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Segmenting and Targeting Markets

Learning Objective

Describe the characteristics of markets and market segments.

A Market is...
(1) (2) people or organizations with needs or wants, and

(3)
(4)

with the ability and

the willingness to buy.

A group of people that lacks any one of these characteristics is not a market.
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Market Segmentation
Market
People or organizations with needs or wants and the ability and willingness to buy A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
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Market Segment

Market Segmentation

Market Segmentation
1 Increased

sensitivity towards the consumer for the Best Fit

2 Helps firm to achieve leverage

3 Helps in appropriate product development 4 Facilitates proper choice of target market

5 Helps in customizing the product to the market need

6 makes marketing effort more efficient and economical 7 Aligns distribution and promotion efforts for maximum benefit
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Learning Objective

Discuss criteria for successful market segmentation.

Criteria for successful segmentation:

1.

Heterogeneous
Substantial

2.

3.

Actionable
Accessible

4.

5.

Measurable

Heterogeneous
Clear differences in consumer preferences for a product must exist.

Substantial
The proposed market segment must have enough size and purchasing power to be profitable.

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Actionable
Companies must be able to respond to difference in preferences with an appropriate and profitable marketing mix.

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Measurable
Difference in preferences for a product must be identifiable and capable of being related to measurable variables.

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Accessible
The proposed market segment must be readily accessible and reachable with targeted programs.

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Segmenting means dividing markets into homogenous groups based on similar characteristics or traits. To divide a market into segments, firms use segmentation variables that describe the characteristics of each part of the market.

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Segmentation Variables
Demographic Segmentation Geographic Segmentation
Psychographic Benefits-Sought

Segmentation

Situation Segmentation
Behavior/Usage

Segmentation

Segmentation
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Demographic Segmentation
Age
Family life cycle
Income Level

Household Structure

Gender

Ethnicity

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Family Life cycle:

1. Initiator 2. Influencer 3. Decider 4. Purchaser 5. Consumer

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Segmentation Variables
Demographic Segmentation Geographic Segmentation
Psychographic Benefits-Sought

Segmentation

Situation Segmentation
Behavior/Usage

Segmentation

Segmentation
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Geographic Segmentation

When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions

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Segmenting Consumer Markets

Demographic Segmentation Geographic Segmentation
Psychographic Benefits-Sought

Segmentation

Situation Segmentation
Behavior/Usage

Segmentation

Segmentation
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Psychographic Segmentation

Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions)
Useful but more difficult to identify and measure compared to demographic variables

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Social Class
Consuming Class: value for money
Rich: Money for value

Aspirants: New entrants

Climbers : This is all I can afford

Destitute: Hand to mouth

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Segmenting Consumer Markets

Demographic Segmentation Geographic Segmentation
Psychographic

Benefits-Sought

Segmentation

Situation Segmentation
Behavior/Usage

Segmentation

Segmentation
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Benefits-Sought Segmentation

Markets can be segmented based on the benefits that consumers desire from using a specific product -> Specific product benefit ->Convenience ->Social Acceptance ->Value for money

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Segmenting Consumer Markets

Demographic Segmentation Geographic Segmentation
Psychographic Benefits-Sought

Segmentation

Situation Segmentation
Behavior/Usage

Segmentation

Segmentation
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Situation Segmentation

Purchase situation or occasion

Physical surroundings Social surroundings Temporal perspective

How much time to make a purchase?

Task definition Pre purchase attitude

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Segmenting Consumer Markets

Demographic Segmentation Geographic Segmentation
Psychographic Benefits-Sought

Segmentation

Situation Segmentation
Behavior/Usage

Segmentation

Segmentation
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Behavior/Usage Segmentation

Brand loyalty Impulsive buying Price sensitivity Heavy users Moderator users Light users Usage rate : Markets can be segmented by how often or how heavily consumers use a specific product 80/20 Principle - 80% of revenue generated by 20% of customers
Light Users 80% Heavy Users 20%

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Learning Objective

List the steps involved in segmenting markets.

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Steps in Segmenting a Market

Select a market for study

Choose bases for segmentation

Select descriptors

Profile and analyze segments

Select target markets

Design, implement, maintain mkting mix

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Learning Objective

Discuss alternative strategies for selecting target markets.

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Target Market
A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

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Factors for selecting target segment

1 Market Attractiveness: size, accessibility and profitability 2 Companies resources: financial, managerial, technological

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Undifferentiated Targeting Strategy / Mass marketing

Marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix.

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Characteristics of undifferentiated targeting strategies

1 Company aim at the entire market as single entity

2 Market need is relatively homogenous

3 Economy of scale is achieved

4 Vulnerable to competitors

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Undifferentiated Targeting Strategy

Advantages:
Potential savings on production and marketing costs Economy of scale Unimaginative product offerings Company more susceptible to competition

Disadvantages:

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Differentiated Targeting/ Multisegment Targeting Strategy

A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.

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Characteristics of multisegment targeting strategies

1 Increases firms share

2 Widely used In large firms 3 Potential of the segment should be sufficient

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Multi-segment Targeting Strategy

Advantages:
Greater financial success Same market coverage Price differentiation serves different market Premium pricing possible Less risk

Disadvantages:

High costs Cannibalization

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Concentrated Targeting Strategy

A strategy used to select one segment of a market for targeting marketing efforts.

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Characteristics of concentrated targeting strategies

1 One segment: highly specialized marketing mix

2 Maximum share in one segment 3 Main advantage is specialization 4 Resources can be focused 5 Effective positioning

6 Strength over competitor

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Niche
One

part of the segment in a market.

form of market concentration

Narrower

Focus on very unique features

Customer

ready to pay high prices

Substantial
Market

share is necessary

should have growth and market potential but very less attractiveness for competitors

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Concentrated Targeting Strategy

Advantages:

Concentration of resources Meets narrowly defined segment Strong positioning Segments too small, or changing

Disadvantages:

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Cannibalization
Situation that occurs when sales of a new product cut into sales of a firms existing products.

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New Approaches

1 Mass customization Dell 2 Permission marketing Email news letters

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Consumer Profile

Brand Image

Product
People

Physical Evidence: Logo, color , decor and literature Place Promotion: Television, Tie ups, Movies, Sales promotion, caf citizen card
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Price

Consumer Profile

Brand Image

Product
People

Place

Physical Evidence: Logo, color, decor and literature

Price

Promotion: Sponsorship and collaborations Barista coffee card.

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CCD
Consumer Profile : 15- Brand Image: .Urban. cool hangout Products: Innovative and adopted productsfrappe.cappuccino Prices: Reasonable pricing range..Rs.17..Rs 54 People: People are hired for what they know but fired for how they behave Physical Evidence: Logo: Red and green logogreen stroke caf is noticeable larger font is SLURRY. Color: young colors of todaylight green, yellow orange. Decor: Lots of steel Literature: Youth and young at heart Caf Beat Place: Malls ..cinemas.colleges Promotion: Mass media promotionZee friendsChannel V Get Gorgeous. Associations: Hindi movies, Sales Promotions: Caf citizen card10% discount

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Barista
Consumer Profile : 25-

Brand Image: .For love of Coffee Products: Traditional products with traditional names Prices: Medium pricing range People: Pleasant, polite and Positive Physical Evidence: Logo: Barista written in upward curve with coffee underneathsimple Color: Warm earth glow Decor: Simplicity..light shades of wood Literature: Traditional, customers publication, Place: High street and family entertainment centers Promotion: traditionalprint Associations: Leo Mattel toys.scrabble Sales Promotions: Barista Coffee card
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Make the consumer include the brand in their consideration set

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Learning Objective

Explain how and why firms implement positioning strategies and how product Differentiation plays a role.

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Position
The place a product, brand, or group of products occupies in consumers minds relative to competitors offerings.

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Positioning
Developing a specific marketing mix to influence potential customers overall perception of a brand, product line, or organization in general.

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Effective Positioning

Assess the positions of competing products

Determine the dimensions of these positions Choose an effective market position

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Competitive Frame of Reference

Determine frame of reference by identifying target market and competitors this is called Category Membership

Point of Difference Point of Parity

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Product Differentiation

A positioning strategy that some firms use to distinguish their products from those of competitors.

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Differentiation based on Tangible attributes:

1 Ingredient 3 Additional feature 5 Product design 7 Service 2 Functional 4 Packaging 6 Quality

Differentiation based on non tangible attributes

1 Lifestyle 3 Service industry 2 Emotional

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Positioning.
1 Provides meaning to the products

2 Placing products in predetermined orbits

3 Connects product to the target market

4 Relate to competitors positioning

5 Value preposition

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Repositioning

Changing consumers perceptions of a brand in relation to competing brands.

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