maintain
successful transactions & relationships with the company’s target customers”.

Marketing Environment involves forces that directly or indirectly influence an

organisation’s capability to market its product successfully.

1
 Marketing
Environment

Internal External
Environment or Environment or
Controlable Uncontrolable
Environment Environment

Micro Environment Macro Environment

Figure 7: Components of Marketing Environment

1.7.1 Internal Marketing Environment or Controllable Factors

Internal Environment is generally audited by applying 5 Ms i.e.

 Men
 Money
 Machinery
 Markets
 Materials

The internal marketing environment consists of all factors that are internal to the
organisation like:

 Company‘ s mission, vision and business objectives

 Company Culture
 Company image and Goodwill
 Marketing Strategy
 Technical Capacity
 Managerial Skills and Abilities
 Structure and Processes
 Finance and Sales force
 Production and Research
 Internal Processes and Procedures
 Allocation of responsibilities
 Resource availability
 Attitude of stakeholders
 Organisation culture
 Human Resources – HR department, Operations department, Accounting and
Finance departments, Research and Design

2
1.7.2 The External Environmental Factors may be classified as:
 Internal Factor
 External Factor
External Factors may be further classified into:
External Micro Factors & External Macro Factors
Company’s Internal Environmental Factors:
A Company’s marketing system is influenced by its capabilities regarding
production, financial & other factors. Hence, the marketing
management/manager must take into consideration these departments before
finalizing marketing decisions. The Research & Development Department, the
Personnel Department, the Accounting Department also have an impact on
the Marketing Department. It is the responsibility of a manager to company-
ordinate all department by setting up unified objectives.
1.7.2.1 External Micro Factors:
 Suppliers: They are the people who provide necessary resources needed
to produce goods & services. Policies of the suppliers have a significant
influence over the marketing manager’s decisions because, it is laborers,
etc. A company must build cordial & long-term relationship with suppliers.
 Marketing Intermediaries: They are the people who assist the flow of
products from the producers to the consumers; they include wholesalers,
retailers, agents, etc. These people create place & time utility. A company
must select an effective chain of middlemen, so as to make the goods
reach the market in time. The middlemen give necessary information to
the manufacturers about the market. If a company does not satisfy the
middlemen, they neglect its products & may push the competitor’s product.
 Consumers: The main aim of production is to meet the demands of the
consumers. Hence, the consumers are the center point of all marketing
activities. If they are not taken into consideration, before taking the
decisions, the company is bound to fail in achieving its objectives. A
company’s marketing strategy is influenced by its target consumer. Eg: If a
manufacturer wants to sell to the wholesaler, he may directly sell to them,
if he wants to sell to another manufacturer, he may sell through his agent
or if he wants to sell to ultimate consumer he may sell through wholesalers

3
 or retailers. Hence each type of consumer has a unique feature, which
influences a company’s marketing decision.
 Competitors: A prudent marketing manager has to be in constant touch
regarding the information relating to the competitor’s strategies. He has to
identify his competitor’s strategies, build his plans to overtake them in the
market to attract competitor’s consumers towards his products.
Types of Competition
Pure Competition: Numerous competitors offer undifferentiated products.
No buyer or seller can exercise market power.
Monopolistic Competition: Numerous competitors offer products that are
similar, prompting the competitors to strive to differentiate their product
offering from others.
Oligopoly: A small number of competitors offer similar, but somewhat
differentiated, products. There are significant barriers to new competitors
entering the market.
Monopoly: There is only one supplier and there are substantial,
potentially insurmountable, barriers to new entrants.
Monopsony: The market situation where there is only one buyer.
Company faces three types of competition:
a) Brand Competition: It is a competition between various companies
producing similar products. Eg: The competition between BPL & Videcon
companies.
b) The Product Form Competition: It is a competition between
companies manufacturing products, which are substitutes to each other
Eg: Competition between coffee & Tea.
c) The Desire Competition: It is the competition with all other companies
to attract consumers towards the company. Eg: The competition between
the manufacturers of TV sets & all other companies manufacturing various
products like automobiles, washing machines, etc.
Hence, to understand the competitive situation, a company must
understand the nature of market & the nature of customers.
 Public: A Company’s obligation is not only to meet the requirements of its
customers, but also to satisfy the various groups. A public is defined as

4
 “any group that has an actual or potential ability to achieve its objectives”.
The significance of the influence of the public on the company can be
understood by the fact that almost all companies maintain a public relation
department. A positive interaction with the public increase its goodwill
irrespective of the nature of the public. A company has to maintain cordial
relation with all groups, public may or may not be interested in the
company, but the company must be interested in the views of the public.
Public may be various types. They are:
i. Press: This is one of the most important group, which may
make or break a company. It includes journalists, radio,
television, etc. Press people are often referred to as unwelcome
public. A marketing manager must always strive to get a positive
coverage from the press people.
ii. Financial Public: These are the institutions, which supply
money to the company. Eg: Banks, insurance companies, stock
exchange, etc. A company cannot work without the assistance
of these institutions. It has to give necessary information to
these public whenever demanded to ensure that timely finance
is supplied.
iii. Government: Politicians often interfere in the business for the
welfare of the society & for other reasons. A prudent manager
has to maintain good relation with all politicians irrespective of
their party affiliations. If any law is to be passed, which is against
the interest of the company, he may get their support to stop
that law from being passed in the parliament or legislature.
iv. General Public: This includes organisations such as consumer
councils, environmentalists, etc. as the present day concept of
marketing deals with social welfare, a company must satisfy
these groups to be successful.

5
1.7.2.2 External Macro Environment:
These are the factors/forces on which the company has no control. Hence, it has to
frame its policies within the limits set by these forces:
i. Demography: It is defined as the statistical study of the human population & its
distribution. This is one of the most influencing factors because it deals with the
people who form the market. A company should study the population, its
distribution, age composition, etc before deciding the marketing strategies. Each
group of population behaves differently depending upon various factors such as
age, status, etc. if these factors are considered, a company can produce only
those products which suits the requirement of the consumers. In this regard, it is
said that “to understand the market you must understand its demography”.

ii. Economic Environment: A company can successfully sell its products only
when people have enough money to spend. The economic environment affects a
consumer’s purchasing behavior either by increasing his disposable income or by
reducing it. Eg: During the time of inflation, the value of money comes down.
Hence, it is difficult for them to purchase more products. Income of the consumer
must also be taken into account. Eg: In a market where both husband & wife work,
their purchasing power will be more. Hence, companies may sell their products
quite easily.
iii. Physical Environment or Natural Forces: A company has to adopt its policies
within the limits set by nature. A man can improve the nature but cannot find an
alternative for it.
Nature offers resources, but in a limited manner. A product manager utilizes it
efficiently. Companies must find the best combination of production for the sake
of efficient utilization of the available resources. Otherwise, they may face acute
shortage of resources. Eg: Petroleum products, power, water, etc.
iv. Technological Factors: From customer’s point of view, improvement in
technology means improvement in the standard of living. In this regard, it is said
that “Technologies shape a Person’s Life”.
Every new invention builds a new market & a new group of customers. A new
technology improves our lifestyle & at the same time creates many problems. Eg:
Invention of various consumer comforts like washing machines, mixers, etc have

6
 resulted in improving our lifestyle but it has created severe problems like power
shortage.
Eg: Introduction to automobiles has improved transportation but it has resulted in
the problems like air & noise pollution, increased accidents, etc. In simple words,
following are the impacts of technological factors on the market:
a) They create new wants
b) They create new industries
c) They may destroy old industries
d) They may increase the cost of Research & Development.
v. Social & Cultural Factors: Most of us purchase because of the influence of
social & cultural factors. The lifestyle, values, believes, etc are determined among
other things by the society in which we live. Each society has its own culture.
Culture is a combination of various factors which are transferred from older
generations & which are acquired. Our behaviour is guided by our culture, family,
educational institutions, languages, etc.
The society is a combination of various groups with different cultures &
subcultures. Each society has its own behavior. A marketing manager must study
the society in which he operates.
Consumer’s attitude is also affected by their society within a society, there will be
various small groups, each having its own culture.
Eg: In India, we have different cultural groups such as Assamese, Punjabis,
Kashmiris, etc. The marketing manager should take note of these differences
before finalizing the marketing strategies.
Culture changes over a period of time. He must try to anticipate the changes new
marketing opportunities.
Importance of Environmental Analysis:
The marketing Manager needs to be dynamic to deal effectively with the
challenges of environment. The business environment is not static and it is
changing continuously. The following are the benefits of environment scanning as
suggested by various authorities:

 It creates an increased general awareness of environmental changes on

the part of management.

7
  It guides with greater effectiveness in matter relating to the Government.
 It helps in marketing analysis.
 It suggests improvements in diversification and resource allocations.
 It helps firms to identify and capitalize upon opportunities rather than
losing out to competitors.
 It provides a base of objective qualitative information about the business
environment that can subsequently be of value in designing the strategies.
 It provides a continuing broad- based education of executives in general,
and the strategists in particular.
2.1.1 Types of Market
We as consumers, buy various goods and services for our own consumption
or use in our daily life. 111the same way business enterprises buy
innumerable goods and services for the purpose of using them in
manufacturing process, helping in manufacturing process, for running the
business, and reselling them to the final consumers. For proper
understanding of the markets, therefore, it is essential to classify the markets
011 the basis of the type of buyer group. As such, markets are classified into
two broad categories. They are: consumer markets and organizational
markets. Let us study these two types of markets in detail.

 Consumer Markets: Here consumers mean all the individuals and

households who buy goods and services for their personal or household
consumption. Thus the consumer market consists of all the individuals and
households who buy or acquire goods and services for their own personal or
household use. They buy strictly to satisfy their non-business personal needs
and wants. For example, you purchase items such as toothpaste, soap,
biscuits, sweets etc., for your personal consumption or your family
consumption. But when an individual or organization buys goods for resale or
for further production, such an individual o r organization is not treated as

8
 belonging to the consumer market.

These ultimate consumers are large in numbers and spread throughout the
country. They also vary tremendously in age, income, educational level,
tastes, preferences, etc. These factors are cultural, social, personal,
economic and psychological characteristics of the buyer. You may also recall
while buying different products and services a buyer typically goes through
five stages of buying decision process. These five stages are: problem
recognition or need arousal, information search, evaluation of alternatives,
actual purchases decision and post-purchase behavior.

 Organizational Markets: It is generally considered that business

organizations engage in selling their products and services to their
consumers. This is true, but they also buy vast quantities of raw materials,
manufactured components, plants and equipments, supplies, and business
services. Thousands of business, institutional, and government
organizations represent a huge, lucrative buying market for goods and
services purchased from both domestic and international suppliers. In fact,
organizational markets involve many more lopes and items than do
consumer markets.

Today most of the large companies, in addition to selling their products to

the consumer market, sell to other organizations. Many industrial goods
manufacturing companies sell most of their products to other business
organizations. Even large consumer goods manufacturers engage in
organizational marketing.

Types of Organizational Market:

 The Industrial market: It is also called producer or business market.
It consists of all the individuals and organizations that buy or acquire
goods and services that enter into the production of other products
and services that are sold, rented or supplied to others. The major
industries making up the organizational market are agriculture, forestry

9
 and fisheries; mining; manufacturing; construction; transportation;
communication; public utilities; banking; finance, and insurance;
distribution; and services. For example, Maruti Udyog purchases large
number of raw materials, component parts, machinery, and supplies.
After manufacturing different brands of passenger cars it sells to final
consumers and organizations. Within the industrial market, customers
tend to be larger and fewer than in consumer markets. But even here,
great variations are found. First, the number of industrial firms making
up the market varies from one (monop
sony), to few (oligopoly), to many. Secondly, we can also distinguish
between industrial markets made up of only large films, or a few large
and many small firms, or only small firms.
 The Reseller Market: It consists of all the individuals and
organisations that acquire goods for the purpose of reselling or renting
them to others at a profit. The basic activity of resellers-unlike
industrial or business market-is buying products from manufacturing
organizations and reselling these products essentially in the same
form to the resellers’ customers. In economic terms resellers create
time, place and possession utilities rather than form utility. Resellers
also buy many goods and services for use in operating their
businesses-items such as office supplies and equipment,
warehouses, materials-handling equipment, legal services, and
electrical services. In the case of the resellers like small wholesale
and retail organisations, buying are done by one or a few individuals
In large reseller’s organizations, buying is done by a buying committee
made up of experts on demand, supply, and prices. One of the major
problems a reseller faces is to determine its unique assortment-the
combination of products and services that it will offer to its customers.
 The government market: A government market is a market where
the consumers are federal, state, and local governments.
Governments purchase both goods and services from the private
sector. Governments buy the same types of products and services as
private sector consumers, plus some more exotic products such as

10
 aircraft carriers, fighter jets, tanks, spy satellites, and nuclear weapons.
A growing trend in the past decades has been the outsourcing of
traditional government services to private firms, such as prisons.
Government purchasing processes are different from those in the
private sector of the industrial or business market. A unique feature of
the government buying is the competitive bidding system. Much
government procurement, by law, must be done on a bid basis. That is,
the government agency advertises for bids using a standard format
called a request for proposal (RFP), or quotation states specifications
for the intended purchase. Then it must accept the lowest bid that
meets these specifications. An alternative to this system, the
government may sometimes negotiate a purchase contract with an
individual supplier. This system is used when government wants to
purchase a specialized product that has no comparable products on
which to base bidding specifications. In India, most of the government
purchases for standard products are based on the rates approved by
the Directorate General of Supplies and Disposal (DGS&D). From
time to time DGS&D decides the rates of various products and
services which are needed by governmental agencies. Despite the
vast opportunities available from the government market, many
companies are reluctant to sell because they are intimidated by the
red tape.
 The Institutional Market: This is also known as non-profit
organization or "non business" business market. This market consists
of various non-profit institutions other than the government market.
This includes: educational institutions (schools, colleges, universities,
and research laboratories), hospitals, nursing homes, religious
institutions, etc. Many non-profit institutions have low budgets and
captive clienteles. For example, many universities, colleges and
governmental hospitals work on funds provided by the government
and in most of the cases these are limited. Therefore, those
companies who wish to sell to this market should keep i n mind the
inherent budget constraints.

11
2.1.3. Characteristics of Organizational Market

After discussing various types of organizational market w e now describe briefly the
distinguishing characteristics of organizational market which make it different fro
consumer market. These characteristics are more or less applicable to all types of
organizational market, but these are more applicable to industrial or business
market. These are:
Fewer Buyers: Normally organizational buyers are less in number compared with
consumers. Therefore, an industrial marketer normally deals with fewer buyers
than does the consumer marketer. For instance, if a MRF a leading tyres
manufacturing company wants to sell its tyres in the industrial market, it may
concentrate on one of the big automobile manufacturing concerns. When the same
company wishes to sell tyres to consumers (vehicle owners) it has to contact lakhs
of vehicle owners.

Larger Buyers: Organizational buyers normally require large quantities of goods

whereas personal consumers require smaller quantities. Thus industrial buyers are
large scale buyers. Even among industrial buyers a few large buyers normally
account for most of the purchasing. In such industries as automobiles, telephone,
soaps, cigarette, synthetic yarn etc., a few top manufacturers account for more
than a substantial part of total production. Such industries account for a major
share of raw material bought in the market.

Geographical Concentration: Organizational buyers are mainly concentrated in

few places like, Mumbai, Kolkata, Delhi, Chennai, Bangalore, Pune, Hyderabad,
etc., whereas consumers are spread throughout the country. For example, most of
the companies in textile sector are located in the western belt of India. Because of
this geographical concentration of industrial markets, the marketers need not
establish distribution network throughout the country. This helps in reducing the
cost of distribution.

Derived Demand: The demand for industrial goods is ultimately derived from the
demand for consumer goods. For instance, Maruti Udyog Ltd. purchases steel and
produces cars for the consumer market. If the consumer demand for cars drops, so

12
will the demand for the steel and all the other products used to make cars. Therefore,
industrial marketers sometimes promote their products directly to final consumers to
increase business demand. For example, Intel Corporation, the largest supplier of
computer processors engages in mass media advertising quite often.

Inelastic Demand: Demand for many industrial goods and services is inelastic and
not much affected by price changes, especially in the short run, because producers
cannot make quick changes in production schedules. For example, footwear
manufacturers will not buy much more leather if the prices of leather fall. Nor will
they buy less leather if the prices rise unless they can find satisfactory substitutes. In
case of price increase of industrial product such as key raw material, the
manufacturers will increase the price of the finished product. In this way they pass
on the price increase to the ultimate consumers.

Fluctuating Demand: The demand for industrial goods and services tends to be
more volatile than for consumer goods and services. This is especially true of the
demand for new plant and equipment. A given percentage increase in consumer
demand can lead to a much larger percentage increase in the demand for
necessary plant and equipment to produce the additional quantity in order to meet
the increased demand. Economists refer to this as the acceleration principle.

Professional Purchasing-: Most of the organisations have professionally trained

personnel in the purchasing division. Goods are purchased by these specialists.
There are professional journals which provide for the benefit of these professional
buyers. Consumers, on the other hand are less trained in the art of careful buying.
In industrial purchasing, if the buying decision is complex; it is likely that several
persons will participate in the decision-making process. Purchase committee
comprising experts and top management are common in the purchase of major
goods. In addition to this many of the buying instruments-such as purchase
contracts-are not found in consumer buying.

Close Supplier-Customer Relationship: With the smaller customer base and the
importance and power of the larger customers, industrial sellers are frequently

13
required to customize their offerings, practices, and performance to meet the needs
of individual customers.
Multiple Buying Influences: More people typically influence business buying
decisions. Buying committees are common in the purchase of major goods;
marketers have to send well trained and experienced sales people and often sales
teams to deal with these well-trained buyers

Multiple Sales Calls: With the more people involved in the process, the sales
representatives or sales teams from the industrial supplier are required to call many
times before getting an order from an industrial buyer. A long period, ranging from
a few weeks to few months is required to get an order for major capital equipment
from an industrial buyer.

Direct Purchasing: Organizational buyers particularly business buyers often buy

directly from manufacturers rather than through intermediaries, especially products
that are technically coinplex or expensive.

Reciprocity: Organizational buyers often select suppliers who also in turn buy from
them. For example a paper manufacturer who buys chemicals from a chemical
company that is buying a considerable quantity of its paper. Even in this reciprocal
buying situation the buyer will make sure to get the supplies at a competitive price,
of proper quality and service.

Leasing: In case of major and expensive equipment many industrial buyers lease
rather than buy in order to conserve funds, get the latest products, receive better
service, and gain tax advantages. The lessor often makes more profit and sells to
customers who could not afford outright purchase of equipment; there are certain
income tax benefits according to Indian Income Tax Act given to both lessor and
leasee.
2.2 Market Segmentation:
2.2.1: Concept of Segmentation:
Today companies that sell their products and services to various consumer and
industrial markets are aware that they cannot serve to all buyers in the entire

14
market for a specific product or service category. The reason is that buyers in a
specific product market are too numerous, too widely spread, and have different
needs and buying motives. This is known as heterogeneity or diversity of buyers.
For examples, not all consumers who wear pants want to wear jeans. Even those
wear jeans some will go for designer’s jeans and some go for cheaper jeans. In
the same way businesses who use compute s may not want the same amount of
memory or speed in computers. Thus rather than to compete in an entire market
each company must identify the parts of the market that it can serve in a more
meaningful way.

What we are seeing here is that within the same general market there are groups
of consumers with different needs, buying preferences, or product-use behavior.
In some product markets these differences are relatively minor, and the primary
belief it sought by consumers can be satisfied with a single marketing mix. In
other product markets these differences are pronounced and consumers are not
likely to compromise on single product and other elements of marketing mix. As a
result, alternative or multiple marketing mixes are required to reach the entire
product market. For example, today in India there are various brands of cars
which are serving the "small car market", some are serving "mid-size car market",
and some brands of cars are serving "luxury car market". Whether it is large or
small, the group of consumers (personal consumers or business buyers) for
whom the seller designs and directs a particular marketing mix is a target market.
Mass Marketing: In this marketing practice companies use to produce a single
product on a mass scale, distributed and promoted on a mass level. The main
advantage that has been advocated for mass marketing is that this will lead to
economies of scale to the manufacturers and lower price to the consumers. This
practice is also known as "shotgun approach" or market aggregation. In the
present
market scenario this practice used by the marketers as consumers in most of the
markets exhibit differences in terms of buying preferences, needs and product
use behaviour. This has made mass marketing difficult in the present times.

Target Marketing: Here the total market is consisting of several smaller segments

15
with differences significant enough that one marketing mix will not satisfy everyone
or even a majority in a given product or services, in market. Therefore, a firm here
identifies different submarkets or market segments, selects one or more of them,
and develops products and marketing mixes to each. This strategy develops a
"rifle" approach instead of "shotgun approach".

Selection of a target market (or target markets) is part of the overall process known
as S-T-P (Segmentation→Targeting→Positioning). Before a business can develop a
positioning strategy, it must first segment the market and identify the target (or
targets) for the positioning strategy. This allows to the business to tailor its marketing
activities with the needs, wants, aspirations and expectations of target customers in
mind. This enables the business to use its marketing resources more efficiently,
resulting in more cost and time efficient marketing efforts. It allows for a richer
understanding of customers and therefore enables the creation of marketing
strategies and tactics, such as product design, pricing and promotion, that will
connect with customers’ hearts and minds. Also, targeting makes it possible to
collect more precise data about customer needs and behaviors and then analyze
that information over time in order to refine market strategies effectively.

The first step in the S-T-P process is market segmentation. In this phase of the
planning process, the business identifies the market potential or the total available
market (TAM). This is the total number of existing customers plus potential
customers, and may also include important influencers. For example, the potential
market or TAM for feminine sanitary products might be defined as all women aged
14-50 years. Given that this is a very broad market in terms of both its demographic
composition and its needs, this market can be segmented to ascertain whether
internal groups with different product needs can be identified. In other words, the
market is looking for market-based opportunities that are a good match its current
product offerings or whether new product/service offerings need to be devised for
specific segments within the overall market.

16
2.2.2: Importance of Segmentation:
Market segmentation being customer-oriented is resemblance with the marketing
concept philosophy. In market segmentation, a company first identifies the needs of
consumers within a segment and then decides if it is practical to develop a product
and marketing mix to satisfy those needs. By practicing market segmentation and a
company may obtain the following advantages and benefits.
 By tailoring marketing programs to each market segment, a company can do
a better marketing job and can make more efficient use of its marketing
resources.
 A small company with limited resources may be in a better position to
compete more effectively in one or two small market segments, whereas the
same company would be overwhelmed by the competition from bigger
companies if it aimed for a major segment.
 A company with effective market segmentation strategy can create a more
fine-
tuned product or service offering and price it appropriately for the target
segment.
 The company can more easily select the most appropriate distribution
network and communication strategy, and it will be able to understand its
competitors in a better way, which are serving the same segment.
 By developing strong position in a specialized market segments, a medium
sized company can grow rapidly.
 Even very large companies with the vast resources at their disposal are
abandoning mass marketing strategies and embracing market segmentation

17
 as more effective strategy to reach various market segments in broad
product market. For example, Hindustan Lever Ltd (HLL), one of the most
admired companies, has developed a number of detergent brands to cater to
the needs of various segments in detergent market. This has been done by
HLL after it faced stiff competition in the 1970s from a sinall and lesser
known Nirma Chemicals Ltd, in the form of Nirma brand. As a result of
Nirma’s onslaught HLL came up with an economical brand named Wheel to
cater to the needs of middle class and economy conscious detergent buyers.

Because of these factors and the benefits from the market segmentation most of the
companies both in consumer and industrial markets are practicing this strategy.
Because of obvious benefits, today not only market segmentation is practiced by the
companies manufacturing goods and services but it has also been adopted by
retailers. Many marketing experts are of the view that the days of mass marketing
have gone and even if some companies are following mass marketing its days are
numbered. Therefore, today companies use market segmentation to stay focused
rather than scattering their marketing resources.

2.2.3: Bases of Segmentation:

Some of the major bases for market segmentation are as follows:

 Geographic Segmentation
 Demographic Segmentation
 Psychographic Segmentation
 Behavioristic Segmentation
 Volume Segmentation
 Product-space Segmentation
 Benefit Segmentation.

A large number of variables are used to segment a consumer market. The most
common bases for segmenting markets are as follows: Traditional: Geographic,
Demographic. Modern: Psychographic, Behaviouristic

2.2.3.1 : Geographic Segmentation:

18
Geographic location is one of the simplest methods of segmenting the market.
People living in one region of the country have purchasing and consuming habit
which differs from those living in other regions. For example, life style products sell
very well in metro cities, e.g., Mumbai, Delhi, Kolkata and Chennai but do not sell in
small towns. Banking needs of people in rural areas differ from those of urban areas.
Even within a city, a bank branch located in the northern part of the city may attract
more clients than a branch located in eastern part of the city.

2.2.3.2 : Demographic Segmentation:

Demographic variables such as age, occupation, education, sex and income are
commonly used for segmenting markets.

(a) Age: Teenagers, adults, retired.

(b) Sex: Male and female.

(c) Occupation: Agriculture, industry, trade, students, service sector, house-holds,

institutions.

(i) Industrial sector: Large, small, tiny.

(ii) Trade: Wholesale, retail, exporters.

(iii) Services: Professionals and non-professionals.

(iv) Institutions: Educational, religions, clubs.

(v) Agriculture and cottage industries.

(d) Income Level: Above Rs. 1 lakh per annum, Rs. 50,000 to Rs. 1 lakh, Rs. 25,000
to Rs. 50,000 per annum, i.e., higher, middle and lower.

(e) Family Life-cycle: Young single, young married no children, young married
youngest child under six, young married youngest child over six, older married with
children, older married no children under eighteen, older single, etc.

2.2.3.3 :. Psychographic Segmentation:

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Under this method consumers are classified into market segments on the basis of
their psychological make-up, i.e., personality, attitude and lifestyle. According to
attitude towards life, people may be classified as traditionalists, achievers, etc.

Rogers has identified five groups of consumer personalities according to the way
they adopt new products:

(а) Innovators: These are cosmopolitan people who are eager to try new ideas. They
are highly venturesome and willing to assume the risk of an occasional bad
experience with a new product.

(b) Early Adopters: These are influential people with whom the average person
checks out an innovation.

(c) Early Majority: This group tends to deliberate before adopting a new product. Its
members are important in legitimizing an innovation but they are seldom leaders.

(d) Late Majority: This group is cautious and adopts new ideas after an innovation
has received public confidence.

(e) Laggards: These are past-oriented people. They are suspicious of change and
innovations. By the time they adopt a product, it may already have been replaced by
a new one. Understanding of psychographic of consumers enables marketers to
better select potential markets and match the product image with the type of
consumer using it. For example, women making heavy use of bank credit cards are
said to lead an active lifestyle and are concerned with their appearance. They tend to
be liberated and are willing to try new things.

Psychographic classification may, however, be an oversimplification of consumer

personalities and purchase behaviour. So many factors influence consumers that an
early adopter of one product might well be a laggard for some other product and vice
versa.

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2.2.3.4 : Behavioristic Segmentation:

In this method consumers are classified into market segments not the basis of their
knowledge, attitude and use of actual products or product attributes.

Any of the following variables might be used for this purpose:

(а) Purchase Occasion: Buyers may be differentiated on the basis of when they use
a product or service. For example, air travellers might fly for business or vacation.
Therefore, one airline might promote itself as a business flyer while another might
target the tourists.

(b) Benefits Sought: The major benefit sought in a product is used as the basis of
classify consumers. High quality, low price, good taste, speed, sex appeal are
examples of benefits. For example, some air travellers prefer economy class (low
price), while others seek executive class (status and comfort).

(c) User Status: Potential buyers may be classified as regular users, occasional
users and non-users. Marketers can develop new products or new uses of old
products by targeting one or another of these groups.

2.2.3.5 : Volume Segmentation:

Consumers are classified light, medium and heavy users of a product. In some
cases, 80 per cent of the product may be sold to only 20 per cent of the group.
Marketers can decide product features and advertising strategies by finding common
characteristics among heavy users. For example, airlines having ‘Frequent Flyer’ are
using user rate as the basis of market segmentation. Generally, marketers are
interested in the heavy user group.

But marketers should pay attention to all the user groups because they represent
different opportunities. The non-users may consist of two types of people— those
who do not use the product and those who might use it. Some may change over time
from a non-user to a user.

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Those who do not use due to ignorance may be provided extensive information.
Repetitive advertising may be used to overcome inertia or psychological resistance.
In this way non-users can gradually be converted into users.

2.2.3.6 : Product-space Segmentation:

Here the buyers are asked to compare the existing brands according to their
perceived similarity and in relation to their ideal brands. First, the analyst infers the
latent attributes that consumers are using to perceive the brand. Then buyers are
classified into groups each having a distinct ideal brand in mind. The distinctive
characteristics of each group are ascertained.

2.2.3.7 : Benefit Segmentation:

Consumer behaviour depends more on the benefit sought in product/service than on

demographic factors. Each market segment is identified by the major benefits it is
seeking. Most buyers seek as many benefits as possible. However, the relative
importance attached to individual benefits differs from one group to another. For
example, some consumers of toothpaste give greater importance to freshness while
other prefer taste or brightness of teeth.

Research studies on benefit segmentation reveal that it is easier to take advantage

of existing segment, then to create new segments. As no brand can appeal to all
consumers, a marketer who wants to cover the market fully must offer multiple
brands.

The following benefit segments have been identified:

(а) The Status Seeker: This group comprises buyers who are very much concerned
with the prestige of the brand.

(b) The Swinger: This group tries to be modern and up-to-date in all of its activities.

(c) The Conservative: This group prefers popular brands and large successful
companies.

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(d) The Rational Man: This group looks for benefits such as economy, value,
durability and other logical factors.

(e) The Inner Directed Man: This group is concerned with self-concept, e.g., sense of
homour, independence, honesty, etc.

(f) The Hedonist: This group is concerned mainly with sensory benefits.

Marketing experts suggest that benefit segmentation has the greatest number of
practical implications than any other method of segmentation.

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