Market Segmentation, Targeting, and Positioning

Market Segmentation,
Targeting, and
Positioning
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-1
Selecting a Target Market
 Before a marketing mix strategy can be

implemented, the marketer must identify,
evaluate, and select a target market.
Market: people or institutions with
sufficient purchasing power, authority,
and willingness to buy
Target market: specific segment of
consumers most likely to purchase a
particular product
Types of Markets
 Consumer products: goods or services
purchased by an ultimate consumer for
personal use
 Business products: goods or services
purchased for use either directly or
indirectly in the production of other goods
and services for resale
 The key to classification is to identify the
purchaser and the reasons for buying the
goods.
The Role of Market Segmentation
 Market Segmentation
Division of the total market into smaller,
relatively homogeneous groups
 No single marketing mix can satisfy

everyone. Therefore, separate marketing
mixes should be used for different market
segments.
Ill Levels of Market Segmentation
In mass marketing, the seller engages in the mass
production, mass distribution, and mass promotion
of one product for all buyers.
e.g. Coca-Cola.
Advantages : creates the largest potential market,

which leads to the lowest costs, which in turn can
lead to lower prices or higher margins.
Disadvantages : increasing splintering of market,

advertising media and distribution channels is
making it difficult and expensive to reach a mass
audience.
Mass marketing is dying.
Most companies are turning to micromarketing at

one of four levels:
*segments,
*niches,
*local areas, and
*individuals.
Segment Marketing :
A market segment consists of a group of customers

who share a similar set of needs and wants.
e.g. Car buyers
Advantages : Better design, price, disclose and

deliver the product or service to satisfy the target
market. The company also can fine-tune the
marketing program and activities to better reflect
competitors' marketing.
Market segments can be defined in many different
ways. One way to carve up a market is to identify
preference segments.
e.g. ice cream buyers are asked how much they
value sweetness and creaminess as two product
attributes. Three different patterns can emerge.
1.Homogeneous preferences - a market where all

the consumers have roughly the same preferences.
2. Diffused preferences - At the other extreme,
consumer preferences may be scattered
throughout the space indicating that consumers
vary greatly in their preferences.
3. Clustered preferences - The market might reveal

distinct preference clusters, called natural market
segments .
Niche Marketing
A niche is a more narrowly defined customer group
seeking a distinctive mix of benefits. Marketers
usually identify niches by dividing a segment into
subsegments.
Characterics: The customers in the niche have a

distinct set of needs; they will pay a premium to the
firm that best satisfies their needs;
Niches are fairly small and normally attract

customers
Local Marketing :
Target marketing is leading to marketing programs

tailored to the needs and wants of local customer
groups (trading areas, neighborhoods, even
individual stores).
e.g.Citibank provides different mixes of banking

services in its branches, depending on neighborhood
demographics.
Customerization :
The ultimate level of segmentation leads to "segments of

one," "customized marketing," or "one-to-one marketing."
Today customers are taking more individual initiative in
determining what and how to buy. They log onto the Internet;
look up information and evaluations of product or service
offers; dialogue with suppliers, users, and product critics; and
in many cases, design the product they want.
e.g. Dell
The customer's selections send signals to the supplier's
manufacturing system that set in motion the wheels of
procurement, assembly, and delivery.
No Market Segmentation
Segmented by Gender
Segmented by Age
Criteria for Effective Segmentation
 Market segmentation cannot be used in all
cases. To be effective, segmentation must
meet the following basic requirements.
The market segments must be measurable
in terms of both purchasing power and
size.
Marketers must be able to effectively
promote to and serve a market segment.
Market segments must be sufficiently large
to be potentially profitable.
The number of segments must match the
firm’s capabilities.
Segmenting Consumer Markets
 Geographic Segmentation: Dividing an
overall market into homogeneous groups on
the basis of their locations
Does not ensure that all consumers in a
location will make the same buying
decision.
Help in identifying some general patterns.
 Geographic Segmentation :
Region – NEWS
City – Class I, Class II, Metros
Rural & Semi urban areas – Rural villages

with certain population
 Using Geographic Segmentation
Demand for some goods and services can
vary according to the geographic region
Most major brands get 40-80 percent of
their sales from what are called core
regions
Climate is another important segmentation
factor
 North Indian consumers, for example,
eat more milk products than South
Indians
 Southerners use more spicy foods than
North Indians.
Segmenting Consumer Markets
 Demographic Segmentation: dividing

consumer groups according to
characteristics such as gender, age,
income, occupation, education, household
size, and stage in the family life cycle
 A primary source for demographic data in

India is the Census Bureau
 Demographic Segmentation :
Age
Family Size
Gender
Income
Occupation
Education
Socioeconomic classification
 Segmenting by Age
Identify market segments on the basis
of age
Products designed to meet the specific

needs of certain age groups
Under 6 years, 6-11, 12-19, 20-34, 35-

49, 50-60, 60+
 Segmenting by Family Size:
Identify market segments on the basis of

Family members
Young, Single
Young, Married,no children
Young, Married, youngest child under 6
Older, Married with Children
Older, Married, no chlidern under 18
Older, Single
Others
 Segmenting by Gender
Marketers must ensure that

traditional assumptions are not false
Male , Female
Some companies market

successfully to both genders
Segmenting by Income :
e.g. Aravind Eye Hospitals
*Low
*Lower Middle
*Upper Middle
*High
 Segmenting by Income and Expenditure
Patterns
Engel’s Laws, as family income increases:
 A smaller percentage of expenditures go
for food
 The percentage spent on housing and
household operations and clothing
remains constant
 The percentage spent on other items
(such as recreation and education)
increases
Segmenting by Occupation :
Occupation :
Unskilled worker, Skilled Worker , Professional
and technical;
managers, officials, and proprietors;
clerical sales; craftspeople; forepersons;
operatives; farmers; retired; students;
homemakers; unemployed
Segmenting by Education :
Education :
Grade school or less;
some high school;
high school graduate;
some college;
college graduate
post graduate
Segmenting by Socioeconomic class :
Social class :
Lower lowers,
upper lowers,
working class,
middle class,
upper middles,
lower uppers,
upper uppers
 Psychographic Segmentation
Divides a population into groups that have
similar psychological characteristics,
values, and lifestyles
Lifestyle: people’s decisions about how to
live their daily lives, including family, job,
social, and consumer activities
The most common method for developing
psychographic profiles of a population is to
conduct a large-scale survey
 VALS and VALS 2
“Values and Lifestyles”
Psychographic Segmentation :
Psychographics is the science of using psychology

and demographics to better understand consumers.
In psychographic segmentation, buyers are divided

into different groups on the basis of psychological
/personality traits, lifestyle, or values.
People within the same demographic group can

exhibit very different psychographic profiles.
Psychographic Segmentation :
One of the most popular commercially available

classification systems based on psychographic
measurements is SRI Consulting Business
Intelligence's (SRIC-BI) VALS™ framework. VALS
classifies adults into eight primary groups based on
personality traits and key demographics. The
segmentation system is based on responses to a
questionnaire featuring 4 demographic and 35
attitudinal questions. The VALS system is
continually updated with new data from more than
80,000 surveys per year
The major tendencies of the four groups with higher
resources are:
1. Innovators - Successful, sophisticated, active, "take-
charge" people with high self-esteem. Purchases often reflect
cultivated tastes for relatively upscale, niche-oriented
products and services.
2. Thinkers - Mature, satisfied, and reflective people who are
motivated by ideals and value order, knowledge, and
responsibility. Favour durability, functionality, and value in
products.
3. Achievers - Successful goal-oriented people who focus on
career and family. Favour premium products that
demonstrate success to their peers.
4. Experiencers - Young, enthusiastic, impulsive people who
seek variety and excitement. Spend a comparatively high
proportion of income on fashion, entertainment, and
socializing.
The major tendencies of the four groups with lower resources
are:
1.Believers - Conservative, conventional, and traditional
people with concrete beliefs. Favour familiar,products and are
loyal to established brands.
2. Strivers - Trendy and fun-loving people who are resource-

constrained. Favour stylish products that emulate the
purchases of those with greater material wealth.
3. Makers - Practical, down-to-earth, self-sufficient people

who like to work with their hands. Favour made products with
a practical or functional purpose.
4. Survivors - Elderly, passive people who are concerned

about change. Loyal to their favorite brands.
 Using
Psychographic
Segmentation
Psychographic
profiles produce
rich descriptions of
potential target
markets
Greater detail aids
in matching a
company’s image
and its offerings
with the types of
consumers who are
likely purchasers
 Behavioural or Product-Related Segmentation :
Dividing a consumer population into homogeneous
groups based on characteristics of their
relationships to the product
Can take the form of segmenting based on:
 Benefits that people seek when they buy
 Usage rates for a product
 Consumers’ brand loyalty toward a product
 Benefits
Focuses on the attributes that people seek in
a good or service and the benefits that they
expect to receive from that good or service
Groups consumers into segments based on
what they want a product to do for them
 Usage Rates
Segmenting by grouping people according to
the amounts of a product that they buy and
use
Markets often divided into heavy-user,
moderate-user, and light-user segments
The 80/20 principle (“Praedo’s Law”)
 Brand Loyalty
Segmenting consumers grouped according
to the strength of brand loyalty felt toward a
product
Frequent flyer programs of airlines and
many hotels
 Using Multiple Segmentation Bases
Increase accuracy in reaching the right
markets
Combine multiple bases
 Geographic and Demographic
 Product-related with income and
expenditure patterns
 Others
The Market Segmentation Process
 Develop a Relevant Profile for each

Segment
 Forecast Market Potential
 Forecast Probable Market Share
 Select Specific Market Segments
Strategies for Reaching
Target Markets
 Undifferentiated Marketing: when a firm

produces only one product or product line
and promotes it to all customers with a single
marketing mix
 Differentiated Marketing: when a firm

produces numerous products and promotes
them with a different marketing mix designed
to satisfy smaller segments
 Concentrated Marketing (niche marketing):
when a firm commits all of its marketing
resources to serve a single market segment
 Micromarketing: involves targeting potential

customers at a very basic level, such as by ZIP
code, specific occupation, lifestyle, or individual
household
 Selecting and Executing a Strategy
No single, best choice strategy suits all firms
Determinants of a market-specific strategy:
 Company resources
 Product homogeneity
 Stage in the product life-cycle
 Competitors’ strategy
Positioning: a marketing strategy that
emphasizes serving a specific market
segment by achieving a certain position
in buyers’ minds
 Attributes
 Price/quality
 Competitors
 Application
 Product user
 Product class
Positioning map
Graphic illustration that shows differences
in consumers’ perceptions of competing
products
Reposition
Marketing strategy to change the position
of its product in consumers’ minds relative
to the positions of competing products
Hypothetical
Competitive
Positioning
Map for
Selected
Retailers

Market Segmentation, Targeting, and Positioning

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Market Segmentation,

 Before a marketing mix strategy can be

 No single marketing mix can satisfy

Advantages : creates the largest potential market,

Disadvantages : increasing splintering of market,

Most companies are turning to micromarketing at

*local areas, and

A market segment consists of a group of customers

e.g. Car buyers

Advantages : Better design, price, disclose and

1.Homogeneous preferences - a market where all

3. Clustered preferences - The market might reveal

Characterics: The customers in the niche have a

Niches are fairly small and normally attract

Target marketing is leading to marketing programs

e.g.Citibank provides different mixes of banking

The ultimate level of segmentation leads to "segments of

City – Class I, Class II, Metros

Rural & Semi urban areas – Rural villages

 Demographic Segmentation: dividing

 A primary source for demographic data in

Products designed to meet the specific

Under 6 years, 6-11, 12-19, 20-34, 35-

Identify market segments on the basis of

Marketers must ensure that

Some companies market

e.g. Aravind Eye Hospitals

Psychographics is the science of using psychology

In psychographic segmentation, buyers are divided

People within the same demographic group can

One of the most popular commercially available

2. Strivers - Trendy and fun-loving people who are resource-

3. Makers - Practical, down-to-earth, self-sufficient people

4. Survivors - Elderly, passive people who are concerned

 Develop a Relevant Profile for each

 Forecast Market Potential

 Forecast Probable Market Share

 Select Specific Market Segments

 Undifferentiated Marketing: when a firm

 Differentiated Marketing: when a firm

 Micromarketing: involves targeting potential

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