Demographic Segmentation

Study of a demographic segment and its sub segment falling in the age group 18 year to 25 years Saneel Gaonkar IBS Gurgaon Study of a demographic segment and its sub segment falling in the age group 18 year to 25 years Introduction Different kinds of people display different buying patterns even in a segment of age group 18 years to 25 years. This truth is well understood by those people who are responsible for market research, product development, pricing, sales and strategy. Market segmentation is the identification of portions of market that are different from one another. Every individual falls under one or other demographic segment of the society ‘Mr. Philip Kotler has defined a market segment as a group of customers who share a similar set of needs and wants (Philip Kotler, 2009). ’ A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. The criteria that a true market segment should meet are as follows: distinct from other segments, homogenous within the segment, it responds similarly to market stimulus and it can be reached through market intervention. Researchers try to define segments by looking at descriptive characteristics: geographic, demographic and psychographic. Then they examine whether these customer segments exhibit different needs or product responses. Few other researchers have tried to define segments looking at behavioral consideration such as consumer responses to benefits, use occasions or brands. Researchers than see whether different characteristics are associated with each consumer response segment. (Philip Kotler, 2009). The key here is to identify customer differences. The major segmentation variables are Geographic, demographic, psychographic, and behavioral segmentation. Living in metropolitan city like Mumbai exposes you to a wide competitive market in all sectors. Segmenting Consumers in Mumbai by using these segmenting techniques gives a thorough idea of the consumers in Mumbai Geographic Geographic segment calls for division of the market into different geographical units such as nation, states, region, countries, cities or neighborhoods. In India geographic segmentation assumes importance due to variation in consumer preferences and purchase habits across different regions, and across different states. In India rural and urban markets differ on number of different essential parameters like literacy levels, income, spending power. There is a vast difference in infrastructure such as electricity, telephone network and roads. The need to segment the market geographically becomes clearer when we look at some of the characteristics of the market. In India there are 5000 towns and over 6, 38,000 villages (Pradeep Kashyap, 2003-04) (Philip Kotler, 2009) Region Mumbai falls in Western region of India. There are few significances of this region that needs attention, Maharashtra the state with Mumbai as its capital derives its culture from Indo – Aryan Vedic culture influenced by the Maratha Empire and the British Empire. City of Mumbai According to 2011 census, the population of Mumbai was 12,478,447 (The Registrar General & Census Commissioner, 2011). (censusindia. gov. in) According to extrapolations carried out by the World Gazetteer in 2010, Mumbai has a population of 13,830,884 and the Mumbai Metropolitan Area has a population of 21,347,412. The population density is estimated to be about 20,482persons per square kilometer. The sex ratio was 838 (females per 1,000 males) in the island city, 857 in the suburbs, and 848 as a whole in Greater Mumbai, all numbers lower than the national average of 914 females per 1,000 males. PopulationIndia. com, 2011) The low sex ratio is partly because of the large number of male migrants who come to the city to work (â€Å"Parsis top literacy, sex-ratio charts in city†, 2004) As Per 2011 census, Greater Mumbai, the area under the administration of the BMC, has a literacy rate of 94. 7 %, higher than the national average of 86. 7%. (The Registrar General & Census Commiss ioner, 2011)Sixteen major languages of India are also spoken in Mumbai, most common being Marathi, Hindi, Gujarati and English. The religions followed in Mumbai include Hindus (67. 39) , Muslims (18. 56%), Buddhists (5. 22%), Jain (3. 99%), Christians (4. 2%), Sikhs (0. 58%), Parsis and Jews making the rest of the population. (Mehta, 2004) Mumbai is also home to the largest population of Parsi Zoroastrians in the world, with about 80,000 Parsis in Mumbai. (â€Å"The world's successful diasporas†) Looking at the data it is clear fact that Mumbai is a large market with intelligent customer. Amount of exposure to brands and products a person goes through in Mumbai is vast. Culture This Research also includes finding new potential markets in the age group of 18 to 25 years, for this purpose knowing the culture of Mumbai is also essential. The culture of any place is always determined from its people, cuisine, religion, language and festivals. Mumbai has a mixture of people from various communities and subsequently they follow different religions. The metropolitan observes modern trends; here people enjoy participating in all festivals irrespective of caste, creed and color. Mumbai is the birthplace of Indian cinema. The influence of the Bollywood in the cities culture is observed. The cultural heritage of Mumbai presents a combination of old and new. The ‘bindaas' or carefree approach of the Mumbaikars comes alive in their dialect of Mumbaiya Hindi too. (Principal Cities) Economy Mumbai is the financial and commercial capital of India. It generates 6. 16% of the total GDP. It is the economic hub of India, contributing 10% to factory employment 25% of industrial output, 33% of income tax collection, 60% of custom duty collection, 20% central excise duty collection ,40% of India’s foreign trade , Rs 4000 crore in corporate taxes. â€Å"The world's successful diasporas†) In April 2008, Mumbai was ranked seventh in the list of â€Å"Top Ten Cities for Billionaires† by Forbes magazine, (Forbes Magzine) Demographic In demographic segmentation, the market is divided into groups on the basis of variables such as age, family size, family lifecycle, gender, income, occupation, education, religion, race, generation, nationality, and social clas s. Demographic variables are very popular among marketers as they are often associated with consumer needs and wants; another is that they are easy to measure. (Philip Kotler, 2009) Age and Lifecycle Age and Lifecycle are important variables to define segments as the needs and wants of the consumer change with age. Johnson & Johnson’s baby oil which is popular in India is a classic example of product of infants. (Philip Kotler, 2009) This research is focused on the market segment which falls in the age group of 18 years – 25 years. Consumers falling into this age group may have the falling into this group may be college going students, working, pursuing higher education, married and working, having their own business . Their wants and needs differ from each other. College going students will have their own wants and needs, what a college student would need is education, books, clothes, food his wants are a cricket bat, mobile, bike etc, he may desire to get education in a higher graded college, a car, Touch screen mobile etc. Working consumers have different needs compared to students. Working consumers may need a mobile, laptop, bike, blazers; he automatically becomes a prospective customer to housing development companies, car companies, furniture companies, aviation companies, Food chains, financial service companies, holiday tours and travel package companies etc. Consumer who I married and working may need jewelry for his wife, furniture for his house and other consumer durable and non durable products, prospective customers for car manufacturers, Insurance companies etc. Consumers having their own business may need, a working space, desks, electricity, ac’s, he may become prospective customer for insurance companies, luxury car companies, High end products etc. So Consumer pursuing higher education falls between these four sub-segments, His needs are all a mixture of all three, he will be getting married so all the needs and wants of a married working is a part of this consumer group. So by this we can infer that this wants and needs of this group is a mixture of all the other sub- segments. Slicing this segment further by Gender we find Men and women are different in their behavior, Research shows that women are likely to pick up the product without prompting while men often like to read product information before buying. (Philip Kotler, 2009) Income Income segmentation is a long standing practice in variety of products and services. Income determines the ability of consumers to participate in the market exchange and hence this is a basic segmentation variable (Philip Kotler, 2009) Slicing the segment on the base of income we may see college going student, Students pursuing higher education are dependent on their family’s income , while other sub- segment are earning consumers who control their consumption pattern through their own pocket. Psychographic Segmentation Psychographic Segmentation is the process of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided into different group based on psychological / personality traits, lifestyle or values. People within the same demographic group can exhibit very different psychographic profile. (Philip Kotler, 2009) VALS (â€Å"Values, Attitudes and Lifestyles†) (Philip Kotler, 2009)is a research methodology used for psychographic market segmentation. VALS was developed in 1978 by Arnold Mitchell and his subordinated at SRI International VALS Framework and Segment Innovator: These Consumers have the highest incomes, and such high self-esteem and abundant resources that they can indulge in any or all self-orientations and are on the leading edge of change, Image is important to them as an expression of taste, independence, and character. Their consumer choices are directed toward the â€Å"finer things in life. † ? Thinkers: These consumers are the high-resource group of those who are motivated by ideals. Their characteristics are mature , responsible, well-educated professionals. They have high incomes but are practical consumers and rational decision makers. Believers: These consumers are the low-resource group of those who are motivated by ideals. They are predictable and conservative consumers who favor established brands. They have modest incomes. ?Achievers. These consumers are the high-resource group, motivated by achievement. Work-oriented people who get their satisfaction from their jobs and families fall under this category. They are politically conservative and respect authority and the status quo. They favor established products and services that show off their success to their peers. ?Strivers. These consumers are the low-resource group who are motivated by achievements. They have values very similar to achievers but have fewer economic, social, and psychological resources. Style is extremely important to them as they strive to emulate people they admire. ?Experiencers: These consumers are the high-resource group of those who are motivated by self-expression. They are the youngest and energetic of all the segments, . They have a lot of energy, which they pour into physical exercise and social activities. They are avid consumers, spending heavily on clothing, fast-foods, music, and other youthful favorites, with particular emphasis on new products and services. Makers: These consumers with low-resource group of those who are motivated by self-expression. They are practical people with value self-sufficiency. They are focused on the familiar-family, work, and physical recreation-and have little interest in the broader world. As consumers, they appreciate practical and functional products. ?Survivors. These consumers are with lowest incomes. They have t oo few resources to be included in any consumer self-orientation and are thus located below the rectangle. Oldest of all the segments, with a median age of 61. They tend to be brand-loyal consumers. The age group taken into consideration here is 18 to 25 year. Some of them may fall into Experiencers segment who are young and energetic and who are motivated by self expression. Some of them are thinkers, i. e. Smart buyers. Behavioral Segmentation Behavioral segmentation divides a population based on their behavior, the way the population respond to, use or know of a product. Consumer behavior is a subject studied in depth over time in marketing management. This is mainly because there are several factors which a consumer takes into consideration before taking a decision. Thus consumer decision making is affected by his behavior and that is exactly how the behavioral segments are targeted. (Philip Kotler, 2009) Forms of Behavioral segmentation Buying on occasions: Buying on occasions is the first form of behavioral segmentation. Products such as chocolates and premium foods will sell on festivals. Similarly, confectioneries will sell when there is a party. Thus these products are generally targeted by behavioral segmentation. Benefits sought – Several products are targeted towards the benefits sought by the customer. Recently, there has been a war between Colgate and sensodyne to target the people who have sensitive teeth. Similarly, there are other toothpastes which are targeted towards whitening of teeth. Hair shampoos are targeted towards split ends, anti dandruff or others. Loyalty – There are two ways to grow a business. First is to acquire new customers and second is to retain your existing customers. The more loyal your customer is to you, the more your customer base will increase. That’s one more kind of behavior which marketers target. The strategy for brand loyal customers is very different from that used for acquiring new customers. Usage rate – In residential or commercial segment, the usage can be demonstrated in the form of heavy usage, moderate usage or lesser usage. Taking the example of beauty parlors or personal care. There are some customers who use a lot of personal care products whereas others do not use personal care products much. Thus depending on their usage the customers can be targeted. Among the age group that we are focused on one may find all such behavioral buying patterns. A person can be loyal to one brand for one product , but for other product he may switch brand as he is getting discounts. Research Methodology Data Gathering and Analysis To have a clear perception of the term research one should know the meaning of scientific methods. The two main terms, research and scientific method, are closely related. Research as we have already stated can be termed as â€Å" an inquiry into the nature of, reason for and the consequences of any particular set of the circumstances, whether these circumstances are experimentally controlled or recorded just as they occur. Here the researcher is interested more than particular results; he is interested in the repeatability of the results and in their extension to more complicated and general situation. Research in common refers to a search for knowledge. Research can also be defined as a scientific and systematic search for pertinent information on a specific topic. It is usually an art of scientific investigation. The purpose of research is to discover answer to question through the application of scientific procedures. The main aim of research is find out the truth which is hidden and which has not been discovered as yet. Research methodology is a way to systematically solve the research problem. It may be understood as science of studying how research is done systematically. It has many dimensions and research methods do constitute a part of Research Methodology. The scope of Research methodology is wider than that of research method. 1. Why a research study has been undertaken? 2. How the research problem has been defined? 3. In what way and why the hypothesis has been formed? Are usually answered when we talk of research methodology concerning a research problem or study. Whatever may be the types of research works and studies, one thing i. e. important is that they all meet on the common ground of scientific method employed by them. The research methodology can be defined as a way systematically solves the research problem along with the logic behind them. Researchers not only need to how to develop certain indices, how to calculate mean, mode, median and how to apply particular research technique and what would they mean and indicate and why? All this means that it is necessary for the researchers to design his methodology for his problem. The scope of Research methodology is wider than that of research methods. Thus research methodology deals itself not only with research method but also in considering the logic behind the methods used in the research study. Research Design: The research design is the conceptual structure within which research is conducted. It is a plan of action, a plan of collecting and analyzing data in economic, efficient and relevant be manner. It contains the blue print for the collection, measurement & analysis of data. The proposed study is an exploratory cum descriptive. The purpose of preparing research design could be either to test a hypothesis or to give a cause effect relationship to the given situation. The design provides answers for questions such as: â€Å"What techniques will be used to gather data? † â€Å"What kind of sampling will use? † As in this case research is to be a quantitative research. We are dealing with 12,478,447 population of Mumbai and slicing it to different segments. The data that has to be collected should be from an authentic source as the research is based on authentic facts of the region. Quantitative research Systematic empirical investigation of quantitative properties and phenomena and their relationships. Asking a narrow question and collecting numerical data to analyze utilizing statistical methods. The quantitative research designs are experimental, correlation, and survey (or descriptive). ] Statistics derived from quantitative research can be used to establish the existence of associative or causal relationships between variables. SOURCES OF DATA: The data that has to be collected has to be authentic, so it should be collected from authentic source like government websites, this type of research require authentic quantitative data. Data collection from primary sources is not a option here. So data has to be collected from secondary sources. Secondary Data: Information regarding the project, secondary data was also required. These data were collected from various past studies and other sources like magazines, newspapers, and websites which qualified as reliable. Limitations of the study †¢Limited Access to Secondary data †¢Lack of time Conclusion Mumbai is a large consumer base, the youth population following in the age group of 18 to 25 years itself is diverse in their own ways, each of them have different wants , needs and desires. All of their wants and needs are not always satisfied. Markets are oversaturated with products at claim to fulfill their needs; some fulfill the needs some partially. Buying decision of the consumer in this age depends upon what he thinks about the product and the brand and the amount of exposure he has gone through for that brand. As we are saying the needs of the consumers may be partially filled, so automatically there is a consumer base who wants something that will fulfill their needs in totality, this brings about a market opportunity for the companies which can be targeted by them, i. . slicing into that segment of Mumbai consumers. Many of the consumers are unaware of their needs as well, Example, Including the use of day today technology in household activities etc, there are many untapped markets in Mumbai that has to be exploited by the companies, Consumers of this age group are attracted to new technology and feature, they want to stay ahead of their generation, these wan ts and desires should be tapped upon by the companies. Bibliography â€Å"Parsis top literacy, sex-ratio charts in city†. (2004, september 8). Times OF India . 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