Segmentation, Targeting & Positioning
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Concept of Market Segmentation
Market segmentation is the process of dividing a potential market into
distinct sub-markets of consumers with common need and characteristics
Benefits of Market Segmentation
Helps to understand the customer need
To adopt better positioning strategies
Proper allocation of marketing budget
Helps in preparing a better competitive strategy
Provides guidelines in preparing media plan of the company
Different offerings in different segments enhances the sales
Customer gets more customized product
Helps company to identify niche markets
Provides opportunities to expand market
Encourages innovations
Requisites of Effective Segmentation
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To be effective, segmentation should have the following
characteristics
Measurable and Obtainable
The size profile and other relevant characteristics of the
segment must be measurable and obtainable in terms
of data
If the information is not obtainable, no segmentation
can be carried out
Substantial
The segment should be large enough to be profitable
For consumer markets, the small segment might
disproportionably increase the cost and hence products
are priced too high
Requisites of Effective Segmentation
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Accessible
The segment should be accessible through existing
network of people at affordable cost
Differentiable
The segments are different from each other and
require different 4Ps and programs
Actionable
The segments which a company wishes to pursue
must be actionable in the sense that there should be
sufficient finance, personnel and capability to take
them all
The Process of Market Segmentation
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The process of market segmentation passes
through the following stages:
Identify the
existing and
future wants in
the current
market
The Process of Market Segmentation
1.
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Identify existing and future wants in the current
market
Marketers must examine the changing needs of
the customer
This process provides opportunity to examine
whether customers are satisfied with existing
products or not
If they are not satisfied what are the features
they are looking for the product
E.g.. Titan watches
The Process of Market Segmentation - Identifying existing and
future wants
The Process of Market Segmentation
2. Examine the attributes that distinguish among
segments
 In this process marketers should segregate
different types of wants into homogeneous
categories
 This may be on the basis of product features,
lifestyle or behavior
The Process of Market Segmentation –
Examine the attributes
The process of market segmentation
3. Evaluate the proposed segment attractiveness on
the basis of measurability, accessibility and size
 Segments selected in second steps should be
evaluated against the requisites, ie.
Measurability, accessibility, substantial,
actionable and differentiability
Proposed segment attractiveness
Bases of Segmenting Consumer Markets
Geographic
Segmentation
Psychographic
Segmentation
CONSUMER
MARKET
SEGMENTATION
Behavioral
Segmentation
Demographic
Segmentation
Bases of Segmentation
Bases of Segmentation
1.
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Geographic Segmentation
Dividing the market into different geographical
units such as nations, states, regions, cities or
neighborhoods
The company can operate in one or a few
geographic areas or operate in all buy pay
attention to local variations
Bases of segmentation
Bases of segmentation
Demographic Segmentation
 In demographic segmentation the market is
divided into groups on the basis of variables
such as age, family size, family life-cycle,
gender, income, occupation, education, religion,
race, generation, nationality and social class
 This is the most popular bases for distinguishing
customer groups
 One of the major reason is that consumers’
wants, preferences and usage rates are often
associated with demographic variables
Bases of segmentation
Some of the demographic variables are:
A. AGE & LIFE-CYCLE STAGE
 On the basis of age, a market can be divided into
four parts viz. children, young, adults and old
 A successful marketing manager should understand the
age group for which the product would be sold and
determine his marketing policy, pricing policy,
advertising policy etc
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Bases of segmentation – Age & Life Cycle
Bases of segmentation
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B. Gender
This segmentation is very common in clothing, hairstyling, cosmetics etc
C. Income
Income segmentation is very popular in such product
and services such as automobiles, clothing, cosmetics,
travel etc
But income does not always predict the best customers
for a given product
Bases of segmentation - Gender
Bases of segmentation - Income
Bases of Segmentation
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3. PSYCHOGRAPHIC SEGMENTATION
When the customers are categorized on the basis of life style,
personality or values
People belonging to the same demographic group may exhibit
different psychographic profiles
The major psychographic factors are:
A.LIFE STYLE
People exhibit different life style and goods they consume express
their life styles
One of the most used psychographic profiling schemes is called
VALS developed by SRI International Inc.
VALS-1 (First Version) groups the entire US population into 8 groups
Bases of Segmentation – Life Style
Bases of Segmentation
VALS - 1
Psychographic segmentation – Ref
Page No: 130,131,132,133
Bases of Segmentation
B. PERSONALITY
 When marketers use personality variables to
segment the markets, they endow their products with
brand personality that corresponds to consumer
personalities. Eg. Raymonds
C. SOCIAL CLASS
 It has a strong influence on consumer preferences
and the products they buy or consume
 Social class becomes the key factor in buying
Bases of Segmentation
4. BEHAVIORAL SEGMENTATION OR CONSUMER
RESPONSE SEGMENTATION:
 In behavioral segmentation, buyers are divided into
groups on the basis of their knowledge or attitude
towards the use of , or response to a product
 Some of the behavioral factors are:
a.
Occasions
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According to occasions, buyers develop a need,
purchase a product or use a product
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A company should consider critical life events to see
whether they are accompanied by certain need
Bases of Segmentation - Occasion
Bases of Segmentation - Occasion
Bases of Segmentation
b. Benefits
 Buyers can be classified according to the benefits
they seek from the products
c. User Status
 Market can be segmented into non-users, potential
users, first time users and regular users of a product
 Market leaders will focus on attracting potential
users, whereas smaller firms will try to attract
current users away from the market leader
Bases of Segmentation- User Status
Bases of Segmentation
d. Usage Rate
 Markets can be segmented into light, medium and heavy users of
the product
 Heavy users are small percentage of the market but account for
high percentage of total consumption
 Marketers try to attract heavy users than light users
e. Loyal Status
 Consumers have varying degree of loyalty to specific brands, stores
and other entities. Buyer can be divided into four groups according
to brand loyalty status:
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Hardcore Loyals – Consumers who buy one brand all the time
Split Loyals: Consumers who are loyal to two or three brands
Shifting Loyals: Consumers who shift from one brand to another
Switchers : Consumers who show no loyalty to any brand. When there is
a low involvement and few significant perceived brand differences,
consumer try to purchase different brands in the category
Bases of Segmentation –Loyal Status
Hardcore Loyal
Bases of Segmentation –Loyal Status
Split Loyals
Bases of Segmentation –Loyal Status
Shifting Loyals
Bases of Segmentation –Loyal Status
Switchers
Bases of Segmentation
f. Buyer-Readiness Stage
 A market consists of people in different stages of
readiness to buy a product
 Some are unaware of the product, some are aware,
some are informed, some are interested, some
desire the product and some intend to buy
Targeting
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Targeting is defined as a group of people or
organizations for which an organization designs,
implements and maintains the marketing mix
Once the bases of segmentation are selected, the
marketer has to identify the people or organization
to whom the product is meant
SELECTING TARGET MARKET SEGMENTS
Depending upon the emerging patterns of market
segmentation, there exists various segments in a
market. They are:
Targeting
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Homogeneous Preference
Showing no natural segments as in case of soft drinks
Diffused Preference
Showing clear preference as in case of automobile
market
Clustered Preference
Market showing natural segments as in case of
occupation having impact on the types of clothes worn
Targeting
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a.
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The general strategy adopted for market segmentation
are:
Undifferentiated Marketing
It is a market coverage strategy in which the company
treats the target market as one and does not consider
that there are market segments that exhibit uncommon
needs
The company focus on the centre of the target market
to get maximum advantage
The feature of ‘one product all segments’ calls for
presenting one marketing mix for the target market.
Example Coca Cola
Targeting
b. Differentiated Marketing
 It is a market coverage strategy in which the
company goes for proper market segmentation as
depicted by the analysis of the total market
 The company goes for several products or several
segment approach which calls for preparing
different marketing mixes for each of the market
segment
 This is followed by Hindustan Lever that sell soap in
different segments
Targeting
c. Concentrated Marketing
 It is a market coverage strategy in which company
follows ‘one product one segment’ principle.
 The manufacturer gets maximum knowledge about
the segment’s needs and therefore acquires special
reputation.
 This strategy helps the small companies to stand
against a large corporation because small
companies can create niches in its one-product one
segment approach by providing maximum varieties
Choosing a Market Coverage Strategy
COMPARISON OF MARKET COVERAGE STRATEGIES
FOCUS
UNDIFFERENTIATED
MARKETING
DIFFERENTIATED
MARKETING
CONCENTRATED
MARKETING
PRODUCT
ONE/FEW
MANY
ONE/FEW
SEGMENT
ALL
MANY
ONE/FEW
MANY
ONE/FEW
MARKETING MIX ONE
Choosing a market coverage strategy
Undifferentiated
Marketing
Differentiated
Marketing
Concentrated
Marketing
Constrained Firm
Resources
More suitable
Least suitable
Most suitable
Common usage of
products
Most suitable
More suitable
Least suitable
Different need
satisfying products
Least suitable
Most suitable
More suitable
Market Positioning
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Each firm needs to develop a distinctive positioning for
its market offering
Positioning is the act of designing the company’s
offering and image to occupy a distinctive place in the
target market’s mind
Many marketers advocate promoting only one central
benefit and Rosser Reeves called it as ‘ a unique selling
preposition’ (USP)
Some of the USP includes ‘best quality’, ‘best service’,
‘lowest price’, ‘best value’, ‘safest’, ‘more advanced
technology’ etc
Market Positioning
Sometimes double benefit positioning may be necessary if two or more firms claim
to be best on the same attribute
 A company must avoid four major positioning errors:
1.
Under Positioning
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Some companies discover that buyers have only a vague idea of the brand. The
brand is seen as just another entry in a crowded market place
2. Over-positioning
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Buyers may have too narrow image of the brand
3.Confused Positioning
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Buyers might have a confused image of the brand resulting from the company’s
too many claims or changing the brand’s positioning too frequently
4.Doubtful Positioning
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Buyers may find it hard to believe the brand claims in view of the product’s
features, price or manufacturer
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Positioning Maps
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Is a two dimensional graph of how a product, brand or
company is perceived versus competition
These maps are drawn on important buying dimensions
of consumer for company products as well as
competitors products
Construction of Position Map
Evaluate the buying dimension of customer
 Select two buying dimensions of consumer - Eg. Price and
quality
 Identify the relative market share
 Draw the circles according to relative market share on two
dimension graph
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Positioning Maps for soaps
Godrej No:1
Cosmetics
Lifebuoy
Low price
Santoor
High Price
Ayurvedic
Bases of Positioning the Product
The bases for positioning strategies are:
1.
Attribute Positioning:
 A company positions itself on an attribute such as
size or number of years in existence
2. Benefit Positioning
 The product is positioned as the leader in a certain
benefit
3. Use or Application Positioning
 Positioning the product as best for use
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Bases of Positioning the Product
4. User Positioning
 Positioning the product as best for some user group
5. Competitor Positioning
 The product claims to be better in some way than a
particular competitor
6. Product Category Positioning
 The product is positioned as the leader in a certain
product category
7. Quality or Price Positioning
 The product is positioned as offering the best value