Week 2:Understand Your

Target Audience
Market Segmentation

Market segmentation is a strategic process of dividing or grouping your target

customer or market into subsets or segments that share similar characteristics
based on demographics, geography, behaviour, or psychographics, and then
designing and executing marketing strategies to reach them.
According to Investopedia, Market segmentation is a marketing term that refers to
aggregating prospective buyers into groups or segments with common needs and
who respond similarly to a marketing action.
Market segmentation is a continuation of research, aimed at identifying specific
groups of customers to align products, services, and branding to be appealing or
attractive to them. The essence of segmenting the market is to mitigate risk by
identifying which products are most likely to gain the target market share. This
strategy enhances a company's efficiency by directing limited resources toward
efforts that yield the highest return on investment (ROI).
 Types of Market Segmentation
There are basically four types of market segmentation and they are:
1. Demographic Segmentation: is one of the simplest and most common methods of market
segmentation. This approach breaks down the market into various customer demographics such
as age, income, gender, race, education, or occupation. The strategy is based on the assumption
that individuals with similar demographic profiles will also have similar needs.
2. Geographic segmentation is essentially a subset of demographic segmentation. This method
groups customers based on their physical location, under the assumption that people in the same
geographical area may have similar needs. It’s particularly advantageous for larger companies
aiming to expand into various regions, branches, or offices. E.g. Hubmart Supermarket displaying
more food stuff in their VI branch than Ojodu Branch in Lagos.
3. Behavioural segmentation primarily relies on market data, consumer actions, and decision-
making patterns. This approach assumes that past spending habits can predict future purchasing
behaviour. E.g. health conscious individuals, frequent buyers, occasional buyers etc.
4. Psychographic segmentation, often considered the most challenging market segmentation
approach, aims to categorize consumers based on lifestyle, personality, opinions, and interests.
This method can provide the most impactful market segment results by grouping individuals
according to intrinsic motivators rather than external data points. However, it is also difficult to
achieve due to the fluidity (changes or flexibility) of these traits and the scarcity of readily
available objective data. For example, the FMCG industry may target customers who are health-
conscious. A practical example is Holdent International Limited marketing their dishwashing
liquid Mama Lemon as an anti-bacterial and fragrant cleaning agent, targeting those who care
about both wellness and smell.
Examples of Types of Market
Segmentation
Behavioural Psychographic
Demographic Geographical Segmentation Segmentation
Segmentation Segmentation Segment: Health- Segment: Adventure
Segment: Young Segment: Urban vs. Conscious Seekers
Professionals Rural Consumers Consumers Characteristics:
Characteristics: Characteristics: Characteristics: Lifestyle: Adventurous,
Age: 25-35 years old Urban Consumers: Consumers who love outdoor activities
Income: Middle to Living in cities, higher prioritize health and and challenges
high-income earners income, fast-paced wellness in their Interests: Hiking,
Education: College lifestyle, preference for purchasing decisions. camping, extreme sports,
graduates convenience. Regularly purchase traveling to exotic
Occupation: White- Rural Consumers: organic, natural, and locations
collar jobs in urban Living in towns or health-centric Personality Traits:
areas countryside, moderate products. Thrill-seekers,
Family Status: Mostly to lower income, Likely to read labels spontaneous, and enjoy
single or newly married traditional lifestyle, and ingredients to taking risks
without children preference for value avoid harmful Values: Seek
and accessibility
additives. experiences over
material possessions,
prioritize freedom and
exploration.
 Demographics Geographical
Age Location
Gender Climate
Ethnicity etc. Language etc.

Customer
Segment
Behavioural Psychographics
Occasions Values
Usage rates Beliefs
Benefit ought Opinion
Loyalty/usage Interest etc.
history etc.
 How to Determine your Market Segment

Phase 2: Phase 3: Evaluate

Phase 4:
Phase 1: Identify Potential Segment
• What risks are there Develop
Expectations/Goals Customer
that our data is not Segment
 What is the purpose or Segment
• What segments representative of the Strategy
goal of performing
are the company's true market • How can the
market segmentation?
 competitors selling segments? company test its
What does the
• Why should we choose assumptions on a
company hope to find to?
• What publicly to cater to one type of sample test
out by performing
available customer over market?
marketing
information another? • What defines a
segmentation?
• What is the long-term successful
 Does the company (i.e. data) is
relevant and repercussion of marketing segment
have any expectations
available to our choosing one market strategy?
on what market
market? segment over • How can the
segments may exist?
• What data do we another? company measure
• What is the company's whether the
want to collect,
and how can we ideal customer profile, strategy is
collect it? and which segments working?
• How should we best overlap with this
segment "perfect customer"?
customers?
Phase 5: Launch and
Monitor
• Who are the
key stakeholders that
can provide feedback
after the market
segmentation strategy
has been unveiled?
• What barriers to
execution exist, and how
can they be overcome?
• How should the launch of
the marketing campaign
be communicated
internally?
Advantages/Benefits of Market
Segmentation
Market segmentation demands considerable effort and resources to implement effectively.
Nevertheless, when executed successfully, market segmentation campaigns can significantly enhance
an organization's ROI. The benefits of market segmentation are manifold, including:
1. Increased Resource Efficiency: Market segmentation enables management to focus on specific
customer demographics. By targeting particular segments rather than the entire market,
businesses can implement a more precise and cost-effective approach, ultimately reducing
marketing expenses.
2. Stronger Brand Image: Market segmentation prompts management to carefully consider how
they want the brand to be perceived by a specific group. Once a market segment is identified,
management crafts messages tailored to this audience. As a result, the company's branding and
communication become more intentional and focused, leading to improved customer experiences.
3. Greater Potential for Brand Loyalty: Market segmentation enhances the opportunity for
consumers to build long-term relationships with a company. Personalized marketing approaches
resonate more deeply with customers, fostering a sense of inclusion, community, and belonging.
Moreover, segmentation increases the likelihood of attracting the right clients who align with the
company's product line and demographic.
4. Better Targeted Digital Advertising: Market segmentation enables a company to develop more
effective targeted advertising strategies. This includes creating marketing plans that focus on
specific age groups, locations, or consumer habits through social media.
Limitations of Market
Segmentation
While market segmentation can greatly benefit a company, it's not without its challenges. Here are
some disadvantages to keep in mind when implementing market segmentation strategies:
1. Higher Upfront Marketing Expenses: While market segmentation aims to be efficient in the
long run, it requires significant upfront investment. Companies must spend resources on
gathering insights, data, and research into their customer base and broader markets to
effectively implement segmentation strategies.
2. Increased Product Line Complexity: Market segmentation involves breaking a large market
into more specific, manageable pieces. This approach can inadvertently lead to an overly
complex and fragmented product line, with each segment's needs being deeply catered to. As a
result, the company's product mix may become confusing and inconsistent, potentially diluting
the overall brand message.
3. Greater Risk of Misassumptions: Market segmentation is based on the assumption that
similar demographics share common needs. This isn't always accurate. By grouping a population
together under the belief they have shared traits, a company may risk misidentifying the needs,
values, or motivations of individuals within that segment.
4. Higher Reliance on Reliable Data: Market segmentation's effectiveness hinges on the quality
of the underlying data. It's crucial to use reliable data sources and be mindful of changing
trends. This ensures that market segments remain accurate and reflective of the current market
dynamics.
What is Consumer Behaviour?

Consumer behaviour involves the actions and decisions that

individuals or households undertake when selecting, purchasing,
using, and disposing of products or services. This process is
influenced by several psychological, sociological, and cultural factors that
shape consumer interactions with the market.
It is a multi-stage process that includes identifying needs or problems,
gathering information, evaluating alternatives, making purchasing
decisions, and assessing the post-purchase experience. Consumers
may be influenced at each stage by personal beliefs and values, social
norms, marketing efforts, product characteristics, and
environmental factors.
Technological
Factors
• Technological Economic
Advances Factors
• Digital Influence Psychological • Income
Factors • Economic
• Motivation Conditions
• Perception • Prices and Value
Sociological
• Learning for Money Factors
• Beliefs and
Factors • Family
Attitudes • Reference
that may
Groups
influence • Social Status
Cultural consumer
Factors behaviour
• Culture Personal
• Subculture Factors
• Social Class Age and Life
Stage:
Environment
Occupation
al Factors
Lifestyle
• Physical
Personality and
Environmen
Self-Concept
t:
• Climate
 Class Activities
Activity 1
Title: "Segmentation Strategy for a New Product"
Objective:
To help students understand how to apply market segmentation concepts (geographic, demographic,
psychographic, and behavioral) to develop targeted marketing strategies for a new product.
 Step 1: Explain Market Segmentation Categories for the product of your choice.
 Step 2: Identify three potential segment for your product or brand.
 Step 3: Create a customer profile for your product
Activity 2
 Consumer Behaviour Scenario:
Each group will be tasked with simulating a real-life consumer purchase decision. They will need to
consider the following factors in their scenario:
 Scenario 1: The product you are buying is a smartphone. One member of the group represents
the consumer, while the others play the roles of friends, family members, or salespeople.
 Scenario 2: The product you are buying is a pair of running shoes. Group members should
represent different factors such as personal preferences, health motivation, or brand loyalty.
 Scenario 3: The product you are buying is a luxury item (e.g., a designer handbag or high-end
watch). Some group members may take the roles of peer pressure or social influence, while
others might represent budget constraints.
In each case, groups will work through these stages:
 Need Recognition: What triggers the consumer’s desire to purchase the product?
 Information Search: Where does the consumer go for information about the
product (online reviews, friends, ads)?
 Evaluation of Alternatives: What features matter most in choosing between
competing brands/products (price, quality, reviews)?
 Purchase Decision: What factors ultimately influence the decision to purchase the
product?
 Post-Purchase Behavior: How does the consumer feel after making the purchase?
(Satisfaction, cognitive dissonance, brand loyalty)
Role-Play and Group Discussion:
 Role-Play: Each group conducts a role-play based on their scenario. One person will
act as the consumer, and the others will role-play different influences (salespeople,
family members, or friends) who may have an impact on the consumer’s decision-
making process.
 Group Discussion: After the role-play, the group should discuss what factors
influenced the consumer's decision the most (e.g., price sensitivity, brand loyalty,
social influences, urgency, or emotional appeal). Each group member should identify
which psychological, social, or cultural factors played a role in the decision.