The Importance of Market Segmentation

How Market Segmentation Works For Companies?

In order to increase profit, a company has to increase its sales. The sales of a company are directly related to two factors, the company’s ability to attract consumers and to satisfy their necessities. Both factors need effective and logical assessment of the target market, which can be done by the segmentation of market. Segmenting a market is a procedure in which the market is divided into different segments on the basis of some common traits and choices[1]. It takes customers, both potential and existing, and breaks them into fragments. Each fragment includes customers who have similar attributes and interests. The fundamental concept of market segmentation is to provide customized products to the consumers to satisfy their needs properly. Every person has some similar and some dissimilar qualities to other persons. Consumers in today’s world are being more demanding and selective about their purchases. On the other hand, the lifespan of a product in market is decreasing due to powerful competition in the market. Hence, there is a need to observe and understand the market thoroughly in order to produce the best possible products for the consumers and increase their brand loyalty[2]. After the segmentation, it is possible to strategize marketing[3] plans[4] and prepare products according to the different categorical needs of the consumers. Market segmentation efficiently helps the companies to target a specified market cost-effectively. Age, gender, geographical position, religion, occupation, education, earning, attitude, emotion, hobbies are some variables on which the segmentation depends[5]. This report is prepared to present an elaborate analysis of how market segmentation should be done with reference to four advertisements as examples of each segment. After choosing an advertisement for each category, descriptions have been given on how that advertisement utilizes the specific segmentation to create a more attractive advertisement for its product.

Marketing segmentation is a tool to do an extensive market research in order to identify the prospective market as per their requirement. It helps the company to recognise the potential customers in order to approach them differently. Based on the variables market segmentation can be of four types[6].

Diversity is one of the important features of a society. The choices change between different religions and races. Diverse age group also has diverse preferences. In fact, men and women of same age group, religion and race may have different inclinations. The variables on which demographic segmentation of the target market depends are age, educational background, gender, religion, income and other socio-economic factors in order to target the market more efficiently[7]. Advantages of this segmentation is that it helps the company to understand the needs of its market and to create advertisement that will be gender and age appropriate and will fit their budget[8].

Types of Market Segmentation

L’Oréal group is a French company that sells personal care products. Currently it is one of the largest companies that do business in cosmetics[9]. It produces hair and skin care products, make up, hair colour, pefume, both in professional and consumer level, to its worldwide customer range. Any business needs a thoroughly planned marketing strategy for promotions, especially a brand like L’Oréal. It deals with skin care and make up where visual convenience and trust is essential. Therefore the company has employed many celebrities into their ahigh quality and visually attractive dvertisements. Identifying the target market is crucial in advertising. L’Oréal uses demographic market segmentation to identify its target market.

The above displayed advertisement aims to promote a new range of lipcolours named as Infallible Lipcolours. The advertisement evidently targets women who are employed. Hence the age range of targeted customers should be anything above 25 years. Attractingly, this advertisement offers two products in one package, one is a lipcolour and the other is a lip balm. L’Oréal promises that this new Infallible range of lipsticks will last till twenty four hours. This specification is particularly created for working women who stays out for most of the days time. Applying lipstick again and again is annoying and often inconvenient too. A lipstick that promises to stay intact for twenty four hours will certainly turn their heads. This new range of lipsticks have been produced with help of the all new gel technology that keeps the colour intact for such a long time. Along with each lipstick, a lip balm is also offered that acts as a conditioner. The lip balm conditions the lips and keeps them soft and moisturised. This means L’Oréal is offering a package that keeps the lips coloured for a long time and at the same time keeps them soft n smooth too. The two in one offer comes as a lucrative one to those women who work for long hours, have dry lips and travel long distance. Associating celebrities to utilize their fan base and appeal is a well practised device in the world of advertising. L’Oréal had made contracts with several celebrities for promotional purposes. Here, the company employs a prominent face of the music world Beyoncé to promote their product. Using Beyoncé  in the promotion indicates the companies target to raise their brand equity[10]. Asociating with celebrities help to achieve greater sales and profit using the huge fan base of that celebrity, which in this case is Beyoncé. It also signifies that the product L’Oréal is selling is for women who are young or middle aged and hard working. As this particular advertisemnet of L’Oréal targets the working women who belong to middle class and upper class of the society, demographic segmemtation is the correct choice for them.

Demographic Segmentation Example: L’Oreal’s Infallible Lipcolours Advertisement

Different customer has different aspects while purchasing, some look for better quality while some look for cheaper price. There are customers who wait for a discount to buy an item; also, there are customers who never buy from a sale. Behavioural segmentation strategy is to classify the customers based on the behavioural pattern of the customer while buying a product. After observing the customers’ usage frequency of a particular product, the qualities needed for purchasing, the timeline of the purchase, their brand loyalty; the company groups together the buyers with similar buying habits[11]. This is how they keep focused on their target market[12] and their requirements. It means focusing on customer satisfaction[13] will give customer loyalty in return.

1. J. Heinz Company which is more famously known as Heinz, is a company that precesses food. The company was founded in 1869[14] and currently serving more than a thousand of food products across the whole world. Among the various products that it sell, tomato ketchupand sauce are still the most popular. Moreover, with each new generation, the demand for fast food is growing. French fries, burgers, hot dogs, sandwiches, crispy fries – no matter what the food item is, ketchup and sauce are always there beside it to enhance the taste. Since ketchup are sauce are integral part of any fast food, its demand is also raising. This 149 years old company has been creating many attractive and innovative advertise thorough out the years. Such a long time in the food processing industry have gained them a loyal consumer base.

The object of this advertisement is to promote heinz products. Young generation is trending towards fast foods like burgers, pizzas, fries and many more. Using the behavioral segmenting approach, this advertisement targets the new generations who tend to consume more fast food than others. The line in the advertisement says PASS THE HEINZ instead of pass the ketchup or pass the sauce. This indicated that to mean one is in need of sauce is to say one is need of Heinz sauce. Thois is a strong message that the company is conveying to its customers. It is saying that there is only one true ketchup in the market which Heinz sells. The minimalistic approach keeps it simple and straightforward, that if one has to buy ketchup then it should be Heinz ketchup, as the other ketchups can never provide the taste and quality that Heinz provides. Heinz is trying to promote their ketchup in the advertisement, and yet, that ketchup is missing in the advertisement. This is another interesting technique of advertising, to omit the product that is being advertised. This creates an additional interest in the minds of the buyers. Insead of ketchup bottle or the word ketchup, the word Heinz is used so that the consumers can easily associate the brand Heinz with their foods. This is also majorly depends on brand loyalty. Heinz has been in the market of prcessed food for almost 150 years which allowed them the time to create a brand name. Along with thate brand name came brand loyalty. The loyal customers only need to see the name Heinz on it and they will give their attention to it. With the minimal use of words and the position of the brand name, which is at the top written in bold, it is easy to attract the loyal customers.

Behavioral Segmentation Example: Heinz Advertisement

Another way to segment market is to divide consumers based on the factors like shared interests, common activities, lifestyle and hobbies, opinions and other usual aspects that people share with each other. With this division, it is possible to separate the consumers with common interests, lifestyle[15] and opinions to target them specifically. This psychographic segmentation[16] also helps to create advertisements that will derive the desired reaction of a company from its target market. Understanding the psychology of a group of people makes it easier and cost-efficient for a company to serve products and create advertisements that will increase the consumer purchase.

Sime Darby is a Malaysia based trading company that deals in many sectors of business. In the year of 2007, the Synergy Drive merger[17] took place and the three companies – Golden Hope, Sime Darby and Guthrie – joined together to create a single entity named Synergy Drive. Later in the same year the name was changed to Sime Darby Berhad. Sime Darby Property is a part of the conglomerate that deals in the real estate industry and is one of the largest corporations that develops property in Malaysia.

In this particular advertisement of Sime Darby, the company uses psychographic market segmentation. Here, the object of the company is to promote and sale their Lifestyle Collection and High Life Series – a luxuriously designed property which especially offers a peaceful ambience amidst the chaotic city life. As a company that is trying to sale luxuriously built properties, the target market[18] for Sime Darby Property is obviously the upper class people of the society who want to establish a statement through their lifestyle. The advertisement is saying that the property has swimming pool and other activity zones for the purpose of rejuvenating the people who will live there. In this way the company is attracting people who want to indulge themselves in swimming or other refreshing activities after a long stressful day or week. The picture used as a background in the advertisement gives a preview of what the company is promising to provide its customers. It portrays a lavishly designed pool and poolside area which confirms their promise of relaxation and luxury. While selecting house or apartment, some people consider the spaciousness of the property as the most valued aspect, while some prefers to select the design that has more practicality in it. Semi Darby offers both. In their Lifestyle Collection, the company offers a range of properties that is built to fulfill every criterion of the customer whether it is spaciousness or practical designing or comfort. In the inset, the advertisement displays a picture of a model bedroom of their High Life Series. The modernly designed luxurious and spacious bedroom has an explicit view of the city. Many city people have this wish to have a clear view of the whole city from their place. Sime Darby is offering that too through their High Life Series to their customers. This series is for those people who prefer to live in an apartment based society or community. This series assures the customers that it will provide proper privacy in their lives along with other modern conveniences. In today’s world where sound pollution is a rising issue, and stress and anxiety is a part of daily life for every person, Sime Darby Property offers the peace, quiet and relaxation that everyone longs the most. Both in their Lifestyle Collection and High Life Series, the company is approaching the people who can afford to maintain a quality lifestyle to come and live in their offered property to enjoy life in absolute privacy and tranquility.

Psychographic Segmentation Example: Sime Darby Property Advertisement

Customer requirements are affected by geographical conditions. People living in hot climatic zone does not have the same requirements as the people living in cold climatic zones. Again, a person who lives in a city and a person who lives in a village will not always look for the similar qualities in a product. Geographic segmentation separates the market based on which geographical condition the customers live under. The market can be segregated city, town and country wise. This helps understanding what effect the geographical position is having on the market. A person can have different choice in buying depending on the weather, custom, culture, availability of resources of the area where that person lives in. Geographical segmentation can help a company to draft products that fulfils the demands of the consumers based on a particular zone.

The well-known McDonald is a fast food selling restaurant chain famous for its burgers. Established in 1940[19], it has become the largest restaurant chain in the world. Although hamburger is their key product, they have introduced other kinds of burgers and products as well, in order to grow their business. Acknowledging that advertisement is a vital part of business, McDonald has always been focused on their advertisement. They had created minimalistic, humorous and innovative advertisements to attract their customers worldwide. However, success of an advertisement relies heavily on the proper planning behind it and for that, market segmentation[20] is required.

The McDonald Nasi Lemak Burger[21] advertisement is an ideal example of how geographical market segmentation[22] is done. The advertisement aims to keep hold of their customers in Malaysia and some other countries around it. With the help of this popular dish McDonald is focusing on the population of the Southeast Asian countries as their target market. Through this advertisement, the company wants to exhibit their interest in the local cuisine. They infused the local Favourite dish Nasi Lemak to their famous form of fast food – Burger. The Nasi Lemak Burger carries out the message of recognition of the national delicacy of Malaysia to its people. Nasi Lemak is the most distinguished Malaysian rice dish served usually in breakfast. It contains rice cooked in coconut milk, boiled egg, pieces of cucumber, cooked peanuts, sambal sauce which is a spicy sauce made from chillies, and meat or fish. In the ingredients, McDonald saw a potential combination for burger as it is evidently seen that they have created a layer for each item of the dish in their burger, only replacing the rice with the bread. Malaysia is located near the Equator therefore the climate is hot, and hence they use coconut, cucumber, chillies in their dishes as these keep the body cool in high temperatures. McDonald Malaysia is trying to customise their menu according to the preferences of the native people. In that process, being precise about the ingredients and the distinct taste is crucial as the people of Malaysia are very patriotic in nature and they are proud of their cuisine. Malaysia has a distinct taste in food; it mixes several flavours together to create one single exquisite flavour; and to recreate that distinct taste was a challenge the company. McDonald appointed local vendors who are specialized in Nasi Lemak to recreate the same flavour for them. In the advertisement, the burger is shown to be served on banana leaf. The significance of the banana leaf is that Nasi Lemak is traditionally served on banana leaves[23]. The inclusion of this detail gives the idea that McDonald not only concentrated on their product details but also observed the local traditions and included them in marketing. As an economically resilient country with cooperative government policies for business[24], Malaysia is a potential country for expanding business in Asia.

Conclusion

Market segmentation is an integral part of planning the product marketing strategy. Segmentation is a tool that helps dividing the potential market into subdivisions to make a more focused target market. Marketing segmentation is done to understand the market better so that the companies can cater products according to the customer needs. Segmenting a market helps to plan cost-efficient marketing strategy and keep the company’s focus on their production. Depending on variables such as age, race, gender, brand loyalty, purchase tendency, income, educational background, geographical position, climate, a potential market is divided into four subdivisions – demographic segmentation, behavioural segmentation, psychographic segmentation and geographic segmentation. Demographic segmentation depends on some basic factors like race, age, religion, gender, income, family. This category helps creating a target market that has a particular age range, gender, income range, similar educational qualifications and religion. Behavioural segmentation separates a market based on its brand loyalty, usage frequency, and purchase time. With the help of these factors, a consumer group can be created with common demand in the product, brand loyalty, similar frequency of usage. Psychographic segment is a market division that depends on common interests and opinions, habits and hobbies, lifestyle and social position. Psychographic segmentation creates a group that shares same interests and values, and has a similar lifestyle. In geographic segmentation, the market is classified on the basis of the geographical position of the consumers, a climate, density of the population. This segmentation creates a group of consumers that lives in same climatic area, has similar population, and lives in similar geographical area. With the help of these segments, a company can create advertisements that gets their desired reaction and develop products that satisfy their customers. In the above-mentioned examples it is described that how each of the four companies has chosen different segmentation in their advertising to promote their products in the most effective way.

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