· Marketing mix response - The market segment should be responsive to marketing and promotion effort.
Taking all this into account we can therefore go on to the different basis for market segmentation. The first basis is geographic segmentation; this basis for segmentation relies solely on the geographic location of certain people. Geographic segmentation may be according to nation region state towns or cities. The idea of this type of segmentation is that buyers in generally the same areas will buy the same type of product.
The next basis for segmentation is segmentation by demographics; demographic segmentation is based on the personal characteristics of a possible market. Such variables as age, gender, income level, occupation and family life cycle come into play in this variable. Demographic variables are the easiest way to measure the market because consumer needs very often vary closely with demographic variables.
The third variable in the market segmentation process is segmentation by psychographics this variable was brought about by the fact that people having the same demographic grouping can have very different psychographic make-ups. Here factors such as social class and lifestyle come into play.
Merely knowing all this though doesn’t mean you can come up with a basis for market segmentation for any given product. The art and the science of segmentation is not just as simple as choosing a variable and targeting that, it is a delicate balance between a number of variables to come up with a viable market segment and later a target market. In the business world today rarely does a company only use one or a few of these variables but usually it is a mix of a lot of them.
To further illustrate this idea I have chosen to use the company SMART telecommunications. In 1991, the cellular phone market was an open market. There were no sophisticated market segments and no complicated service menus; all there was, was that if you wanted to have a cell phone and could afford it than you went to a cell phone provider and got yourself a unit. There was no style involved and no real extra features you could ask for. But in the age o innovation gone are the days of that era and now the cell phone revolution is in effect. Cell phone providers must come up with new ideas and selling points for their products. As of the present the best at market segmentations is SMART. This telecommunications company has come up with the most effective and thus far creative way to segment the cell phone market. Now smart has come up with its three divisions for their different target markets and each is an intricate example of the balance they have achieved from their market segmentation.
The first of the three post-paid divisions is SMART gold. The gold line is what you may call the best value for your money line. It is the basic SMART offer and is no-frills, value for money oriented. The target segment for smart gold are cell phone users aged 25-40 from social classes A,B, C1, C2, and C3 who don’t really demand much from their cell phone providers except for the basic services like making and receiving calls and sending and receiving text messages. This target market comes from a mixture of the following segmentation variables. It is a combination of users in the Philippines which is a geographic variable. With demographic variables being all genders with no age limits and with an income that can sustain a cell phone line being the general income requirement. This division of Smart doesn’t so much target social class or lifestyle, but what it lacks there it focuses more on the behavioral aspect. The target market here are the users who have a bigger than average usage rate for their cell phones so generally there are more free minutes and advantages offered with reference to heavy usage of the service. It is clear in this example that SMART has mixed 5 variables of the segmentation guideline to come up with a successful mix directed at their target market. Here Smart targets the no-frills cell phone user as its target market which in turn came from a good market segmentation plan.
As time moved on as is always the case SMART identified a smaller target group with a better defined list of needs and wants, though small in the beginning SMART realized the need for this target market to be addressed, as the technology of GSM progressed so did the need to cater to this specific market. Thus SMART had an answer…
Addict Mobile... Supposedly the most exciting line under the SMART banner; the addict mobile service is a careful mix of other variables from segments that the gold line failed to touch on. It offers services such as MMS and GPRS at faster rates, and even special phones to make the best out of these features. Addict Mobile introduces the cell phone as a virtual hand held business center. In coming up with this market segment SMART found the mix concentrating on the following criteria. The target market of ADDICT mobile and quote Mr. Jeffrey Damian one of Addict mobile’s marketing executives is this: “addict targets late teens until the yuppie age; so eighteen to late thirties… or even those “feeling bata”… definitely in the High spending high income demographic segment. With psychographic criteria which includes a social class of A, B and higher C (what SMART execs call c1). And a fast paced, highly independent technologically advanced lifestyle. This market segment contains those generally heavy users of extra functions like MMS and GPRS, and are also those who actually use the pricier components offered by the GSM service. To them the fast transfer of information is the most important thing and value for money only secondary. This formula for the Addict Mobile target market was once again a mixture of the different variables used in market segmentation and a very successful example at that. It was a proper mix of demographic, psychographic and behavioral segmentation and the mix in return provided smart with a very viable and extremely profitable target market.
With the success of both the SMART gold and Addict Mobile campaigns smart turned its cross hairs on the one target market yet to be singled out by any other Cell phone service provider. The “crème de la crème” of present Philippine society, the people who made most of the money and who also spend it. The premise here was that those with the money will spend it on every conceivable luxury and perk available. The SMART answer to this possible market SMART INFINITY.
The idea behind SMART INFINITY is actually simple “those with the money deserve the best their money can buy them”. Thus the tag line: “enjoy life’s best”. The Infinity service, offers such luxurious services as GPRS reservation and booking at the best hotels and resorts all over the world. Ample amount of free calls for smart to smart lines, the idea here, being that the Big Boss is calling all his SMART wielding subordinates. Even a tailor-fit cell phone menu suited to the users’ lifestyle and his needs and wants. On top of that INFINITY offers a 24-hour concierge service which caters to your every want and need anywhere in the world you may be. When segmenting for Infinity SMART looked no further than the highest, the richest and the brightest. Only those in the highest earning cut of the demographic were targeted, males and females who either own their own large companies or are CEO’s of others were included. Most likely candidates for this market are of the age group 40’s - late 60’s. They are part of the elite and have a jet setting lifestyle most can only dream of, these clients know what they want and are willing to pay for it. And pay for it they do, with a price range starting from 5,000 pesos and ending at 10,000 pesos monthly fees SMART Infinity is the most expensive GSM service in the country. With a target market that only had approximately 400 people in it, SMART Infinity’s success is yet to be seen.
As it is made clear by the examples shown above; market segmentation is clearly not a product of just one variable but a delicate mix of multiple variables that the marketers take into consideration. It is through this delicate mix that most target markets are formulated and from those markets successful business’ thrive.
In the case of SMART it illustrates effective market segmentation from the beginning, as they observed a growing need not catered to by SMART Gold, and from there formulated a new mix of segmentation variables to come up with a smaller and better defined target market. And later launching a product designed for that target market Addict Mobile. Mixing and matching the different variables for the segmentation of a market is now the only way for this activity to be effective.
