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SEGMENTING AND

TARGETING MARKETS
Market Segmentation

What is a market segment?


Why is it important?
Case Study
P & G – Segments the
Market
Strategy The Payoff
 Sells multiple brands  P&G generates revenues
within the same product in excessive of $4 billion in
category for detergents, U.S. laundry detergent
soaps, and other goods. market alone.
 Each brand features a  Tide has 34% share of
different mix of benefits powder and 24% share of
and appeals to a different liquid market segments.
segment.  Combined, all P&G brands
 Product modifications account for 75% share of
appeal to different niches powder and 55% share of
within certain segments. liquid detergent markets.
 It was goodbye to mass marketing. "We
were reconciled to the fact that P&G had
always stood for offering the consumer
superior value through technologically-
superior products," says a P&G manager.
"So, trying to be a janta brand with a
premium positioning and pricing wasn't
on." That kicked off Project Spearhead,
which was meant to identify consumers
who would see value in P&G's superior
offerings, and also have the purchasing
power to buy them on a regular basis.
Wha t i s a “ Mark et S egme nt” ?

 Set of potential customers


 Who have similar needs
 Who reference each other when buying
 Are alike in the way they:
• Perceive value
• View products and services
• Purchase products and services
Wh y D ef ine a M arket S egment?

 Easier to understand customer needs


 Focus “whole solution” to a narrower
set of customer needs
 Easier to become a leader in a smaller
market (Big fish in small pond)
 More effective use of marketing Rupee
 Generally more profitable
Why does an organisation need
to segment a market?

 No single product can satisfy


the needs of all customers.
 What would happen if Adidas
sold only a single product? How
well would it compete in the
marketplace? What would be
the - Impact on - Profit /
sales / market share? -Discuss
 Consumers all have different
needs and wants
 Companies must consider -
Individual Features & Benefits
sought, and the individual
characteristics of consumers
Why Market Segmentation is
Important

 Relatively modern concept


 Powerful marketing tool
 Define needs and wants more
precisely
 Better able to define meaningful
marketing objectives and allocate
resources
Levels and Patterns of Market
Segmentation
 Levels of Market Segmentation
• Mass marketing –Mass Production , Mass Distribution ,
mass promotion of one product for all buyers .
• Henry Ford with Model T- Ford- Black, Coca Cola when
it sold only one kind of Coke in 6.5 ounce bottle.
Micromarketing
• Segment marketing – group that share similar set
of needs and wants
• Market segment – young middle income car buyers
• Flexible market offering
– Naked solution – product and service element that all
segment members value
– Discretionary options – that some segment members
value
Levels and Patterns of Market
Segmentation

 Market segment can be defined in many


ways – Identify preference segments
 Patterns for Market Segmentation
• Preference segments
• Homogeneous preferences
• Diffused preferences
• Clustered preferences
– Natural market segments
– Concentrated marketing
Figure 10-1: Basic
Market-Preference
Patterns
Levels and Patterns of Market
Segmentation
• Niche Marketing
• Narrowly defined customer group seeking a distinctive
mix of benefits
Ezee from Godrej for Woolen clothes
Crack , Ointment from Paras Pharmaceuticals- prevention
and treatment of cracked heels for women
Itchguard for Itching sensation
TV Channels on Regional languages
Magazines like Better Photography targeted for specific
interest groups
Spirulina : Natural food supplement for health, commands
a premium price
By targeting Ayurvedic Medicines and health supplements,
Himalaya Herbal Healthcare serves a growing niche
market
Ultimate skiing and snowboarding goggles
 Local Marketing : Target Marketing is
leading to Marketing Programs tailored to
the needs and wants of local customer
groups.
 Many banks have NRI branches in Kerala
to cater to the needs of families whose
relatives remit money from abroad,
especially from the middle east
 Nike’s Initial success is attributed to Local
Marketing like sponsorship of local school
teams , provision of shoes , clothing etc.
Customerization

• Mass-customization - Asian Paints , Nerolac


– Segments – more standardization of market
offering
– Individuals within segment differ greatly
– Choice Boards: An interactive online system that
allows Individual customers to design their own
products and services by choosing from menu of
attributes, components , prices, and Delivery
options
Customerization combines operationally driven
mass customization with customized marketing
in a way that empowers consumers to design the
product and service offering of their choice
The Segmentation Variables

 Segmenting Consumer
Markets
Geographic Segmentation

• Define– region in country or world,


market size, market density or even
climate
• Four good reasons to use region:
– Data (via scanners, etc.) tells us what sells in a
region
– Regional brand preference data
– Faster to react to competition in a given region
Markets: Geographic Variables

Pacific, Mountain, West North Central, West


South Central, East North Central, East
Region South Central, South Atlantic, Middle
Atlantic,4,999;
Under New England
5,000-19,999; 20,000-
City or 49,999 . . .
metro size 1,000,000-3,999,999; 4,000,000 and
over rural, suburban
Urban,
•HLL – Lesancy (big soap), Philips introduced ‘Bahadur’
Density •in rural area

Northern, southern, tropical


Climate e.g. Punjab has different food habits and dress
code than people in
South India.
Exporters segment the market as Western
countries , African Countries.
Markets: Geographic Variables

Climate--Rajasthan and Gujarat Demand air coolers in


summers
Ineffective in areas like Kerala or Goa as climate is hot and
Humid
Food Habits- Consumers in Southern state of Tamil Nadu
show a preference for freshly Brewed coffee and in North
Indians tend to prefer tea.
Taste and other quality Parameters – some parts of India
prefer strong tea from Assam whereas in some other parts
Nilgiri Tea

This difference has promoted various tea marketing


companies to offer variety of tea under same brand name
Food preference too have important implications for
marketers.
Demographic Segmentation

 Define– use age, gender, income, and


family life cycle
• Age segmentation (know key
characteristics)
• Importance of children < 9
• Tweens- building early loyalty, brand
awareness
• Teens- have allowances, specific preferences
• Young adults
• Baby Boomers
• Seniors
Markets: Demographic Variables

Income
Age
Gender
Occupation
Family size
Education
Nationality
Religion
Ethnicity
Demographic Segmentation

 Income segmentation
• Housing, clothing, cars, and food
• Funskool and Mattel Toys segment on the basis of age .
 Auto manufacturers on the basis of income,
 Producers of refrigerators, Washing Machines, Microwave –Oven
take income and family size as important Variable.
 e.g Chi rag Din , Arrow, Van – Heusen ,Louis Philippe , levis and
others Segment on the basis of social class.

 Nirma was Launched as a lowest price washing powder targeted


at Middle income sector with value for Money proposition

 Small sachets for shampoos . Oils , creams , toothpaste

 Aravind Eye Hospitals offering world class eye care for poor
people in urban and rural India
Demographic Segmentation
concluded
 Family Life-Cycle (FLC) Segmentation
• Define- stages involving age, marital status,
presence/absence of children
• Spending pattern information, types of purchases, etc. differ
at each stage
HUL has different toothpastes for different age groups –
Pepsodent – for Kids , Adult ,Close – Up
Channels like Aastha , sanskar target older people
MTV , Disney, Pogo , Cartoon Network, Channel V target
youngsters ,
TV Serials Like Ramayana

J&J No tear Shampoo targeted to kids and children – Mild


regular use shampoo
Magic Pot , Femina , Saheli , Just another magazine to youth
New Born
 Insurance companies offering schemes for people who are
planning their retirement life
 Saving cum Insurance schemes to help young parents plan for
education of their children
 Gender : Clothing, Hair style , cosmetics and magazines
e.g Axe Deo , Park Avenue , Raymond as Masculine brands
Bajaj Wave specially for women , Fair and Lovely , Fair and
Handsome , Scooty in different colors
One study suggests that 48% of the women buy skin care Items 51
% hair wash products
52% freshening Deodorant such as Talcum powder
55% for personal wash products such as toilet soap
60% for [products like Toothpaste or Tooth powder
Bajaj Wave specially for women
TVS Scooty in different colors
 Hindustan Unilever
has entered the kids
segment in the
toothpaste category
under a new sub-
brand — Pepsodent
Kids. Creating three
new variants under
the segment, the
FMCG company has
brought in Barbie,
Superman and Tom &
Jerry to entice
children.
PEPSODENT
COLGATE DENTAL CREAM -DOUBLE
PROTECTION

 Packaging consist – Red


Color, Double Ring
 Double ring signifies
Double Protection
 Target customer -
-ADULTS
 Helps to fight more germs.
 Unique super active foam
 Colgate regular mint flavor
keeps your breath fresh.
COLGATE GEL (RED AND BLUE)

 LAUNCHED IN TWO VARIABLE COLORS –


Red and Blue
 Same product line, same set of customers
 Targeted towards YOUNGSTERS
 Highlights two aspects – Super
Transparency and Actrinse
Colgate for Kids

Featuring Fun Barbie Graphics

Target – Kids ages 3 – 8

Fun bubble fruit flavor

Fights against bad breath and cavities.


Gender

 ‘Clinic All Clear Men’ – Because


Men’s Scalps Differ from Women’s
Behavioral
Segmentation
Markets: Usage Variables

Occasions Regular occasion, special occasion

Benefits Quality, service, economy, speed

User status Nonuser, ex-user, potential, first-time, regular


Usage rate Light user, medium user, heavy user

Loyalty status None, medium, strong, absolute


Buyer-
Unaware, aware, informed,
readiness
stage interested, intends to buy
Attitude
Enthusiastic, positive, indifferent,
toward
product negative, hostile
Behavioral:

• Occasion segmentation
• Special promotions.
– Amul’s Brand Choclates are promoted as a gift for
someone you love , Archies cards , Biscuits with Tea ,
Kurkure , Parle’s Monacco with toppings to be served
as snacks .
• Special products for special occasions.
– (e.g., Kodak disposable cameras), (e.g., Hershey
Kisses), Bajaj Utsav Uphaar in festive season
Behavioral:

• Benefits Sought
• Different segments desire different benefits
from products.
– (e.g., P&G’s multiple brands of laundry detergents to satisfy
different needs in the product category)
– Brands as Clinic plus , Chic , Pantene , Heads and
Shoulders , Sunsilk for different benefits
– Cinthol from Body odor
– Dettol offers total protection
– Ammonia free hair colors
– Dove range for hair care
– Parachute Hair fall solution
Head and Shoulders
Smooth and Silky
shampoo combines
clinically proven dandruff
protection with
conditioning ingredients
that help relieve dryness
and prevent frizz and
split-ends. It locks in
moisture and treats
dandruff, leaving hair
soft, sleek and easy to
manage.
 Nizoral shampoo is
clearly meant for
people suffering from
dandruff. It promises
freedom from flaking,
scaling and itching.
 Forget about hair
loss forever
Benefit Segmentation

• Snack foods – nutrition, weight loss,


party, etc. Kukure , Monaco

A light crispy biscuit


sprinkled with salt,
Monaco adds a
namkeen twist to
life’s ordinary
moments.

Pack Sizes
available:75 G,
120 G, 240 G
Frito Lays

•They are Masala Munch


(orange pack), Green
Chutney Rajasthani Style
(light green pack), Red
Chilli Chatka (dark green
pack) and Tamatar
Hydrabadi Style (brown
pack).
•There are two new
flavours too. One is the
Kurkure Xtreme Electric
Nimbu and the other is
Kurkure Xtreme Risky
Chilli.
•A Special Edition flavour,
Jaljhalo Hit has been
released as a Pujo Special
for Durga Puja, 2007.
Toothpaste . fresh breadth, decay prevention
and whiter teeth from , COLGATE
TOTAL, AQUAFRESH, CLOSE-UP
Crest for Sensitive teeth
Fi gure 3 .5
Ad O ffering
Combined Benef its
 Used every day,
Sensodyne
relieves sensitive
teeth by building a
barrier that blocks
the pain of hot and
cold and keeps it
from coming back.
Usage Rate Segmentation

 Dividing the market by the amount of


product bought or consumed
• Heavy users, former, potential – Mothers to
be , first-time, light or irregular, or medium
• Heavy users account for large % of product
sales, so the marketing mix…
• 80/20 principle– 20 % of all customers
generate 80% of the demand
• Goal: create a heavy user (frequency/loyalty
programs)
• Reward and retain heavy users
• Heavy users given benefit and offered packages
• Mobile users providing low tariff at entry level
Goggles – Fast Track ….How
many do you have ?
JOHNSONS® BUDDIES™ Easy-comb Detangler
Figure 3.3
Ad Des igned to Spel l
Out
Rew ards of
Co nsumer L oy al ty
Psychographic Variables

Lifestyle Personality

Hobbies
Compulsive
TV viewing habits
Outgoing
Social activities
Authoritarian
Club memberships
Ambitious
Vacation preferences
Psychographic Segmentation

 Fills in segmentation blanks- use with


other variables to better detail the segment
description
• Uses the following variables
• Personality – habits, traits and attitudes
• Motives- status-related vs. rational motives
• Lifestyles- how do you spend your time and what
things do you have)
e.g Motorcycle segment market on the personality as Macho
Image
Liquor, cigarettes and apparel etc. segment on the basis of
personality and Self image
PEPSODENT- Junk eating habits
BASIS FO R SEGMENTA TION

Lifestyle segmentation is particularly useful in case of product


categories
Such as perfumes , beer , jewellery and other ego-intensive
products

The VALS ( value and lifestyle)


Stanford research institute (SRI) developed a popular approach
to psycho
Graphic segmentation called VALS
People are
Abundant resources ------------ least
Actualiser , Fulfilled ,Achiever, Experiencer,Believer ,
Striver , Maker , Struggler
ACTUALIZERS
High Resources

Principle Oriented Status Oriented Action Oriented

FULFILLEDS ACHIEVERS EXPERIENCERS

BELIEVERS STRIVERS MAKERS

Low Resources
STRUGGLERS
VALS NETWORK

 Actualisers-
Sucessful,Sophiticated,Active.Purchase often
reflects cultivated tastes for relatively
upscale, niche-oriented products.
 Fulfilleds-
Mature,satisfied,comfortable,reflective.Favor
durability,functionality,and value in products.
 Achievers- Successful, career- and work-
oriented. Favor established,prestige products
that demonstrate success to their peers.
VALS NETWORK
 Experiencers-
young,vital,enthsiastic,impulsive,and
rebellious. Spend a comparatively high
proportion of income on clothing, fast
food,music,movies, and videos.
 Believers-Conservative,conventional,and
traditional. Favor familiar products and
established brands.
 Strivers-Uncertain,insecure,approval-
seeking,resource constrained .Favor stylish
products that emulate the purchases of those
with greater material wealth.
VALS NETWORK

 Makers-Practical,self-
sufficient,traditional,family-
oriented.Favor only products with
practical or functional purposes.
 Strugglers-
Elderly,resigned,passive,concerned,re
source-constrained,Cautious
consumers who are loyal to favorite
brands
May appeal
Actualisers:-
Sucessful,Soph
iticated,Active.
Purchase often
reflects
cultivated
tastes for
relatively
upscale, niche-
oriented
products
Both Fulfilled and
Believers have a
strong family
orientation

Fulfilleds-
Mature,satisfied,com
fortable,reflective.Fa
vor durability,
functionality, and
value in products

Believers-
Conservative,
conventional, and
traditional. Favor
familiar products
and established
brands
This Ad
would
Appeal to
Achievers’
Appreciation
of prestige
products

Successful,
career- and
work-oriented.
Favor
established,
prestige
products that
demonstrate
success to their
peers
McDowell
associates
achievement
with the
product
differences in the Indian market
compared to the more developed markets
Indian market US market
■ Quality interpreted as impact
 Quality interpreted as on fuel efficiency and engine
‘no adulteration’ performance
 Quantity interpreted as
■ Quantity is not a parameter
getting the right for consideration
amount of fuel, i.e.
integrity ■ Price is a very important
 Price is not a factor
differentiating factor

■ However, as the Indian market evolves,

• Parameters such as integrity of fuel quantity and purity are likely to


become hygiene factors

• Consumer needs will change and require changes to the value


proposition
Distinct psychographic consumer segments are emerging in
India

• Higher emotional needs • Petroleum purchasing is


• More brand conscious seen as a ‘drudgery’.
• Stereotyped as “self- • Seeks additional vehicle
made” repair and maintenance
• Potential target for services.
Prestige Routine
international or premium • Indulges in monotonous
brands seeker Chore routine jobs
doer
• Unique to emerging
markets such as India • Strong need for
Trust Time locational convenience
• Driven by a strong desire
for integrity and by Seeker Poor and other non-fuel
strong relationships with related services.
the retailer • Characterized by his
• A typical late adapter, need for quick service
price and quality and convenience.
conscious • Likely to be a
professional, 24X7
worker
Each consumer segment represents a potentially profitable target group
Hybrid Segmentation

 Demographic/Psychographics=
Combination of demographic and
psychographic profiles of consumer
segments profiles
Hero
provokes
the
teenager
to be a
receiver
of
innovatio
ns

(1977-
1994)
F&S ad
targets the
segment of
the
ambitious
freshers in
business
How to Select a Target Market:
Strategies

 Target market: the group of people


for whom your company is
designing, implementing and
maintaining a marketing mix in order
to meet the needs of that group (who
is most likely to buy your product)
 Three strategies for selecting a target
market
Undifferentiated Targeting

 Mass market philosophy- 1 mix for entire market


(commodity products or brand new products)
• Advantage: Saves Rupees in
production/marketing expenses
• Usually a sort of lazy, unimaginative approach
• Problems: More exposed to competitive threats
• E.g Coca Cola ( Non- alcoholic beverage market , IBM
( computer market ) , General Motors ( Vehicle
Market)
Concentrated Targeting (#2)

 Select a market niche (one segment of a market)


• Be able to focus and specialize the marketing mix
• Concentrate resources rather than spread too thinly
• Better knowledge about segment
• Operating economies thru specializing its Production,
Distribution , and Promotion
• If it captures segment leadership , a firm can earn higher
profits
 e.g. recycled paper producer Wizard India focus on marketing for
Greeting And Wedding cards,
 Oshkosh Truck for Airport rescue trucks
 M&M on Tractors to Agriculture Markets
 Zodiac on formal shirts for executives and Professionals
Multisegment Targeting (#3)
 Strategy that chooses two or more well-defined
market segments and develops distinct marketing
mix for each
• i.e., Barbie for little and older girls
Product same, different promotional appeal,
rather than completely different marketing mix

 e.g Maruti Suzuki – Maruti 800 , Omni , Gypsy , Alto ,


Zen , Wagon R , Swift , Esteem and Baleno
appealing to customer preferences of different
market segments
 Companies producing toiletries are offering different
versions of toilet
Soaps for dry skin, oily skin and normal skin.
 increases costs considerably.
Costs of Multisegment Targeting

$ Product design costs


$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
Conclusion:

Don’t enter a new market


segments unless you can
capture 25 -30% market share
in a few years
Entre pr en eur ial S tra tegy :

 Define market segment small enough


to allow you to capture 25% to 30%
share
 Be a “Big fish in small pond”
 Ideal: Be the only supplier in a very
narrowly defined market.
 But: Is the market large enough for
future growth?
Market Targeting

 Additional
Considerations

• Segment-By-Segment
Invasion Plans: A
company should be wise
enough to enter one
segment at a time .
• Competitors must not
know to what segments)
the firm will move next .
 Too Many companies fail to develop
long term invasion plans
 PepsiCo is Exception .
 It first attacked Coca Cola in Grocery
Market , then in vending machine
market , then in fast food market and
so on
 The company’s invasion plans are
thwarted when it confronts blocked
markets .
 The invader then must figure out the way to break
in
 It needs Mega Marketing approach
It is a strategic coordination of economic,
psychological , political , and public relations
skills , to gain cooperation of number of parties in
order to enter or operate in a given market .

• Pepsi Used Mega Marketing


PEPSICO

 After Coca- Cola left India


 PepsiCo worked with Indian business Govt. approval
for its entry over the objection of domestic soft drink
companies and Multi-National legislators
 Pepsi offered to help India export some agricultural
products in a volume that would more than cover the
cost of importing soft drink concentrate
 Pepsi also promised to help rural areas in their
development
 It offered to transfer food-processing , packaging and
water-treatment technology to India
 Pepsi’s bundle of benefits won the support of
various India interest groups
HP

 Hewlett-Packard positions itself as a


company implementing “e-inclusion” ---
the attempt to help bring the benefits of
technology to the poor
 Working with local Govt. , the company is
helping to provide the rural poor the
access to Schools , health information ,
crop price , etc.
 This builds not only Goodwill but helped
company to discover new, profitable lines
of business
Ethical choice of Market Targets

 Taking undue advantage of vulnerable


groups like Children
 Mc. Donald's , Coca- Cola , Pepsi have
been criticized

Socially responsible Marketing calls for


targeting that serves not only the
company’s interests , but also the
interests of those targeted