MKT1003X Chapter 7

Market Segmentation
There is no single way to segment a market one has to try different
segmentation variables to find the best way to view the market structure
-

Segmentation: dividing the total market into smaller segments to

identify meaningful groups of customers
Targeting: select the segment of segments to enter/ to serve
Positioning: position the market offering in the minds of target
customers
Differentiation: differentiate the market offering to create superior
customer value

Segmentation: the process of classifying consumers into groups exhibiting

different needs, characteristics or behavior
furnish much information about the market
provides input to opportunity analysis
enhance effectiveness and efficiency of marketing prog
Segment: group of consumers who respond similarly to a given set of
marketing stimuli
4 major types of segmentation bases:
1) Geographic
Dividing the market into different geographical units such as
nations/regions/states
many companies localize their prods. Advertising/ promo and sales
efforts to fit to the needs of individual regions and cities
eg: China coast vs China inland diff needs due to diff
weathers/circumstances companies thus segment companies
geographically
2) Demographic
Dividing the market into groups based on variables such as age,
gender, family size, fam life cycle, income, occupation, education,
religion race
- The most popular base for segmentation because:
o Good correlation w behavior, customer needs/wants and
usage rates vary closely w demographic variables
o Easier to measure
3) Psychographic
Divides buyers into diff groups based on sical class, lifestyle,
personality characteristics
- People in the same demographic group can have different
psychographic makeups

4) Behavioral Segmentation
Divided based on their knowledge, attitudes, uses of, or responses to a
product
- Many believe that it is the the best starting point for building market
segments
o Occasions: when buyers get the idea to buy/ make the
purchase/ use the purchased item
o Benefit Sought: according to the diff benefits that consumers
seek from the product finding the major benefits people
look for in the product class, the kinds of people looking for
each benefit and the major brands that deliver each benefit
o User Status: non user, ex user, potential user, first time user,
regular user
o Usage Rate: light, medium and heavy product users
o Loyalty Status: undivided loyalty, divided, spurious (repeat
purchases with poor relative attitude), latent (fav attitude but
low repeat purchaser), no brand loyalty
*Mkters are increasingly using multiple segmentation bases to identify
smallers, better defined groups this provides a powerful tool for
marketers, helping companies to identify and better understand key
customer segments
-

Segmenting business markets: use of many of the same variables

to segment markets geog, demo, benefits sought, user status,
usage rate and loyalty status

Segmenting intl markets: operating in diff countries present new

challenges countries can vary a lot in economic cultural and
political makeup thus segmentation based on geog
o Intermarket segmentation forming segments of customers
who have similar needs and buying behavior

REQUIREMENT FOR EFFECTIVE SEGMENTATION

- Measurable: variables can be measured
- Accessible: the market segments can be effectively reached and
served
- Substantial: segments are large/profitable enough to serve
- Differentiable: segments are conceptually distinguishable and
respond differently to different mkting mix elements
- Actionable: effective progs can be designed for attracting and
serving the segments
MARKET TARGETING
1) Evaluating mkt Segments

- Segment size and growth:

Company collects and analyzes data from current and projected sales
and profits for various segments
- Segment structural attractiveness:
o Current and potential competition determine the
attractiveness of a company
o Power of buyers: buyers with strong bargaining power affects
segment attractiveness at the expense of profitability
o Power of SSers: SSers who can control prices or reduce
qlty/qty of g/s
- Company objectives and resources
Meshing with the company LR objectives or strengths of the
company
Target Market Selection
A target market is the set of buyers who share the common
needs/characteristics that the company decides to serve
Target Market Segments: undifferentiated, differentiated, concentrated,
micromarketing

Undifferentiated Marketing
A firm decides to ignore market segment differences and target the whole
market w one offer
- Focuses on what is common in the needs of consumers rather than on
what is different
Cost efficient

 Often have trouble competiting with more focused firms that do a

better job of satisfying needs of niches
Differentiated Marketing
A firm decides to target several market segments and designs separate
offers for each
- By offering different market variations, companies hope for higher
sales and a stronger position within each market segment
Increases business costs
possible oversegmentation
Concentrated Marketing
Appeals when company resources are limited, going after a large share of
one or a few smaller segments
- The firm achieves a stronger market position because of greater
knowledge of consumer needs in the niches it serves and special
reputation acquired
- Markets more efficiently and effectively
involves higher than normal risks
if segment fails, companies relying on one or few segments will suffer
too
Micro Marketing: Local and Individual
Local Marketing
Involves tailoring brands and promos to the needs and wants of local
customer groups
- Helps company to market more effectively in the face of pronounced
regional and local diffs
- Meets the needs of companys first line customers
can drive up manufacturing and marketing costs by reducing EOS
can create logistic probs as companies try to meet varied
requirements of diff regional and local mkts
brands overall image might be diluted if product and message vary
too much in diff localities
Individual Marketing
Tailoring products and marketing programmes to the needs and
preferences of individual customers (one to one marketing)
- Customized
- Personal identity
Choice of a targeting strategy:
- Company resources: when they are limited, concentrated marketing
makes most sense
- Product Variability: undifferentiated is more suited for uniform
products while differentiation/concentration more suited for prods
that vary in design

Products life cycle stage: undifferentiated marketing/concentrated

marketing when a firm intros only one version of new product
launched ||||| in mature stage of prod life cycle, differentiated
marketing is desired
Market Variability: if more buyers have same taste, undifferentiated
marketing
Competitors marketing strategies: follow the same!! Dont lose out!

POSITIONING
A products position is the way the product is defined by consumers on
important attributes the place the product occupies in consumers minds
relative to competing products
Positioning Strategies
- Product attributes
- Usage occasions
- Directly against a competitor
- Benefits
- User class
- Product class
Points of Differences (PODs)
- Unique associations with a brand
- Clear superiority
Points of Parity (POP)
- Associations shared w other brands
- Necessary but not sufficient for brand choice
- Negate competitors PODs
- On par with competitors especially when consumers are
sophisticated and competition is intense
Pitfalls of Positioning
- Underpositioning
o Failing to position brand
o Vague idea of brand
o Dont know whats so special about the brand
- Overpositioning
o Giving buyers too narrow a picture of the brand, restrictive
Eg: starbs only sells coffeeeeee
- Confused positioning
o Leaving buyer with confused image of brand
Which differences should we promote?
- Relevance: is it important?
- Distinctive: competitors do not offer the diff or the company can
offer it in a more distinctive way

Superior: the difference is superior to other ways in which customers

might obtain the same benefit
Communicable: the difference is communicable and visible to
buyers
Believability
Pre-emptive: competitors cannot easily copy the difference
Affordable: buyers can afford to pay fr the difference
Profitability: the company can introduce the difference profitably

Once the company has chosen a position, it must take strong steps to
deliver and communicate the desired position to target consumers the
marketing mix efforts must support the positioning strategy.