IDENTIFYING MARKET SEGMENTS & SELECTING

TARGET MARKETS
Small opportunities are often the beginning of great enterprises.

Target marketing requires 3 major steps.

1. Market Segmentation

Identifying distinct group of buyers who might require separate products and/or
marketing mixes.

2. Market Targeting

Selection of one or more market to enter.

3. Market Positioning

Establish & communicate, the product distinctive benefits in the market.

MARKET SEGMENTATION

Segmentation is done because, there are number of buyers which constitute the
market and buyer differs in many ways that’s (why segmentation is done).

LEVELS OF MARKET SEGMENTATION

Segmentation can be done on four levels segments, niches, local areas, and
individuals.
Mass Marketing Concept

Manufacturer is engage in the mass production, mass distribution and mass

promotion of one product for all buyers e.g. Coke, Pepsi “one size fits all”

Ford company (One product one size and color sold for many years)

Mass marketing have an effect of lower cost, lower prices & higher margins.

1. Segment marketing

Marketing segment is a large identifiable group with in a market.

Segments are made due to buyer differences in wants, purchasing power,

geographical buying attitudes and habits i.e. customization (Variation).

Consumer belonging to the same segment is assumed to be quite similar in needs

and wants.

Yet they not identical some need additional features and benefits.

2. Niche marketing

Niche is more narrowly defined group, typically a small market whose needs are
not being well served.

Marketers usually defines niches by dividing a segment into sub segment.

(Who has got some distinctive set of traits with in a group (segment).

Segments are large and thus attract many competitors.

Niches are fairly small and normally attract only one or a few competitors.

e.g Toyota 1.6 GLi Auto transmission.

Niche are priced more for time specialty ofference and differentiation

There is riches in niches. Sub-sub division.

Nicher is provider of a product to niche

3. Local marketing

Target marketing is shifting towards local marketing just to satisfy individual

needs in the market.

There are many disadvantages but variation in product will satisfy the individual
customer needs.

4. Individual Marketing

Ultimate level of segmentation leads to.

Segmentation of one.

Customized marketing

One to one marketing. (Job shop concept)

(Expensive but effective)

Mass customization is the ability to prepare on a mass basis individually designed

products and communications to meet each customer’s requirements. Concept of
individuality.

Self marketing is a form of individual marketing.

It is a form individual marketing in which customer takes more responsibility of

deciding which product and brands to buy.
A person gets information from the internet and get the views of people. (with no
sales people involved for promotion of the product) and than decides on his own to
buy the product or not.

So he has taken more responsibility for taking decision in buying the product.

He has done more self marketing e.g. orders via phone and computers.

PATTERNS OF MARKET SEGMENTATION

Patterns in segments can be defined by preference in it i.e. (preference segment) if

products are offered what will they buy.

a. Homogeneous segments in which nearly all buyers have same

preferences.

b. Diffused segments customer preferences are scattered throughout the

space.

c. Clustered preferences market might reveal distinct preferences clusters

called natural market segments.

In this type first company entering has three options.

1. It might position in the center hoping to appeal to all groups

2. It might position in the largest market segment (concentrated

marketing).

3. It might develop several brands each position in a different

segment.

If first firm only introduces one brand, competitor will enter and introduce brands
in other segments.
MARKET SEGMENTATION PROCEDURE

3 step approach, used for segmentation

STEP 1:SURVEY STAGE.

Customer survey is done, and as the aim is to know motivations, attitudes and
behavior.

Researcher do exploratory and focus group interviews.

After knowing this researcher make questionnaires to collect the data on.

Attributes and theirs importance, ratings

Brand awareness and Brand ratings

Product usage patterns.

Attitudes towards product category.

Demographics, geographic, psychographics and media graphics of the

respondents.

All general data concerned with customer preferences.

STEP 2 ANALYSIS STAGE

For analysis different statistical techniques are used e.g. Factor analysis to remove
highly correlated variables, Cluster analysis

dividing a big data in to specified no of groups such that data in each group is
homogeneous.

(Game theory, multiple regression, mathematical programming queuing model

etc.)
STEP 3 PROFILE STAGE

Group is than defined terms of profile it shows.

Profile includes attitudes behavior demographics; psychographics etc are basis for
profile making).

Market segmentation is done once, must be change periodically because of change

in market segments e.g. PC 1stly market those people who admired speed and
power now, market segment is change and like dell and gate way after e-mail and
user friendly packages which is now priority for the segment.

One way to discover new segments is to investigate the attributes that consumer
examine in choosing a brand.

Process is known as market partitioning.

If consumer first decide on the manufacturer and then on its car division is (brand
dominant hierarchy ( Japanese car than Toyota than Corolla).

Similarly segments can be made like

price dominant

type dominant

brand dominant price/type/brand dominant of another one .

BASIS FOR SEGMENTING CONSUMER MARKETS

Two factors are considered

1. Consumer Characteristics

Geographic.

Demographic.

Psychographics.
2. Consumer Responses

benefits sought (satisfaction)

use on occasions (brands)

These two factors are the cause of segmentation of consumer markets (Researcher
divide market on these two above mentioned variables).

Geographic segmentation

Nations

States

Regions

Geographical units

Countries

Cities
Demographic segmentation

Age

Family size (influential/position)

Family life cycle stage (old, young, children).

Income

Occupation

Education

Religion

Race Generation (has its own characteristics)

Nationality
Consumer wants and preferences are highly associated with consumer
demographics.

Hence it is a popular way of distinguishing or segmenting markets.

(e.g Age is a Poor indicator of lifestyle characteristic as 40 can be young energetic

person 40 can be old business executive.)

Psychographics segmentation

• Life styles

• Personalities

People exhibit more life styles man shown by division of classes.

Brand personalities corresponds to consumer personalities

ford different personality

Chevrolet personality.

Behavioral segmentation

Consumers are divided on the basis of knowledge of product.

Attitude towards product

Use of product

Response to a product

Behavioral variables

1. Occasion 5. Loyalty status

2. Benefit 6. Buyer readiness stages

3. User status 7. Attitude

4. Usage rate
Occasion

Buyers can be distinguished on the basis of occasions they develop to buy a

product or need is developed (massage, promotion, children, acquisition of home).

Benefits

Derived from products can be different i.e. benefits from traveling.

To meet the family

Adventure, Education, Shopping (fun)

User Status

• Non user

• Ex-user

• Potential user

• First time user

• Regular user

Usage Rate

• Light

• Medium

• Heavy

Loyalty Status

Hard core loyals (one brand buying all the time)

Split loyals (loyals to 2 or 3 brands)

Shifting loyal (favoring one brand to another)

Switchers (no loyalty to any brand)

(want something new every time)

Hard core loyal represent the class of buyers in the market.(lower, middle and
upper).

Split loyal will tell the product largest competitors.

Shifting loyals will tell product weaknesses

Buyer Readiness Stage.

Unaware

Aware

Informed

Interested

Desire of the product

Intentions to buy

Attitude

Enthusiastic. Positive

Indifferent Negative

Hostile
MULTI-ATTRIBUTE SEGMENTATION (GEOCLUSTERING)

- Average consumer concept is gone.

- Limiting target market to big sign is failed.

- Now manufacturer is turning to small potential market with different

buying habits.

MULTI ATTRIBUTE SEGMENTATION

- Late to other variables, which may form, a small target market but are the
target of manufacturer.

GEOLOCLUSTERING

One of the most promising development in multi attribute segmentation is

geoclustering

it reflects socioeconomic status and life style of a neighborhood in habitants.

e.g Cal traits Inc has developed a geoclustering approach called PRIZM.

Potential rating index by zip Markets

it classifies over 500,000 us residential into 62 distinct life style grouping.

Clusters have different titles called PRIZM.

Blue blood estates home town retired, winners circle Latino America.

In the cluster the average buying habits are the same.

Geoclustering is a segmentation tool .eg. cashmere and countryclub;

These ageing baby boomers live the good life in the suburbs, they like to by
Mercedes, Golf digest and high end TV’s.
(Annual average income $ 22,900.)

TARGETING MULTIPLE SEGMENTS:

• Companys ist try to target one market and than expand.

• Easily accessible mkt to penetrate

• then geographical mkts

• extensive distribution strategy (distributing a product on grocery stores)

BASES FOR SEGMENTING BUSINESS MITTS:

Robertson and Barich identified three business segments.

1-FIRST TIME PROSPECT

Customer who have not yet purchased. They want to buy from the sales person
they know and they rely on.

2-NOVICES.

Who have already purchased a product. they need manuals hot lines, a high level
of training and knowledge able sales reps.

3-SOPHISTICATES:

Customer who wants speed in R&M product customization, and high technical
support.

Rangan ,Moriarty and swartz.

4 Business segments (Introduced)

A- PROGRAMMED BUYERS:

Product is not very imp to their operation they by as a routine purchase item,
paying full price and receiving below average service.
(highly profitable segments for vendors).

B- RELATION SHIP BYERS

Product is moderately imp, they are knowledge able about competitive offerings.

They get a small discount and a modest amount of service.

They prefer vendor service.

C- TRANSACTION BUYERS

Product is very imp, to their operations.

They are price and service sensitive.

They receive about 10% discount and above average service.

They are knowledgeable for competitive offerings and ready to switch for better
price even at the sacrifice of services.

D- BARGAIN HUNTERS

Byers who see the product as V- imp

demand deepest discount and highest service

they are aware of alternative suppliers, bargain hard, and are ready to switch of the
slightest dissatisfaction.

Company needs here buyers for volume purposes as they are not much profitable.

One his to be careful as many buyers are

cross shopper.

1) Gross dresser 2) Cross eater

Shop an expensive spit but look for cheap under garments

REQUIREMENTS FOR EFFECTIVE SEGMANTATIVE

Not all segmentation are effective

mkt must be

• Measurable

• Substantial (large + profitable enough to serve)

• Accessible (effectively reached and served )

• Differentiable (conceptually distinguished segments and Married and

unmarried people if corresponds to the product in a similar manner then
they are in a same segment)

• Actionable (effective programs can be made to serve the segment )

MARKET TARGETING:

Once the segments are defined now its upto the company that which one is to
target.

Process of evaluation and selecting marketing segments.

1- EVALUATION THE MARKETING SEGMENTS:

Size, growth, profitability

• Over all attractiveness of the segment

• Obj and resources

2- SELECTING THE MARKETING SEGMENTS;

In many segments which or how many segment must be focused can be decided
by (5 patterns of target marketing selection).
A- SINGLE SEGMENT CONCENTRATION:

E.g VW concentrates on small Car mkt

• More profitability

• More knowledge of segments need

• higher risk also

B- SELECTIVE SPECIALIZATION:

• Number of segments are selected

• money makes segments (mostly)

• There is minor synergy presents in the segment difference

• Diversified risk

• Multi segment coverage.

C- PRODUCT SPECIALIZATION:

• Making a product which will be sold on many segments

• Product/failure can cause damage.

D- MKT SPECIALIZATION

• One group

• Satisfying their all needs .

E- FULL MARKET COVERAGE:

• All customer group are target

• large firms do this.

DIFFERENTIATED MARKETING:

• Firm ignores differences and goes after the whole market with one
marketing offer.

• Buyers needs are given preferences then the buyer differences.

• Mass marketing and mass distribution is needed. eg Coca-Cola , Pepsi

 • Standardization concept.

DIFFERENTIATED MARKETING:

• Firm target different segment

• with different strategy for each segment

• customization concept

• But cost of the product is higher

• product modification cost, manufacturing cost, Administrative cost

,inventory cost promotion cost.

• Additional consideration in evaluating and selecting segments

3- ETHICAL CHOICE OF MARKETING TARGETS

• Segment interrelationships and super segments.

• When selecting more then one segments.

• should pay attention on segments relation ships in technology, cost,

performance.

SUPER SEGMENTS

• Is a set of segment sharing some exploitable similarity?

• in which demands of the segments with product

• Toothpaste aqua fresh

• Anti cavity

• Whites teeth

• Fresh breath.
 • So he company must target those people in a segment which exactly
demands there 3 things

5- SEGMENT BY SEGMENT INVASION PLANS

• To hide from competitor your next segment move.

• One segment should be largest and capture that

• Than go towards other

• 1st penetrate slowly into the competitor that they do not get aware

& then seeing the situation and opportunity give a full attack on segment.

6- INTERSEGMENT CO-OPERATION

• Many segment for example

• segments Manager

Manger S1 ------------------------------------------------------------ Manager S2

Co-operation