Unit-IV

Consumer Behaviour and

Market Segmentation

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Consumer behaviour & Market
Segmentation
Consumer Behaviour
Consumer behavior refers to the study of
how Individuals, Groups or
Organizations make decisions to select,
purchase, use, and dispose of goods,
services, ideas or experiences to satisfy
their needs and wants.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Consumer behaviour & Market
Segmentation
Key Factors of Consumer Behaviour
A. Psychological Factors
(Learning, Motivation,Perception,
Attitude & Beliefs).
B. Personal Factors
(Demographic- Age, Gender, Income;
Lifestyle, Interest; Personality, Unique
Traits).
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Consumer behaviour & Market
Segmentation
Key Factors of Consumer Behaviour
C. Social Factor
( Family, reference group, social status).
D. Cultural Factors
(Culture-custom & values; Sub- culture/
religion or ethnicity; and Social Class-
economics and social standings).
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Consumer behaviour & Market
Segmentation
Importance

1. Scope of Product Development

2. Development of Marketing Strategies
3. Improving Customer Satisfaction

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Consumer behaviour & Market
Segmentation
Market Segmentation
Market segmentation is the process of dividing a
broad market into smaller, more specific groups of
consumers who exhibit similar needs, characteristics
or behaviours.
This helps Organization to target their customers by
catering to the unique preferences to each segment.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

Consumer behaviour & Market
Segmentation
Importance of Market Segmentation
1. Designing Target Market (to be more
Efficient & Cost effective)
2. Product customization (to meet the need
of different customer groups)
3. Competitive Advantage ( to lead brand
loyalty)
4. Customer Retention (to increase customer
satisfaction by fulfilling specific needs)
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Consumer behaviour & Market
Segmentation
Bases /Types of Market Segmentation
1. Demographic segmentation- Gender, age
2. Geographic segmentation- Region, climate, city
3. Psychographic segmentation-Interest, lifestyle
4. Behavioural segmentation- Habit, loyalty
5. Benefit segmentation- Specific benefits need.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Bases of Market Segmentation
Many companies use multiple segmentation
bases to create more precise target markets.
By combining Demographic, Geographic,
Psychographic and Behavioural factors,
Organization can develop more detailed
consumer profiles and develop their marketing
strategies to suit specific groups.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Bases of Market Segmentation
1. Demographic Segmentation
• It focuses on segmenting the market based
on Demographic variables such as age,
gender, income, education, occupation,
family size, marital status, religion,
nationality, etc.
• Demographic factors strongly influence
consumer needs and purchasing behavior.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Bases of Market Segmentation
1. Demographic Segmentation
Age groups: Targeting millennials vs. baby
boomers with different marketing messages.
Gender: A beauty product brand offering
separate product lines for men and women.
Income: Luxury car brands targeting high-
income individuals, while budget brands target
lower-income groups.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Bases of Market Segmentation
2. Geographic Segmentation
• It focuses on segmenting the market based
on location, such as country, region, state,
city, neighborhood or climate.
• Consumer needs and preferences can vary
significantly based on geographic location

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Bases of Market Segmentation
2. Geographic Segmentation
• Region: A clothing retailer offering lighter fabrics in
tropical areas and warmer clothing in colder regions.
• Urban vs. Rural: Fast food chains may focus more on
urban areas, while agricultural machinery companies
target rural regions.
• Climate: Companies selling snow removal equipment
will focus on regions with cold, snowy winters.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Bases of Market Segmentation
3. Psychographic Segmentation
• It focuses on segmenting the market based on
lifestyle, values, attitudes, interests, opinions,
and personality traits.
• Company target to fulfill the psychological
and emotional needs of consumers.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Bases of Market Segmentation
4. Behavioral Segmentation
• It focuses on segmenting based on consumer
behavior related to the product, such as
purchasing habits, usage rate, brand loyalty,
benefits sought and readiness to buy.
• Behavioral segmentation focuses on how
consumers react and use a product.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Bases of Market Segmentation
4. Behavioral Segmentation
• Usage rate: Segmenting consumers into light,
medium, and heavy users of a product (e.g., a
Coffee Brand offering different Packaging sizes).
• Loyalty status: Rewarding loyal customers with
special discounts or offers.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Bases of Market Segmentation
4. Behavioral Segmentation .

• Benefits sought: A toothpaste company offering

different products for consumers looking for
whitening, sensitivity relief, or cavity protection.
• Occasion-based: A chocolate brand targeting
Valentine’s Day or holiday shoppers with special
offers.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Bases of Market Segmentation
5. Benefit Segmentation
• It focuses on segmenting the market based on the
specific benefits consumers seek from a product or
service.
• Target different groups of consumers who are looking
for Unique value like high value sport shoes.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Bases of Market Segmentation
Example
A luxury Cruise Travel Agency may target
• High-income individuals (Demographic),
• Living in urban areas (Geographic),
• Who Value Unique experiences
(Psychographic) and are
• Frequent travellers (Behavioural).
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Market Segmentation
Strategies
Ø MSS refers to the approaches that
companies use to divide their target market
into smaller, more specific groups
(segments) and then develop marketing
efforts for each segment.
Ø By implementing these strategies, a
company can better understand customer
needs and create more personalized and
effective marketing campaigns.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Market Segmentation
Strategies
Types
1. 1. Undifferentiated Marketing segmentation
2. 2. Differentiated Marketing segmentation
3. 3. Concentrated Marketing segmentation
4. 4. Micro Marketing segmentation

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Market Segmentation
Strategies
Strategy Description Advantages Disadvantages Example

Targeting the entire

Undifferentiated Cost-efficient, broad Lacks personalization, Coca-Cola
market with one
Marketing product/strategy.
reach highly competitive (Early strategy)

Targeting several
Meets diverse High cost, complex L’Oréal
Differentiated segments with
needs, increases to manage multiple (Multiple beauty
Marketing tailored products &
market share strategies product lines)
marketing mixes.
Concentrated Focusing on a single Deep customer focus, Limited growth Rolex
Marketing segment or niche. less competition potential, high risk (Luxury watches)

Customizing marketing Amazon

High cost,
to individuals or very Highly personalized, (Personalized
Micro Marketing small groups (local or increases loyalty
difficult
product
to scale
individual targeting). recommendations)
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Market Segmentation
Strategies
• Each Market Segmentation Strategy has its own
advantages and disadvantages.
• The Best Approach depends on the company’s
goals, resources, market conditions and customer
needs.
• By choosing the right strategy, Organization can
optimize their marketing efforts and improve
customer satisfaction and loyalty.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Market Segmentation
Strategies
1. Undifferentiated Market Segmentation Strategy
Works well for broad appeal.

2. Differentiated Market Segmentation Strategy

Targets multiple segments with customized offerings.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Market Segmentation
Strategies
3. Concentrated Market Segmentation Strategy
Focuses on niche markets.

4. Micro or Individual Market Segmentation Strategy

Provides highly personalized solutions for small
segments or individual customers.

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

 Requirements of A Good Market
Segmentation

 A Good Market Segmentation is used as a powerful tool to

efficiently target customers, to identify specific customer
needs, improve product offerings and enhance marketing
effectiveness.
 Good Market Segmentation helps organization to identify
and target the right consumer groups. These requirements
ensure that Segmentation is Practical, Actionable and leads
to better market Results.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
 Key Requirements of Market
Segmentaton

1. Measurable
 Segments should be quantifiable. Marketers need to
determine the size, purchasing power, and characteristics of
each segment to ensure they can effectively target them.
 Market segmentation based on age groups (e.g., 18-24, 25-
34). Company can gather data on the number of Consumers
in each age group & their purchasing behavior.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
Key Requirements of Market Segmentaton

2. Accessible
 Segments must be reachable through marketing efforts. This
means that the Company should be able to effectively
communicate with and deliver products to the targed
Segment.
 A Luxury Brand may identify a Segment of High-income
Consumers or Professionals
Company can access segment through magazines, social
media platforms like LinkedIn and exclusive events.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
Key Requirements of Market Segmentaton

3. Substantial
The Segments should be large enough to be Profitable. A
Segment that is too small may not justify the Marketing
Costs.
A Brand targeting eco-conscious consumers finds a
substantial market of individuals interested in sustainable
products representing a significant portion of potential
buyers.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
Key Requirements of Market Segmentaton

4. Differentiable
Segments need to be distinct from one another, with unique Needs,
Preferences or Behaviours. This ensures that different Marketing
Strategies can be effectively formulated for each Segment.
A smart Home appliance manufacturer segments the market into
tech enthusiasts, casual users, and elderly customers. Each group
has unique needs (e.g., advanced features vs. simplicity)

Dr. Pramod K. Verma, Dept. of Management, Medicaps University.

Key Requirements of Market Segmentaton

5. Actionable

The Segments must be practical for the Company to

target. This depicts there should be enough Resources &
Capabilities to serve the needs of the Segment.
A Fitness Brand targets health-conscious consumers
with specific workout programs and nutrition plans
tailored to their preferences.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.
Key Requirements of Market Segmentaton

6. Relevant
Segments should align with the company’s goals & product
offerings, ensuring to create value for both the Company &
the Customers.
A Tech-Company focuses to prioritize innovative features and
sustainability in products, aligning their Marketing Strategies
with both the Demographic and its Corporate Values.
Dr. Pramod K. Verma, Dept. of Management, Medicaps University.