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Market Segmentation
The market segmentation is mentioned as being one of the key elements of
modern marketing and is, as mentioned, the process of dividing the market
into several groups and/or segment(s) based on factors such as demographic,
geographic, psychological and behavioral factors. By doing so the marketers
will have a better understanding of their target audience and thereby make
their marketing more effective. This is due to the fact that by using the analytical
process that puts customers first, the marketer will get more satisfied
customers and thereby gain a great advantage over. Market segments can be
characterized in different ways on way is to characterize the preferences of the
target customers; homogeneous preferences, referring to customers that roughly
have the same preferences. Secondly there are diffused preferences which mean
that the customers vary in their preferences and finally clustered preferences
which mean that the natural market segments emerge from groups of consumers
with shared preferences.
When talking about market segmentation it is necessary to briefly mention
the three areas of marketing which is to be taken into consideration when
market a product.
The first area is mass marketing. It covers the area of mass producing, mass
distributes and mass promotes on product to all. However, marketers have
realized the great variety in each individual customer and therefore the market
segmentation is a helpful tool for the marketers to customize their marketing
programs for each individual. The second area is product differentiated
marketing. The marketer produces two or more products that display different
features, styles, quality, sizes etc.
The third, and dominating, area is target marketing. The marketer distinguishes
among a variety of market segments, chooses one or more of the segments
and then develops products and marketing mixes customized to each segment.

Why Segment the market?
Facilitates right choice of target market
Facilitates effective tapping of the chosen market
Makes the marketing effort more efficient & economic
Helps identify less satisfied segments & concentrate on them
Helps offer a compelling value-proposition to each segment
Ensures a proper match between chosen market & company resources
Divide the market for conquering the market
Criteria for selecting Market Segments
A segment should be measurable. It means you should be able to tell how
many potential customers and how many businesses are out there in the
A segment should be accessible through channels of communication and
distribution like: sales force, transportation, distributors, telecom, or internet.
Segment should not have frequent changes attribute in it.
Make sure that size of your segment is large enough to warrant as a segment
and large enough to be profitable
Unique Needs
Segments should be different in their response to different marketing efforts
(Marketing Mix).
Segmentation for consumer markets
Demographic segmentation
The demographic segmentation divides customers into segments based on
demographic values such as age, gender, family size, family life cycle,
income, occupation, education, religion, race, generation, social class and
The demographic segmentation is often used in market segmentation for the
reason that the variables are easy to identify and measure. Furthermore the
demographic variables are associated with sale of many products and services
and finally they provide a description of the target customers so media buyers
and others can target a desired target market.
Each of the variable are useful knowledge when segmenting markets and
some of the above mentioned variables will be elaborated in the following.
Age and life-cycle segmentation
The consumers needs and wants change with age. Therefore some companies
use age and life-cycle segmentation, where age and the life-cycle determine
the marketing approach. Using telephones (landline and mobile) as an example
the marketers must take into consideration that although some 70-years-old use a
landline telephone, e.g. Due to the lack of technological knowledge, others may
only use a mobile telephone. Thus, marketers using the age and life-cycle
segmentation must be careful to guard against stereotypes.
Furthermore the age and life-cycle segmentation are associated with
behavioral characteristics and buying patterns. An example of this is single
people who have a tendency of purchasing new fashionable items due to the fact
that they have no other economic obligations. This is opposed to married people,
who have a large economic obligation and thereby they prioritize their economy
Gender segmentation
Gender segmentation is used to differentiate the needs and wants between men n
due to the fact that men and women have different attitudes toward a
product. The gender segmentation has long been applied in connection with
clothing, hairstyling, cosmetics and magazines. Furthermore it must be taken
into consideration that metro sexuality has become a common gender-factor
and thus the marketers must not only define a product as being masculine or
Income segmentation
Income segmentation divides the market into different income groups. It is used
in automobiles, clothing, cosmetics, financial services and travel. Many
companies within the mentioned categories seek to target the high-income
customers. Others seek to target the customers with a lower income in
order to gain consumer loyalty and lessen the competitive pressures.
However, companies must consider the fact that the income does not
always predict the most suitable customers for a given product due to the
fact that some customers may have other preferences and prioritize their
money different.
Generation segmentation
Each generation is influenced by the times in which they grow up i.e. the
music, the movies, politics and other significant events characteristic of that
period. Marketers therefore market to a generation by using icons and images
that is relatable according to the generation.
Social Class segmentation
Social class segmentation divides the customers according to their
preferences in cars, clothing, home furnishings, leisure activities, reading
habits and retailers. However, although the tastes of social classes changes,
many companies design products for specific social classes.
3.3 Geographic segmentation
The geographic segmentation divides customers into segments based on all areas
such as nations, states, regions, counties, cities or neighborhoods. A company
can target one or more areas and must be aware of the fact that data
according to geographic segmentation may vary due to population shift.
It is important to segment according to geographic, due to the fact that the g
behavior of the customers are influenced on where they live, work etc.
Therefore many companies customize their products, advertising, promotion and
sales efforts to fit the needs of the geographical variables.
The geographic segmentation is furthermore useful when there are differences in
a location where a product is marketed. The differences can be caused by
cultural factors, traditions, politics etc. and furthermore the differences can be
significant in one segment, whereas in other segments the differences can be
minor and less significant.
Furthermore as a result of an increase in the globalization today the geographic
segmentation has been linked to other differences in socio-economic and
demographic characteristics. The result of this type of segmentation is referred to
as geodemographics. The geodemographic segmentation combines the
geographic segmentation with the demographic segmentation and thereby
combines the study of the target customers with where they live. Hence the
geodemographic classifies the customers according to where they live in
comparison to the way the social class defines consumers by their occupation and
thereby the companies are more capable of predicting consumer behavior.
Psychographic segmentation
The psychological variables derive from two principal types of customer;
personality profiles and lifestyle profiles (psychographics). Psychological
profiles are often used as a supplement to geographic and demographics
when these does not provide a sufficient view of the customer behavior.
While the traditional geographical and demographical bases (sex, age,
income etc.) provide the marketer with accessibility to customer segments, the
psychological variables provide additional information about these and
enhance the understanding of the behavior of present and potential target
Psychographic segmentation therefore divides people according to their attitudes,
values, lifestyles, interests and opinions. Furthermore some marketers have used
personality variables to segment the markets, for example the landline
telephone is outdated (Appendix 1) and a commercial could appear to target
elder people whereas the actual purpose is that the commercial is aimed at a
much broader personality group.
Behavioral segmentation
Behavioral segmentation is based on the customers attitude toward, use of, or
response to a product. Many marketers believe that the behavioral variables such
as occasions, benefits, user status, usage rate, buyer-readiness stage, loyalty
status and attitude are the best starting points for constructing market
segments and thus these variables will be described further in the following.
Occasions are when the customers are divided into segments based on the time of
day, week, month and year. People is therefore being grouped according to the
time (occasions) on which they get the idea to buy, make their purchase or
use the purchased item.
This can for example be during the time around holidays such as Christmas. A
company may choose one kind of marketing strategy around Christmas and
another at Valentines Day in February and thus being able to target as
many desired target customers as possible.
Benefit segmentation divides the customers according to the different benefits
they may seek from a product. Benefit segmentation seeks to find the benefits
people look for in a certain product, the kinds of people who look for each benefit
and the brands that deliver each benefit.
Furthermore the benefit segmentation identifies market segments by casual
factors rather than descriptive factors such as e.g. demographics.
User status
By segmenting according to nonusers, ex-users, potential users, first-time
users and regular users of a product a company can customize its
marketing for each group. Where regular users of a certain product request
one kind of marketing approach, potential users may request another kind
of marketing approach, and thus it is necessary to divide the customers into
different segments and target them in different ways.
Usage rate
The usage rate segmentation divides the customers according to how much they
use a product. They are divided into groups of non-users, light, medium and
heavy product users and companies often seek to target one heavy user rather than
several light users. This is due to the fact that the heavy users constitute a
small percentage of the market but account for a high percentage of the
total buying. Thus a company should seek to adapt their marketing strategy
according to these customers.
Buyer-Readiness stage
Buyer-readiness stage refers to peoples awareness and interest of the product.
Some people are unaware of the product, some are aware, some are
informed, some are interested, some desire the product and some intend to
buy. The purpose is to lead the customer along so he or she will purchase the
product in the end.
Loyalty status
A market can also be segmented according to the loyalty of the customers.
It is assumed that customers are always loyal by buying the same product. These
customers are referred to as hard-core loyal. Other people that are loyal toward
two or three brands and buy these on a random basis are referred to as
being split loyal. A third group of people are those who shift from one brand to
another and staying with that brand for a period of time until they shift to
another brand. These customers are referred to as shifting loyal. The fourth and
final group of loyal are those who do not show loyalty or preference towards one
particular brand, but rather buy a product or brand that is on sale or
available at the time of the occasion. These customers are referred to as
Segmenting business markets
We can segment business markets with some of the same variables we use in
consumer markets, such as geography, benefits sought, and usage rate, but
business markets also use other variables.
Industry: Which industries; should we serve?
Company: What size companies should we serve?
Location: What geographical areas we use?
Operating Variables
Technology: What customer technologies should we focus on?
User of nonuser status: Should we serve heavy users, medium users, light
users, or nonusers?
Customer capabilities: Should we serve customers needing many of few
Purchasing Approaches
Purchasing- Function Organization: Should we serve companies with
highly centralized or decentralized purchasing organization?
Power Structure: Should we serve companies that are engineering
dominated, financially dominated and so on?
Nature of existing relationship: Should we serve companies with which we
have strong relationship or simply go after the most desirable companies?
General purchasing policies: Should we serve companies that prefer
leasing? Service contract? Systems purchases? Sealed budding?
Purchasing criteria: Should we serve companies that are seeking quality?
Serve? Price?
Situational Factors
Urgency: Should we serve companies that need quick and sudden delivery
or service?
Specific application: Should we focus on certain application of our
product rather than all applications?
Size or order: Should we locus on large or small orders?
Personal Characteristics
Buyers-sellers similarity: Should we serve companies whose people and
values are similar to ours?
Attitude toward risk: Should we serve risk-taking or risk-avoiding
Loyalty: Should we serve companies that show high loyally to their
Market Targeting
In the segmentation process the second stage is market targeting. Once the
marketer has identified the segments it must be decided how many and
which customer groups/segments to target. With respect to the decision to
which customer groups or segments to target the company may choose one or a
combination of the following marketing strategies; mass marketing strategy
(undifferentiated marketing), single segment strategy (differentiated marketing) or
multi-segment strategy (concentrated marketing). Undifferentiated marketing
With undifferentiated marketing a company does not consider the
differences between each segment and chooses to target the market with
one offer. Thereby the company focuses on the similar needs of the customers
rather than the differences. However, when using undifferentiated marketing, it is
not possible to meet every customers needs and thus it is not possible to satisfy
all customers. Furthermore companies may meet hard competition from
companies using e.g. concentrated marketing (see below).
Differentiated marketing
Differentiated marketing is a marketing strategy where a company target
many market segments with offers specially designed for each segment. Thereby
the company may have a higher sale and thus stronger position within each
market segment. However, differentiated marketing also means increased costs
of doing business due to the separate marketing plans for each segment.
Therefore companies must consider increased sales against increased costs when
using differentiated marketing strategy.
Concentrated marketing
Concentrated marketing, also referred to as niche marketing, involves going after
a larger share of one or a few segments. By using niche marketing the company
can market more effectively due to a strong position and great knowledge of the
customers needs within each segment. Although concentrated marketing can be
highly profitable it also involves a high risk due to the fact that the company relies
on one or a few segments for their whole business and will suffer greatly if the
segment turns sour.
By considering these above mentioned factors the company can decide on
viability of particular segments and ensure that resources are appropriately.
Positioning Strategy

Positioning strategies can be conceived and developed in a variety of ways. It can
be derived from the object attributes, competition, application, the types of
consumers involved, or the characteristics of the product class. All these attributes
represent a different approach in developing positioning strategies, even though
all of them have the common objective of projecting a favourable image in the
minds of the consumers or audience. There are seven approaches to
positioning strategies:

Using Product characteristics or Customer Benefits as a
positioning strategy
This strategy basically focuses upon the characteristics of the product or customer
benefits. For example if I say imported items it basically tell or illustrate a variety
of product characteristics such as durability, economy or reliability etc. Lets take
an example of motorbikes some are emphasizing on fuel economy, some on
power, looks and others stress on their durability. Hero Cycles Ltd. positions first,
emphasizing durability and style for its cycle.

At time even you would have noticed that a product is positioned along two or
more product characteristics at the same time. You would have seen this in the
case of toothpaste market, most toothpaste insists on freshness and cavity
fighter as the product characteristics. It is always tempting to try to position
along several product characteristics, as it is frustrating to have some good
characteristics that are not communicated.

Pricing as a positioning strategy
Quality Approach or Positioning by Price-Quality Lets take an example
and understand this approach just suppose you have to go and buy a pair of jeans,
as soon as you enter in the shop you will find different price rage jeans in
the showroom say price ranging from 350 rupees to 2000 rupees. As soon as look
at the jeans of 350 Rupees you say that it is not good in quality. Why? Basically
because of perception, as most of us perceive that if a product is expensive will be
a quality product whereas product that is cheap is lower in quality. If we look at
this Price quality approach it is important and is largely used in product
positioning. In many product categories, there are brands that deliberately attempt
to offer more in terms of service, features or performance. They charge more,
partly to cover higher costs and partly to let the consumers believe that the
product is, certainly of higher quality.

Positioning strategy based on Use or Application
Lets understand this with the help of an example like Nescafe Coffee for many
years positioned itself as a winter product and advertised mainly in winter but the
introduction of cold coffee has developed a positioning strategy for the summer
months also. Basically this type of positioning-by-use represents a second or third
position for the brand, such type of positioning is done deliberately to expand the
brands market. If you are introducing new uses of the product that will
automatically expand the brands market.

Positioning strategy based on Product Process
Another positioning approach is to associate the product with its users or a class
of users. Makes of casual clothing like jeans have introduced designer labels to
develop a fashion image. In this case the expectation is that the model or
personality will influence the products image by reflecting the characteristics and
image of the model or personality communicated as a product user. Lets not
forget that Johnson and Johnson repositioned its shampoo from one used for
babies to one used by people who wash their hair frequently and therefore need a
mild people who wash their hair frequently and therefore need a mild shampoo.
This repositioning resulted in a market share.

Positioning strategy based on Product Class
In some product class we have to make sure critical positioning decisions For
example, freeze dried coffee needed to positions itself with respect to regular and
instant coffee and similarly in case of dried milk makers came out with instant
breakfast positioned as a breakfast substitute and virtually identical product
positioned as a dietary meal substitute.

Positioning strategy based on Cultural Symbols
In todays world many advertisers are using deeply entrenched cultural symbols
to differentiate their brands from that of competitors. The essential task is to
identify something that is very meaningful to people that other competitors are not
using and associate this brand with that symbol. Air India uses maharaja as its
logo, by this they are trying to show that we welcome guest and give them royal
treatment with lot of respect and it also highlights Indian tradition. Using and
popularizing trademarks generally follow this type of positioning.

Positioning strategy based on Competitors
In this type of positioning strategies, an implicit or explicit frame of reference is
one or more competitors. In some cases, reference competitor(s) can be the
dominant aspect of the positioning strategies of the firm, the firm either uses the
same of similar positioning strategies as used by the competitors or the advertiser
uses a new strategy taking the competitors strategy as the base.

Differentiation strategy

Why Differentiate?
The concept of being unique or different is far more important today than it was
ten years ago. The key to successful marketing and competing is differentiation.

Differentiation based on Opportunities in the External Environment

Trends or Fads:
Firms can provide a differentiated product to satisfy the needs of customers who
are responding to trends or fads.
Government Policy:
Changes in government policy provide many opportunities for firms to
develop differentiated products.
Social Causes:
Social causes can create demand for differentiated products that help people
further their cause of choice.
Uses of differentiation strategy:
A successful differentiation strategy creates a line of defense against
Porter s five forces: rival competitors, buyers, suppliers, potential entrants,
Threats of potential entrants
Product differentiation helps reduce the threat of new entry by forcing potential
entrants to an industry to absorb not only the standard costs of beginning business
but also the additional costs associated with overcoming current firms' product
differentiation advantages.
Threat of rivalry
Each firm in an industry attempts to carve out its own unique product niche.
Rivalry is not reduced to zero, for these products still compete with one
another for a common set of customers, but it is somewhat attenuated, because
the customers each firm seeks are different.
Threat of substitutes
Firms reduce the threat of substitutes by making a firm's current products appear
more attractive than substitute products.
Threat of suppliers
Powerful suppliers can raise the prices of the products or services they provide.
These increased supply costs must be passed on to a firm's customers in the form
of higher prices. A firm without a highly differentiated product may find it
difficult to pass its increased costs on to customers, since these customers
will have numerous other ways to purchase similar products or services from a
firm's competitors.
Threat of buyers
When a firm sells a highly differentiated product, it enjoys a near
monopoly in that segment of the market. Buyers interested in
purchasing this particular product must buy it from a particular firm.
Techniques for studying the bases of product differentiation :
Multidimensional Scaling
I t i s a t e c h n i q u e f o r a n a l y z i n g t h e p e r c e i v e d similarity of a set
of products or services. It is a pure inductive method for describing the bases of
product differentiation in an industry.
Regression Analysis of the determinants of product price
It is more deductive
approach to the empirical analysis of bases of product differentiationapproach,
the analyst proposes a wide range of characteristics that may havean impact
on a product's price.