Segmentation, Targeting, Positioning
Identifying Market Segments and
Selecting Target Markets
Segmentation is the process of placing together
consumers into groups such that consumer
heterogeneity on specified characteristics is
minimized within groups and maximized across
groups e.g. value for money buyers as distinct
from economy buyers.
Segmentation can also be thought of as taking a
market and dividing them into groups based on
some common characteristic e.g. diet-colas,
regular colas.
Mass Marketing or Undifferentiated Marketing
e.g. Ruf & Tuf Jeans, Model T Henry Ford
Segment Marketing - Cars
Niche Marketing – specialize to a narrowly defined
customer group – Temple jewellery for South Indian
women wanting to take part in cultural programmes
Levels of Market
Segmentation
Local Marketing – Athica for IIMB and around
One to One Marketing
Individual Marketing
Mass customization –
ability to prepare on a
mass basis individually
designed products
Flexible market offering – naked solution containing the
No frills product and discretionary options that are
Priced extra such as A/C, power windows, moon roof
Homogenous preferences e.g. bite size candies, eclairs
Segment Marketing
(Patterns of Segment
Markets)
Diffused Preferences – House Buildings
Clustered Preferences – distinct clusters in the
Market also called natural market segments
e.g. car market
Why is segmentation useful ?
 Segmentation helps firm tailor their marketing programs
 focuses an actionable and accessible set of the market.
 cuts of wasteful expenditures on unwanted consumers
 matches needs and wants of specific groups of buyers to firm’s offerings
 stimulates demands through multi-products for multi-segments
 resource allocation to segment specific marketing mix activities will be made
more efficient
 Segmentation is a way to plan rather than explain
Criteria for Segmentation
1.
Measurable – size, purchasing power etc – finding the size of
market for refurbished home appliances is not that easy.
2.
Substantial – large enough for the firm to find it as a marketing
opportunity – Premium car market in India may
not be substantial to warrant local manufacture
3.
Accessible – segments can be effectively reached and served –
in communication, serving last mile is not easy
4.
Differentiable – segments should be differentiable from one another –
if rural consumers and urban consumers show
no difference in features of mobile handsets
5.
Actionable – It should be possible for formulating marketing programs for
serving the segment (it cannot add segment descriptors
so easily) – how to sell money for value products such as
expensive watches and pens – not only the monetarily rich
buy it, the mentally rich also buy – how to identify
Bases for Consumer Market Segmentation
Geographic - Rural / Urban; metropolis/city/town/village;
modern retail stores/kirana stores / mandis/ haats
Demographic – Age, Family Size (nuclear or joint ), gender,
Income, Occupation, Education, SEC, religion, race,
Nationality, social class
Bases
Psychographic – Use of Psychology and demographics
* Lifestyle (AIO) – Nike, Benetton, Gatorade
* Personality – Femina – woman of substance
* Values – HiDesign leather accessories – consumers
who hold the value ‘style and elegance in a classical sense’
Behavioral Segmentation – next slide
Behavioral Segmentation - based on buyer’s knowledge of, attitude towards,
use of, or response to a product
Occasions – Marriage, Birth – Archies and Hallmark cards
Benefits – In soaps - Dettol – antiseptic, Lux – Beauty
User Status – Non users, first time users, potential users, regular user
Usage rate – Light users, medium users, heavy users
Buyer Readiness State – Cold Prospect, Hot Prospect
Loyalty status – Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers
Attitude – enthusiastic, positive, indifferent, negative, hostile
Bases of Industrial Market Segmentation
Nested Basis
Nested Approach
Demographic
Operating variables
Purchasing
approaches
Situational factors
Personal Characteristics
Classification of Nests
Personal
characteristics
Inner middle nest
Innermost nest
Outer nests
Situational factors
Company variables
Operating
Demographics
Purchasing approaches variables
Purchase process
Purchase
decision
Demographic Variables
Industry, Company Size (Large, SMEs) , Location
Operating Variables
Technology, User or Nonuser status (light, medium, heavy users)
Customer requirements (few services or extended requirements)
Purchasing Variables
Purchasing function approach (centralized or decentralized), Power
structure( technology top, finance top, marketing top), Nature of
existing relationships( old firms or new firms), general purchasing
policies ( leasing, service contracts, sealed bidding ) , purchasing
criteria (quality, service, price)
Situational Factors
Urgency of requirement, size of order
Personal Characteristics
Loyalty, attitude toward risk, some similarities between buyer-seller
Segment based on existing relationship
First time prospects, novices, sophisticates
Segment based on purchasing criteria –
price oriented customers, solution oriented customers
strategic value customers (enterprise selling or partners)
Super Segments
A set of segments sharing some exploitable similarity
Perfume manufacturers target to modern women rather
only to working women or rich women. Both segments have
a similarity of attempting to obtain – independent identity
Methods to Segmentation
Self Selection
Profiling
Competitive Market Structuring
Attitudinal Segmentation - Survey Method
Self Selection
One of the powerful means of segmenting markets is to allow consumers to
Self select by mass-customizing the marketing offer
American Express works on self selection of customers on dimension of
extent of spending by offering different categories of rewards for light and
heavy users ; Heavy users – 2 airline round trip tickets to extra-spending
within six months; Light users – money towards purchase of car by saving
in five years.
Profiling
Method of describing a set of consumers on market
Characteristics and attaching a tag description to it.
Basic profiling of customers in toothpaste
market
Segment 1
Segment 2
Age
15-40 years
3-60 years
Family size
Small (<4)
Large (5+)
Education
Well educated
Moderately educated
Psychographics
Conservative shopper
Utilitarian shopper
Behavioral
Quality seeking twice a
day brusher, loyal
Economy seeking
once-a-day brusher
deal-prone
Possible segment
descriptor
Upwardly mobile
nuclear family
Conventional large
family
Demographic
Segment Profiling Based on Cluster Analysis
The severe sufferers
The severe suffers are the extreme group on the potency side of the
Market. They tend to be young, have children, and be well educated.
They are irritable and anxious people, and believe that they suffer more severely
than others. They take the ailment seriously, fuss about it, pamper themselves, and
keep trying new and different products in search of greater potency. A most
advanced product with new ingredients best satisfies their need for potency and fast
relief, and ties in with their psychosomatic beliefs.
The Active Medicators:
The Active Medicators are on the same side of the motivational spectrum.
They are typically modern suburbanites with average income and education.
They are emotionally well adjusted to the demands of their active lives.
They have learned to cope by adopting the contemporary beliefs of seeking
help for every ill, and use remedies to relieve even minor signs of ailments
and every ache and pain. In a modern product they seek restoration of their
condition and energy, mental recovery, and a lift for their active lives.
They tend to develop strong brand loyalties.
The Hypochondriacs
The hypochondriacs are on the opposite side of the motivational spectrum.
They tend to be older, not as well educated, and women. They have
conservative attitudes toward medication and a deep concern over health.
They see possible dangers in frequent use of remedies, are concerned over
side effects, and afraid of remedies with new ingredients and extra potency.
To cope with these concerns they are strongly oriented toward medical
authority, seeking guidance in treatment and what products they should use.
They hold rigid beliefs about the ailment and are disciplined in the products
they use and how frequently they use them. They want a simple, singlepurpose remedy that is safe and free from side effects and backed by doctors
or a reputable company.
The Practicalist:
The practicalists are in the extreme position on this side of the
motivational spectrum. They tend to be older, well educated,
emotionally the most stable, and least concerned over their
ailment or the dangers of remedies. They accept the ailment and
its discomforts as part of life, without fuss and pampering. They
use a remedy as a last resort, and just to relieve the particular
symptom. They seek simple products whose efficacy is well
proved, and are skeptical of complicated modern remedies with
new ingredients and multiple functions.
(Wells 1975, p.203; Journal of marketing research published by
the AMA)
Competitive Market Structuring
Caffeine
Non-cola
Caffeine-Free
Cola
Regular
Diet
C
CF
Regular
Diet
C
CF
C
CF
BRANDS
Market Structure of Soft drinks
C
CF
Ground
Coffee
Mildness
Brim
Instant
sanka
Taste
Maxwell
Store brands
Folger’s
HillsBros
Chuck Full o Nuts
Regular
Mildness
Nescafe’
Freeze Dried
Mildness
Taster’s Choice
Folger’s
Maxwell house
Taste
Decaffeinated
Caffeinated
Maxium
Taste
Regular
Mildness
High Point
Freeze dried
Mildness
Sanka
Sanka
Nescafe’
Taste
Taster’s
Choice
Brim
Taste
Hierarchical definition of the coffee market with perceptual maps in each submarket (Urban
Johnson and Brudnick 1981)
Competitive Market structuring can also be obtained, by putting brands
Together in groups based on choice probabilities. In this way, market segments
Are a group of consumers who are homogenous in terms of probabilities of
Choosing different brands in a product class
Coke, Pepsi – consideration set
Coke
Pepsi
Descriptor
Segment 1
Segment 2
Segment 3
0.50
0.5
0.30
0.70
0.70
0.30
Hedonist or
Variety Seeker
Next Generation Seekers of
Protagonist
‘Real Thing’
Attitudinal Segmentation – Survey Method
1.
Whom to Interview.
In a survey of finding segments of customers who are travelers / tourists
to Europe, it is not appropriate to count only those who have been to
Europe, because that accounts for a small percentage. You have to
talk to potential travelers
2.
Frame of reference for questioning
When you are questioning customers on vacations do you take (a) overall
experience of vacations (b) last vacation
3.
Find different ways of segmentation
For example : Vacation to Europe, segment on (a) Favourability towards
Europe (b) Segmenting on Income brackets © segmenting customers
based on desires sought on their last vacation
In a study on 1750 interviews for vacationing the following segments were
Uncovered – (1) visit friends and relatives segments (2) good for family sightSeeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer