IDENTIFYING MARKET SEGMENTS

AND
SELECTING TARGET MARKETS

Presented By:
Syed Amirul Islam, M. Pharm., MBA
CEO
Amulet Pharmaceuticals Ltd.

IDENTIFYING MARKET SEGMENTS

AND
SELECTING TARGET MARKETS

A company cannot serve all customers in a

broad market. The customers are too numerous
and diverse in their buying requirements. The
company needs to identify the market segments
that it can serve more effectively.
Many companies are embracing target
marketing. Instead of scattering their marketing
effort, they can focus on the buyers they have
the greatest chance of satisfying.

IDENTIFYING MARKET SEGMENTS

AND
SELECTING TARGET MARKETS
Target marketing requires marketers to take
three major steps:
1. Identify and profile distinct groups of buyers
who might require separate products or
marketing mixes (Market segmentation).
2. Select one or more market segments to enter
(Market targeting).
3. Establish and communicate the products key
distinctive benefits in the market (Market
positioning).

LEVELS OF MARKET SEGMENTATION

Market segmentation is an effort to

increase a companys precision marketing.
The starting point of any segmentation
discussion is mass marketing. In mass
marketing, the seller engages in the mass
production, mass distribution, and mass
promotion of one product for all buyers.
The argument for mass marketing is that it
creates the largest potential market, which
leads to the lowest costs, which in turn can
lead to lower prices or higher margins.

LEVELS OF MARKET SEGMENTATION

Many companies are turning to micro

marketing at one of four levels: segments,
niches, local areas, and individuals.
i) Segment Marketing - A market
segment consists of a large identifiable
group within a market with similar wants,
purchasing power, geographical location,
buying attitudes, or buying habits.

LEVELS OF MARKET SEGMENTATION

ii) Niche Marketing - A niche is more narrowly
defined group, typically as small market whose
needs are not well served. Marketers usually
identify niches by dividing a segment into subsegments or by defining a group seeking a
distinctive mix of benefits. Whereas segments
are fairly large and normally attract several
competitors, niches are fairly small and
normally attract only or two.

LEVELS OF MARKET SEGMENTATION

iii) Local Marketing - Target marketing is
leading to marketing programs being tailored to
the needs and wants of local customer groups.
iv) Individual Marketing - The ultimate level of
segmentation leads to segments of one,
customized marketing, or one-to-one
marketing. Much business-to-business marketing
today is customized, in that a manufacturer will
customize the offer, logistics, communications,
and financial terms for each major account.

PATTERNS OF MARKET
SEGMENTATION

Market segments can be built up in many ways.

One way is to identify preference segments.
Three different patterns can emerge.
Homogeneous preferences: It shows a market
where all the consumers have roughly the same
preference. The market shows no natural
segments.
Diffused preferences: At the other extreme,
consumer preferences may be scattered
throughout the space indicating that consumers
vary greatly in their preferences.
Clustered preferences: The market might
reveal distinct preference clusters, called natural
market segments.

MARKET-SEGMENTATION
PROCEDURE

Here is a three-step procedure for identifying market

segments: survey, analysis, and profiling.
Step One: Survey Stage : T he researcher prepares a
questionnaire and collects data on attributes and their
importance ratings; brand awareness and brand ratings;
product-usage patterns; attitudes toward the product
category; and demographics, psychographics, and media
graphics of the respondents.
Step Two: Analysis Stage:The researcher applies
factor analysis to the data to remove highly correlated
variables, then applies cluster analysis to create a
specified number of maximally different segments.
Step Three: Profiling Stage Each cluster is profiled in
terms of its distinguishing attitudes, behavior,
demographics, psychographics, and media patterns.
Each segment is given a name based on its dominant
characteristic.
Market segmentation must be redone periodically
because market segments change.

EFFECTIVE SEGMENTATION

Not all segmentations are useful. To be useful, market

segments must be:
Measurable: The size, purchasing power, and
characteristics of the segments can be measured.
Substantial: The segments are large and profitable
enough to serve.
Accessible: The segments can be effectively
reached and served.
Differentiable: The segments are conceptually
distinguishable and respond differently to different
marketing-mix elements and programs.
Actionable: Effective programs can be formulated
for attracting and serving the segments.
MARKET TARGETING : Once the firm has identified its
market-segment opportunities, it has to decide how
many and which ones to target.

EVALUATING THE MARKET

SEGMENTS

In evaluating different market segments, the

firm must look at two factors: the segments
overall attractiveness and the companys
objectives and resources.
First the firm must ask whether a potential
segment has the characteristics that make it
generally attractive, such as size, growth,
profitability, scale economies, and low risk.
Second, the firm must consider whether
investing in the segment makes sense given
the firms objectives and resources.

SELECTING THE MARKT SEGMENTS

Having evaluated different segments, the company can
consider five patterns of target market selection.
1. Single-Segment Concentration
The company may select a single segment. Through
concentrated marketing, the firm gains a strong
knowledge of the segments needs and achieves a
strong market presence. If it captures segment
leadership, the firm can earn a high return on its
investment. A particular market segment can turn sour.
2. Selective Specialization
Here the firm selects a number of segments, each
objectively attractive and appropriate. There may be
little or no synergy among the segment, but each
segment promises to be a moneymaker. This multi
segment coverage strategy has the advantage of
diversifying the firms risk.

SELECTING THE MARKET

SEGMENTS
3. Product Specialization
Here the firm specializes in making a certain product that it sells to
several segments. Through a product specialization strategy, the
firm builds a strong reputation in the specific product area.
4. Market Specialization
Here the firm concentrates on serving many needs of particular
customer group. The firm gains a strong reputation in serving this
customer group and becomes a channel for further products that
the customer group could use.
5. Full Market Coverage
Here a firm attempts to serve all customer groups with all the
products they might need. Only very large firms can undertake a
full market coverage strategy. Large firms can cover a whole
market in two broad ways: through undifferentiated marketing or
differentiated marketing.
In undifferentiated marketing the firm ignores market-segment
differences and goes after the whole market with one market offer.
In differentiated marketing the firm operates in several market
segments and designs different programs for each segment.

Thank you