Example of Market Segmentation

[Reyed Mia (Apprentice, DIU)]

Example of Market Segmentation

Let us take an example of a brand of chocolate cookies. If we have to launch these cookies in the market. We need to see whether we need to target everyone or some specific people in the population. Here is where market segmentation will help us get the answer. Let us consider the market. Market can be considered as a country if it is a local launch.
The marketer can use various variable as discussed above to slice the market. Should we use demographics or psychographics here?
Chocolate chip cookies is not a lifestyle or complicated product nor is it going to be very costly product. So demographic segmentation can help.

A marketer can use age and geography as variables to divide the market I to multiple segments. Companies can get data for the population and then can use various statistical methods like multi dimensional scaling and factor analysis to come at simple variables. In this case, we can have segments like :

1. Geography: Urban / Rural

2. Age(years): 5 to 10/ 10 to 18/ 18 to 25/ 25 to 40/ 40 to 50/ 50+

Now the product being a chocolate cookie, people in the age group of 40 and above can be removed from both rural and urban. Also as the product has chocolate, marketer can chose to target only to urban population for initial launch. Now 10 year old to 25 year old segment in urban can have people who love chocolate and would be willing to buy cookies on a regular basis. Now this can form a decent target group.

In practice the process is much more complicated, here it has been simply put. This way a company actually uses market segmentation to arrive at segments which can be further analysed to arrive at a target group.

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