A COMPREHENSIVE NOTE ON “CHAPTER EIGHT-IDENTIFYING MARKET

SEGMENTATION AND TARGETS”.

Prepared by:
MONIRA ALAM KANTA (G1536248)
International Islamic University Malaysia

INTRODUCTION

An organization cannot perform full customers in a wide market – consumers are too frequent

and various in their requirements. The company or organization needs to identify the market

segments and targets that it can serve more potentially.

Many corporation embrace target marketing where sellers differentiate the significant market

segments, target one or more of those segments, and develop products and marketing events

customized to each. Alternatively of scattering the marketing effort they focus on the customers

they have the ample chance of satisfying (Rifle approach).

In market segmentation, one differentiates homogeneous categories of consumers who can be

attacked in the similar process as they have same demand and preferences. Kotler and

Armstrong define market segmentation as “dividing a market into distinct groups of buyers

who have distinct needs, characteristics, or behaviour and who might require separate products
or marketing mixes” (Armstrong and Kotler, 2005: 54). In 1956 Smith defined, “Market

segmentation involves "Market segmentation involves viewing a heterogeneous market as a

number of smaller homogeneous markets, in response to differing preferences, attributable to

the desires of customers for more precise satisfactions of their varying wants." This being an

exact definition to date, one of its most seductive feature is that it presents segmentation as a

conceptual model as to how well it explains the environment for a specific product or service

to allocate information to managerial decisions, there are others to segmentation, in specific

one-to one marketing in one enormous and multitude marketing in the other.

Target marketing includes three activities: market segmentation, market targeting, and market
positioning. Market segments are large, identifiable groups within a market.

Target marketing requires three steps:

1. Identify and profile distinct group of buyers who might require separate products or
marketing mixes – market segmentation.
2. Select one or more market segments to enter – market targeting.
3. Establish and communicate the products’ key distinctive benefits to the target market –
market positioning.

Levels and Patterns of Market Segmentation

Market segmentation is an effort to increase a company’s precision marketing.

Segment Marketing:
A market segment consists of a large identifiable group within a market with similar wants,
purchasing power, geographical location, buying attitudes or buying habits. For example, for
an auto company might have four broad segments: customers seeking basic transportation or
high performance or luxury or safety.

Each segment buyers are assumed to be quite similar in needs and wants. Anderson and Narus
urge to present flexible market offering instead of a standard offering (“one size fits all”) to all
members within the segment. A flexible market offering consists of two parts:
 Naked Solution: Product and service element that all segment members value
 Options: That some segment member’s value, each option carries extra charge.

For example seat, food and drinks offered to the economy class passenger of an airline are
naked Solution while extra amount charged for an alcoholic beverage/Internet facility to those
who are ready to pay for it would be option.

Benefits of Segment Marketing are:

 The company can create more fine-tuned product or services offering and price it
appropriately for target audience
 Choice of distribution channel and communication channel becomes much easier
 The company also may face fewer competitions in a particular segment.

A.Bases for Segmenting Consumer Markets

There are quite a number of potential market segmentation bases which an organization could
effectively utilize to construct market segments. As a basic guide, segmentation bases can be
classified into four major categories:

Geographic segmentation:
First of all, what is a geography? Geography is the area which the amount of population can be
exists on the exact place.
Then the geographic segmentation, segmentation is the division of something. In this point the
geographic segmentation is explaining about the business and market divisions when a market
and business on the basis of geography divided into many various types for example based on
countries, people, distract and so on there are many examples of geographical segmentation
which are the largest country like China and the smallest one is like Singapore.
Geographic segmentation is focusing on the location of a company sale, into different
geographical units such as:
- Region: by continent, country, state, or even neighbourhood;
- Size of metropolitan area: segmented according to size of population;
- Population density: often classified as urban, suburban, or rural;
- And Climate: according to weather patterns common to certain geographic regions.
Therefore the international companies may divide its market basis on the neighbourhood
countries to provide their services easily, while national companies may star with rural areas
and move on to the cities.

Demographic segmentation:
Demographic segmentation is when a company divides the market into groups on the basis that
each group of the customers share similar demographic qualities. For instance, a company
selling feminine hygiene products might naturally identify its target market as female. The
number of demographic traits included in describing a particular segment can vary. A company
might identify a demographic segment based on common gender, age and income. Market
segmentation allows a company to target its products or services to a specific group of
consumers, thus avoiding the cost of advertising and distributing to a mass market. The
following are the different subsets of demographic segmentation. Demographic segmentation
divides the markets into groups based on variables such as age, gender, family size, income,
occupation, education, religion, race and nationality. As a matter of fact, demographic factors
are the most popular bases for segmenting the consumer group due to consumer needs, wants,
and usage rates which often vary closely with the demographic variables. Moreover,
demographic factors are easier to measure than most other type of variables.
- Age and life-cycle: In order to segment markets, age is one of the most common
demographic variables. As we all know, people desire and abilities change with the age;
that is a reason why some companies try to offer different products or use different
marketing approaches for different ages. For instance, Mc Donald’s target children,
teens, adults and seniors with different ads and media. Therefore, markets that are
commonly segmented by age include clothing, toys, music, automobiles, soaps,
shampoos and foods.
- Life stage: People differ in their life stage and it defines what will be the need of a
particular customer. Moreover, people may be in different situations such as going
through a divorce, deciding to buy a new car and deciding about the insurance and
investment plans. Therefore, it is a opportunity for the marketers to help people based
on these life stage.
 - Gender: Men are from mars and women are from Venus. So naturally their preferences
differ; for example, where men might want the latest in technology, women might
desire the latest in Fashion. Hence, the differentiation in gender is applied on clothing,
cosmetics, hairstyling and magazines.

- Income: Markets are also segmented on the basis of income. Income is used to divide
the markets because it influences the people’s product purchase. It affects a consumer’s
buying power and style of living. Income includes housing, furniture, automobile,
clothing, alcoholic, beverages, food, sporting goods, luxury goods, financial services
and travel.

- Generation: Generation or cohort is a group of people who lived through similar times
in their youth, shaping their behaviour and values. Thus, they share the same cultural,
political and economical experiences. The marketers advertise to a group of cohort the
icons and images which are prominent in their experiences.

Psychographic segmentation:
Psychographics is when you record of someone in his personality like personality between
customers and consumers and such as: worth, ideas attitudes which is the way that of thinking,
lifestyles that people live in life. Because this place of looking for focuses on interests, values.
In psychographic segmentation customer are separate into parts various groups on the essential
of the way living or personality or the worth. People during an identical demographic group
can be show very dissimilar psychographic profile. Also the segmentation system is basically
replying to questions four demographics.

Psychographics is the science of using psychology and demographics to better understand

customers. Psychographic segmentation categorizes your customers by their personality,
lifestyles, attitudes and values. In fact, every customer has a different psychographic make up.
Analysing that make up and grouping similar characteristics together is the start of
psychographic segmentation. Therefore, Strategic Business Insight’s VALS™ framework is
one of the most popular classifications systems based on psychographic measurements which
is commercially available.
 Moreover, VALS™ places the adult consumers into one of eight segments based on
their responses to the VALS questionnaire (Figure 1). The main dimensions of the
segmentation framework are primary motivation (the horizontal dimension) and resources (the
vertical dimension).

Figure 1: The US VALS segmentation system.

According to the VALS Framework, groups of people are arranged in a rectangle and
are based on two dimensions. The vertical dimension segments people based on the degree to
which they are innovative and have resources such as income, education, self-confidence,
intelligence, leadership skills, and energy. The horizontal dimension represents primary
motivations and includes three distinct types:

Consumers driven by knowledge and principles are motivated primary by ideals. These
consumers include groups called Thinkers and Believers. Consumers driven by demonstrating
success to their peers are motivated primarily by achievement. These consumers include groups
referred to as Achievers and Strivers. Consumers driven by a desire for social or physical
activity, variety, and risk taking are motivated primarily by self-expression. These consumers
include the groups known as Experiencers and Makers. At the top of the rectangle are the
Innovators, who have such high resources that they could have any of the three primary
motivations. At the bottom of the rectangle are the Survivors, who live complacently and within
their means without a strong primary motivation of the types listed above.
Behavioral segmentation:

Behavioural segmentation divides a population based on their behaviour, the way the
population respond to, use or know of a product. Actually consumer behaviour is a subject
studied in depth over time in marketing management. This is mainly because there are several
factors which a consumer takes into consideration before taking a decision. Thus consumer
decision making is affected by his behaviour and that is exactly how the behavioural segments
are targeted.

- Need and benefits: People have different needs and benefits from the same product.
Therefore several products are targeted towards the benefits sought by the customer.
Recently, there has been a war between Colgate and sensodyne to target the people who
have sensitive teeth. Similarly, there are other toothpastes which are targeted towards
whitening of teeth. Hair shampoos are targeted towards split ends, anti dandruff or
others.
- Decision Roles: It is easy to identify the buyer for many products. It is the behavioral
segmentation that helps in buyer identification. With regard to the decision making
buyers play roles of that of an initiator, influencer, decider, buyer and that of a user.
Even though different people are playing different roles, all are crucial in the decision
process and the ultimate consumer satisfaction.
- User and usage; Real user and Usage-Related variables: The behavioral variables
which are the best starting points for constructing market segments are :

 Occasions: Buying on occasions is the first form of behavioral segmentation

and it is when customers purchase, use or think of buying a product. For
instance, products such as chocolates and premium foods will sell on festivals.
Similarly, confectioneries will sell when there is a party. Thus these products
are generally targeted by behavioral segmentation. The best example of
targeting buying on occasions is Hallmark cards; greeting cards for all
occasions. The primary targeting of hallmark was that be it any occasion, you
will find the right kind of card for you. Thus you have the perfect option to
express yourself.
 User Status: it groups customers based on whether they are potential users,
first-users, regular users, non-users or ex-users of a product which can be very
useful.
 Usage Rate: usage rate divides customers according to the level of usage they
make of the product. We can distinguish heavy, medium, or light users. Let’s
take the example of the beauty products. Heavy users will use and buy eye
shadows and lipsticks quite often while light users will buy them rarely. Other
example would be airlines that focus on frequent flyers, because they are a
lucrative market and their needs different than those who fly only once a year.
The objective of an organisation should be to attract heavy users who will make
a greater contribution to sales.
 Buyer-Readiness Stage: it is where customers are segmented according to their
readiness to purchase the product. There are 6 stages of buyers readiness
(awareness, knowledge, liking, preference, conviction and purchase). Sales
promotion discounts, or personal selling through sales representatives may be
used to encourage customer to purchase.
 Loyalty status: Customers can be grouped according to their level of loyalty of
the product. Customers are loyal to brands at different levels. Some individuals
will always buy a particular brand. Others will buy this brand occasionally and
switchers will switch between brands. Many companies try to segment their
markets into those where loyal customers can be found and retained as it is much
more profitable than acquiring new customers. The best example of behavioral
segmentation by loyalty can be seen in the hospitality sector where airlines,
hotels and restaurants give their best to provide the best possible customer
service so that they can retain their customer.
 Attitude: Five attitude groups can be found in a market: enthusiastic, positive,
indifferent, negative, and hostile. Door-to-door workers in a political campaign
use voter attitude to determine how much time to spend with that vote. They
thank enthusiastic voters and remind them to vote; they spend no time trying to
change the attitudes of negative and hostile voters.
 Multiple bases: This category rely on providing a more comprehensive and
cohesive view of a market and its segments by combining different behavioral
bases.
Therefore, by using any of these segmentation bases, either individually or in combination, an
organization can construct market segments for evaluation to help them select appropriate
target markets. Probably the best approach to understanding the different segmentation bases
is to view some examples, which are listed in the table 1 below.

Table1: Different segmentation bases and examples

Main Category Segmentation Base Example/s

Geographic Country/continent England, UK, Europe
Region/area of the country North India, West India, South India
City New York, Los Angeles, Dallas, Chicago
Urban/rural Measured by the area’s population
density
Climate Tropical, arid, alpine
Coastal/inland Measured by distance to the coast
Demographic Age group Pre-teens, teens, young adults, older
adults
Generation Baby boomers, Gen X, Gen Y
Gender Male, female
Marital status Married, single, widowed
Family life cycle Young married no kids, married young
kids
Family size Couple only, small family, large family
Occupation Professional, trade, unskilled
Education High school, university, vocational
Ethnic background African-American, Hispanic, Asian
Religion Christian, Jewish, Hindu, Muslim
Psychographic Lifestyle Family, social, sporty, travel, education
Values (VALS) VALS = values and lifestyles
Social class Upper class, middle class, lower class
Personality/self-concept Ongoing, creative, innovator, serious
Activities, interests, opinions Various hobbies, sports, interests
(AIO)
Benefits Sought Needs/motivations Convenience, value, safety, esteem
Behavioral Occasion Birthday, anniversary, Valentine’s Day
Buying stage Ready to buy, gathering information only
User status Regular, occasional, never
Usage rate Heavy, light
Loyalty status Loyal, occasional switcher, regular
switcher
Brand knowledge Strong, some, none
Shopping style Enjoys shopping, functional, avoids
Involvement level High, medium, low
 B. Bases for Segmenting Business market

Business market can be segmented on the bases consumer market variables such as geography,
benefit sought, and other usage rate because therefore business marketers also use other
variable segments.
The world is a huge market. A company cannot effectively serve the entire world with its
products or services -- it is not possible to be all things to all people. To compete more
effectively, many companies are now targeting specific markets. Instead of scattering their
marketing efforts everywhere, companies are focusing on market segments where they have
the greatest change of satisfying the most customers. The following are major segmentation
variables for business markets. Marketers can use these segments to plan and execute their
marketing plans.
Table 2: Major segmentation variables for business markets

Demographic
1. industry: which industries should we serve?
2. Company size: what size company should we serve?
3. Location: what geographical area should we serve?
Operating variables
4. Technology: what customer technology should be focused on?
5. User a nonuser status: should we serve heavy users, medium users, light users, or new users?
6. Customer capabilities: should we serve customers needing many or few services?
Purchasing approaches
7. purchasing function organization: should we serve companies with highly centralized or
decentralized purchasing organizations?
8. Power structure: should we serve companies that are engineering dominated, financially
dominant, and so on?
9. Nature of existing relationships: should we serve companies with which we have strong
relationships or simply go after the most desirable companies?
10. General purchase policies: should we serve companies that prefer leasing? Service contracts?
Systems purchases? Sealed bidding?
11. Purchasing criteria: should we serve companies that are seeking quality? Service? Price?
Situational factors
12. Urgency: should we serve companies that need quick and sudden delivery or service?
13. Specific application: should we focus on certain applications of our product rather than all
applications?
14. Size of order: should we focus on large or small orders?
Personal characteristics
15. Buyer seller similarity: should we serve companies whose people and values are similar to ours?
16. Attitudes toward risk: should we serve risk-taking or risk avoiding customers?
17. Loyalty: should we serve companies that show high loyalty to their suppliers?

C. Marketing Targeting
Target marketing means identifying specific market segments within a larger audience and
targeting them with ad campaigns. This process is commonplace in marketing and helps
companies get more value for their advertising investment. It goes against historical approaches
to marketing whereby companies would simply pay to deliver messages to mass markets
without considering the waste in paying to reach consumers who would never buy. Thus, when
a market is segmented, there must be at least a segment that is measurable, substantial,
accessible, differentiable, and actionable.

 Effective Segmentation Criteria

The many ways to segment the market, but all of them are not effective:
The useful market segmentation is:
1. Measurable: refers to the fact that the market size, purchasing power and profiles of the
segment needs to be measured.
2. Substantial: refers to the fact that the market segments are large or profitable enough to serve.
A segment should be the largest possible homogeneous group worth going after with a tailored
marketing program.
3. Accessible: refers to the fact that the market segments need to be effectively reached and
served.
4. Differentiable: refers to the fact that the market segments are conceptually distinguishable
and respond differently to different marketing mix elements and programs
5. Actionable: The firm needs to be able to implement a distinctive marketing mix for each
market segment.

 Evaluating and selecting the market segmentation

In evaluating different market segments, the firm must look at two factors which are: the
segment’s overall attractiveness and the company’s objective and resource. After evaluating
different segments the company can consider five patterns of target market selection. Marketers
have a range or continuum of possible levels of segmentation that can guide their target market
decisions.

1. Full Market Coverage:

Full market coverage is a marketing strategy wherein a firm is keen to cater to the general
consumer and not restrict itself to a certain consumer group. In other words, the firm prefers
blanketing the whole market with its offerings, not leaving a section untapped. Examples of
such companies include Microsoft, which serves the entire software industry; Pepsi, a holistic
non-alcoholic beverage provider; and Toyota, which has an engulfing presence in the auto
industry. The cost for this type of target marketing approach is high: the business must have
strong distribution channels, large resources, and many products. Small businesses should not
attempt total market coverage.
2. Multi-segment marketing: Multi-segment marketing is a departure from the tradition of
finding a target market and dedicating your small business to serving it. Multi-segment
marketing is aimed at the market as a whole in an attempt to maximize your reach and generate
as many sales as possible. A super segment is a set of segment sharing some exploitable
similarity. For example, Car manufacturers may develop a luxury brand to attract customers
who have aspirational needs and can afford it while come up with an economy brand for certain
income levels.

3. Single-segment concentration: Single-segment concentration refers to a business strategy

wherein a company focuses only on a particular market segment. For example, soccer balls,
soccer shoes, soccer clothing, etc. Through such concentrated and niche targeting, companies
acquire good knowledge about a particular market division and also create a strong business
presence in the segment. Because of focusing on a single-segment or a narrow niche, the
business will gain some economy from specialization (it may grow to be the largest customer
of soccer ball manufacturers, etc.). That economy will help it bring value to the product and to
the market
4. Individual Marketing: Individual marketing is defined as tailoring products and marketing
programs to the needs and preferences of individual customers. In this marketing strategy,
products are customized to suit each person. In individual marketing, it is necessary to meet
the demands of each person successfully. Technology has made remarkable advances and has
helped in the promotion of individual marketing. The importance of individual marketing is
the level between the company and a client and brand is establishing. For example, in a fitness-
center; the trainer changes his training programs to suit each individual.

4. Ethical Choice of Market Targets: Market targeting sometimes generates public

controversy. The public is concerned when marketer take unfair advantage of
vulnerable groups (such as children) or disadvantaged groups (such as inner city poor
people), or promote potentially harmful products. The cereal industry has been heavily
criticized for marketing efforts directed toward children. Critics worry that high
powered appeals presented through the mouths of lovable animated characters will
overwhelm children’s defences and lead them to want sugared cereals or poorly
balanced breakfasts. Toy marketers have been similarly criticized.

Air Asia marketing

Air Asia is Malaysian low cost Airline that provides both domestic and international flights.
Air Asia started opening on 18 November 1996, it pioneered low-cost traveling in Asia. In
2001, the airline which was heavily indebted was purchased by Tony Fernanda’s company
Tune Air Sdn Bhd. Under his charge, Air Asia has become one of the biggest low cost Airlines
operating in issue today. Its main hub is based in the low-cost Carrier Terminal (LCCT) at
Kuala Lumpur International Airport (KLIA). As such, ear issue consumers tend to be from the
lower to middle income population. Thai Air Asia and Indonesia Air Asia are subsidiaries of
Air Asia and are based in Suvarnabhumi Airport, Thailand and Soekarno-Hatta International
Airport, Indonesia, respectively. Company analysis.

1. Segmentation
Air Asia target market segment consists of three different but overlapping segments that were
segmented according to Geographic segmentation, Demographic segmentation, and
Psychographic segmentation. Air Asia targets mainly that Asian market, hence the name Air
Asia. As such, they do Geographic segmentation by focusing their services primarily in Asia.
Being a low-cost Airline, they are targeting the low to middle income group (demographic)
and the cost-conscious Travelers (psychographic).

SWOT analysis of AirAsia

SWOT investigation is a review attempted by an association to recognize its inward qualities
and shortcomings, and in addition its outside circumstances and dangers. To comprehend the
inner factors, for instance, qualities and shortcomings, and outside circumstances and perils to
business objectives, a SWOT investigation of Air Asia can be driven and exhibited as takes
after.
Strengths
 Low cost and easy operations.
 Less administration level, viable, engaged and forceful administration.
 Basic demonstrated plan of action that reliably conveys that lowest fare.
 Enter and animate to potential markets.
 Multi-skilled staffs implies proficient and motivation workforce.
 Single type fleet minimizes maintenance charge and simple for pilot dispatch.
Weaknesses
 Administration assets are limited by lower costs.
 Limited HR couldn't deal with unpredictable circumstance.
 Government obstruction and direction on airplane terminal arrangements and travellers
compensation.
 Non-central area of secondary air terminals.
  Brand is crucial for market position and creating it is always challenge.
 Dependence on outsourcing.
Opportunities
 Whole deal flight is a trial to get undeveloped piece of the overall industry.
 Different from conventional LCC model by including client administrations or
operation as full administration carrier with low fare.
 Continuous industry combination has opened up prospects for new courses and air
terminal arrangements.
 High fuel costs will squeeze out unbeneficial competitors.
Threats
 Full Serviced aircrafts begin cut expenses to compete.
 Entrance of different LCCs.
 High fuel cost decreases yield.
 Accident, terrorist attack, and disaster, influence client certainty.
 Flight direction and government strategy.
 Increment in operation cost in creating esteem included administrations.
 System interruption because of vigorously dependence on online sales.

CONSUMER DIVERSITY

Air Asia's main consumers are still those who could not previously afford to fly, but its
passenger profile is changing as it adds destinations and increases brand awareness.

“The economically disadvantaged are there, and the main Market is still the mass Market that
will never change, but we are reaching markets that we are never dreamt of," says Fernands.
Goldman Sachs executives in Singapore, for example, are very happy that we opened up
Singapore Bandung as it allows them to meet clients in the Indonesian City. Our corporate
business has gone 400% because companies want to save money and, once they fly us, they
don't want to change."

Fernands' Airline is transforming the perception of low cost travel, giving rise to a diverse
cross-section of passengers. The Air Asia chief shift executive says:" we show that low cost
does not mean low class. In the Jakarta Kuala Lumpur flight, you will find women with
diamonds sitting beside maids. You could not see that before. That shows we are reaching
everyone."
1. Geographic characteristics

The geographic characteristics of the target market of Air Asia are within the Australasian
region. Attract people from Australia who wish to visit the Asian region. Using Kathmandu as
a destination that the consumer is dreaming about. The ad implies to stop dreaming about doing
and just go, since the flights are very cheap it allows people to act on their dreams.

2. Demographic characteristics

Concerning demographic characteristics, Air Asia is not targeting a specific demographic

group. It is mostly based on the social status or the average budget of the customers. Air Asia
mainly target workers or low pay salaries earners. It could also be categories like students who
have not a lot of money.

3. Psychographic and behavior characteristics

Air Asia Target's people who want to travel in Asia for Leisure or business purposes. Their
main purchasing motivations are the price and the Simplicity for buying and check in.
Moreover, as the Chief Executive Officer of Air Asia explained, they target people who would
like to travel often to meet their families specially during special occasions, but due to how
expensive it was that time, their desire are not fulfilled. By introducing a low fare will give all
those people opportunity to travel if not more than once in a year. They mostly create a specific
target market. The corporation's brand positioning comparing with other similar organizations
in order to map and measure the Air Asia's brand positioning, I have first decided to compare
it with two similar organizations, Lion Air & EasyJet.
References:
Wedel, Michel and Kamakura, Wagner A., Introduction to the Special Issue on Market
Segmentation (2002). Intern. J. of Research in Marketing 19 (2002) 181–183. Available at
SSRN: https://ssrn.com/abstract=2395277
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