Marketing Aptitude Study Material – Market Segmentation

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The market for any product is normally made up of several segments. A market segment consists of a group of customers who share a similar set of needs and wants.

Market segmentation is a marketing strategy when the marketer divided a broad target market into subsets of consumers who have common needs and priorities and then designing and implementing strategies to target them.

Objectives of Market Segmentation

• To identify the needs, tastes, priorities, buying-motives of the target consumers.
• To make grouping of customers on the basis of their homogeneous characteristics such as nature, habit, behaviour, income, age, education, profession, religion, etc.
• To make the activities of the firm consumer-oriented.
• To determine marketing strategies, targets and goals of the firm
• To identify the areas where the customers may be created and market area can be expanded.

Importance of Market Segmentation

There are the following importance of market segmentation

1.  Understand Customers To sell to your customers, you first must understand why they would want to buy your product. Market segmentation allows for the development of profiles of the many different kinds of customer groups who buy your products. It also can be used to develop products for your target audience.
2.  Maximize Product Potential During the course of your market segmentation, you may come across an alternate use for your product that had not been previously discussed. You may discover a new market for your product.
3.  Improve Distribution Network By studying the buying behaviors of various target customer groups, you can determine the way that customers prefer to buy your product. Market segmentation also helps you to identify geographic areas where your products are popular.
4. Gain New Clients A comprehensive market segmentation analysis includes reasons why consumers are not buying your products. By understanding the reason, you can alter your marketing or change your product development to try to gain new customers.

Characteristics of Market Segmentation

The market segments must be measurable so that they can be identified.

• It must be reachable through communication and distribution channels.
• It should be sufficiently large to justify the resources required to target them.
• It must respond differently to the different marketing mixes.
• It should be relatively stable to minimize the cost of frequent charges.

Requirement for Successful Market Segmentation

There are four criteria which must be met for I successful market segmentation. By segmenting your : market, you should be able to consider your customers buying behavior and specific traits.

1. Substantiablity Your targeted segment needs to be sufficient in size to justify creating and sustaining a  customized marketing mix.
2. Identifiability and Measurability You must be able to identify and measure the specific segment.
3. Accessibility You must have access to your , targeted segment with your specific marketing mix.
4. Responsiveness You should consider how your  target segment shall respond to your proposed marketing mix. What will your customers respond to and what will they disregard as unimportant

Causes of Market Segmentation

Market segmentation is necessary due to the following reasons

1. Increase in Profit
   Segmenting a market will enable organisation to sell same product to different set of customers based on their disposable income. Organisations can enhance their profits by raising their prices for different segments.
2. Popularity in the Market
   Through careful segmentation and proper targeting, smaller businesses are able to compete with stronger and leading ones in the market.
3. Better Customer Satisfaction
   By creating separate solutions for each segment a better satisfaction to the customers can be achieved.
4. Better Opportunity for Product Sales Growth
   Market segmentation can build sales margin, consumer may be encouraged to sell a product.
5. Very Easier Customer-Business Communication Flow
   Manufacturers of products need to advertise and deliver their message to a relevant customer audience. And where there is a broad target market, the key customers will be missed and even the cost of communicating to customers will be too high. But if the market has been segmented, the target customers can be easily reached more often and at a lower cost.

Basis of Market Segmentation

Market segmentation can be classified on the basis of two groups

1. Consumer Market

Segmentation of consumer market are

• Geographic Segmentation
  • Climatic zone
  • State
  • Urban/Rural area
  • Region
  • District
• Demographic Segmentation
  • Age
  • Family size
  • Occupation
  • Educational level
  • Generation
  • Sex
  • Religion
  • Language
  • Income
  • Social
  • status
• Psychological Segmentation
  • Personality traits
  • Lifestyle
  • Attitudes
  • Value
• Behavioural Segmentation
  • Brand loyalty
  • Consumer status : first time, potential, regular, etc.
  • Readiness to purchase
  • Usage rate
  • Occasions stimulating product purchase
  • Segmentation by Benefits
  • Quality
  • Performance
  • Image
  • Service
  • Special features

2. Industrial Market

• Location
• Type of business
• Form of consumer
• Method of purchase

Merits of Market Segmentation

• Increase the focus of a firm
• Increase in competitiveness
• Increase in brand loyalty
• Market expansion
• Customer retention
• Increases profitability
• Have better communication

Demerits of Market Segmentation

• Segments are too small
• Consumers are misinterpreted
• Costing is not taken into consideration
• Increased costs to develop variations of the product
• Higher stock holding costs

Tit- Bits

• Prospective customer means a potential customer. Prospects for a bank may be a student, manager of other bank, administrator of government department.
• Target customer means new customer.
• Product positioning is the process by which marketers try to create an image of the product and to create an identity of the product.
• Re-positioning of product involves changing identity of the product.
• De-positioning involves changing the identity of competing products.
• Customization results in customer retention.

Check Your Skills

1. Market segmentation is method

1. the strategy of dividing markets in order to conquer them
2. the allocation of product
3. the allocation of policy
4. the allocation of service

2. Sub-market is known as

1. origin of market
2. merging of market
3. process
4. market segment or market segmentation
5. plan

3. The basis for consumer market segmentation includes

1. age of consumer
2. location of consumer
3. income of consumer
4. sex of consumer
5. All of the above

4. Which is a benefit of market segmentation?

1. In allocation of marketing budget
2. In effective marketing programme
3. In meeting the competition effectively
4. All of the above
5. None of the above

5. Who is prospective customer?

1. Assets
2. Staff
3. Potential customer
4. Present customer and manager
5. All of the above

6. The benefits of market segmentation includes

1. to search attractive marketing options
2. to determine the product mix
3. to select the target market
4. All of the above
5. None of the above

7. Target customer means

1. cost center
2. profit center
3. new and present customer and staff
4. new customer
5. All of the above

8. The objective of market segmentation includes

1. to find out the new markets
2. to make real customers to the prospects customers of the company
3. to make customer-oriented to marketing activities of the firm
4. All of the above
5. None of the above

9. Who may be prospects for a bank?

1. Student
2. Manager of other bank
3. Administrator of government department
4. All of the above
5. None of the above

10. Occupation involves

1. administrator
2. trader
3. chartered accountant
4. AH of the above
5. None of the above

11. Life style of a customer includes

1. social status
2. cultural value of customer
3. perception of customer
4. motivation
5. All of the above

12. Behavioural basis of market segmentation includes

1. loyalty or brand loyalty
2. attitude
3. buying occasions
4. All of the above
5. None of the above

13. Which are the factors relating to target market?

1. Goals of the firm
2. Image of the firm
3. Company resources
4. Product characteristics and product variety
5. All of the above

14. Which is the basis of psychographic segmentation?

1. Personality
2. Values in life
3. Life style of the customer
4. All of the above
5. None of the above

15. Which of the following is the basis for segmenting the market?

1. Geographic segmentation
2. Demographic segmentation
3. Psychographic segmentation
4. Price segmentation
5. All of the above

16. Which of the following constitutes geographic segmentation?

1. Climatic zone
2. Region
3. State
4. All of these
5. None of these

17. Which of the following comes under demographic factors?

1. Age
2. Sex
3. Family size
4. Religion
5. All of’these

18. Which of the following elements comes under the psychographic segmentation?

1. Personality traits
2. Attitudes
3. Life style
4. Value system
5. All of these

19. The consumer market can be segmented on the basis of

1. income
2. age
3. sex
4. location
5. All of these

20. Which of the following is behaviouralistic variable?

1. Brand loyalty
2. User status
3. Readiness to buy
4. Buying occasions
5. All of the above

21. Basic factors affecting the market segmentation include

1. clear identification of the segment
2. measurability of its effective size
3. its accessibility
4. its appropriateness
5. All of the above

22. The five criteria for an effective market segmentation can be grouped as

1. measurable
2. relevant
3. accessible
4. distinguishable and feasible
5. All of the above

23. Which of the following is the first element of a marketing strategy?

1. Target market
2. Product
3. Production
4. Promotion
5. None of these

24. The ………. and the …….. are the two elements of a marketing mix strategy that determine the success of a

1. product in the market place.
2. target market, price
3. target market, marketing mix variables
4. target market, product
5. product, price
6. None of the above

25. Product positioning is the process by which marketers try

1. to create an image of the product
2. to create an identity of the product
3. Both ‘1’ and ‘2’
4. to sell the product
5. None of the above

26. Re-positioning of product involves

1. placing the product in shops
2. making the products available to the customers
3. changing identity of the product
4. developing the new product
5. None of the above

27. De-positioning involves

1. creating an image of product
2. changing the price of product
3. changing the identity oL competing products.
4. developing the new product
5. None of the above

28. Market segmentation provides a focused approach to winning the game by answering the issues

1. which groups of users should we serve
2. with whom will we compete
3. how can we outperform them
4. All of the above
5. None of the above

29. Market segmentation is useful for [SBI Clerk 2009]

1. preferential marketing
2. targeting existing clients
3. identifying prospects
4. knowing customer’s tastes
5. All of the above

30. Market segmentation is required [SBI PO 2009]

1. for avoiding cold calls
2. to increase production
3. for territory allocation
4. for focused marketing
5. for increasing profits

31. Market segmentation helps in [PNB PO 2009]

1. identifying the target group
2. focused marketing
3. improved lead generation
4. Both ‘1’ and ‘2’
5. All of the above

32. One of the following is a target group for the marketing of Internet banking [SBI Clerk 2009]

1. all the customers
2. all the educated customers
3. all the computer educated customers
4. only creditors
5. All of the above

33. The target group for credit cards is [SBI Clerk 2009]

1. all card holders
2. all existing borrowers
3. individuals with taxable income
4. All of the above
5. None of the above

34. Marketing segmentation involves [BOB PO 2010]

1. dividing the salesman into homogeneous group
2. dividing the employees into talent groups
3. dividing the products
4. measuring the service level
5. None of the above

35. Market segmentation can be resorted to by way of [BOB PO 2010]

1. segmenting geographically
2. segmenting by income
3. segmenting by age
4. Both ‘1’ and ‘2’
5. All of the above

36. Market segmentation is useful for [BOB PO 2010]

1. target existing clients
2. identifying prospects
3. preferential marketing
4. internal marketing
5. All of the above

37. Market segmentation means  [SBI PO 2011]

1. segmentation of sales team
2. distribution of territory
3. sales network
4. division of market according to the requirement
5. market share

38. Target market of education loan is

1. all school students
2. all college students
3. all colleges
4. all schools
5. all hospitals

39. Target group means

1. all buyers
2. all salespersons
3. prospective buyers
4. all customers
5. delivery persons

40. Which one of the following is not a target group for savings bank account? [SBI Clerk 2011]

1. Salaried person
2. Loss incurring companies
3. Doctors
4. Government servants
5. Insurance agent

41. Target market for housing loans will be [SBI Clerk 2011]

1. existing clients
2. persons who do not own a house
3. persons who own more than one house
4. builders
5. NRI’s

42. The target group for personal loans is [SBI Clerk 2011]

1. all private limited companies
2. all businessmen
3. all salaried persons
4. minor children
5. newborn infants

43. The target group for tractor loans is [SBI Clerk 2012]

1. cold storage plants
2. farmers with large land holding
3. farm labourers
4. agriculture colleges
5. vegetable vendors

44. The target group for a car loan is[SBI Clerk 2012]

1. all high income individuals
2. all car dealers
3. all students
4. all BPL persons
5. blind persons

45. Market segmentation means grouping

1. the sales teams
2. the customers as per their needs and tastes
3. selling arrangements
4. the counter staff
5. the back-office staff

46. The target group for SME (Small and Medium Enterprise) loans is [SBI Clerk 2012]

1. all SSIs (Small Scale Industries)
2. all college professors
3. all students
4. all nurses
5. all salaried persons

47. The segmentation of market based on the gender of the customer is a type of [SBI Clerk 2012]

1. geographic segmentation
2. demographic segmentation
3. psychographic segmentation
4. life style segmentation
5. price segmentation

48. Customization results in [SBI Clerk 2012]

1. customer exist
2. customer retention
3. customer complaints
4. better balance sheet figures
5. better technology

49. Market segmentation can be resorted to by dividing the target group as per [SBI Clerk 2013]

1. income levels of customers
2. age of the employees
3. needs of the sales persons
4. marketing skills of the employees
5. size of the organisation

Answer Key