MARKET SEGMENTATION, TARGETING AND POSITIONING

MARKET SEGMENTATION
INTRODUCTION
Markets consist of buyers who differ in one or more respects.
They may differ in their:-

Wants

Resources

Geographical locations

Attitudes and

Buying practices

It is therefore necessary for a marketer to segment his/her market.

MEANING OF MARKET SEGMENTATION
Marketing segmentation is
The act of dividing a market into distinct groups of buyers who might require separate
products, and /or marketing mixes. Or it is the sub-division of a market into smaller
homogenous sub-markets which the organization might successfully satisfy.
BENEFITS OF MARKET SEGMENTATION
The following benefits may be derived by a company as a result of market segmentation.
It may enable a company to select potentially profitable segment(s).
It enables a company to concentrate resources on the chosen segments
The analysis gives a company the opportunity to review developments and anticipate
changes in its chosen segment from competitive activity, legal / political changes, etc.
Sales opportunities are more likely to be effectively and fully exploited by staff when
target audience is properly defined.
Better services tailored to the needs of particular markets segments are offered.
Prices are tailored to customers situations and circumstances.
It may lead to improved level of services both in terms of sophistication and general
standards.

 Assists in identifying gaps. Market segmentation involves marketing research. During

this process, the marketer can also be engaged in Gap Analysis. Gap Analysis is a
process which aims to seek out differences between what markets need and want and
what is actually being supplied the gap.
Hence gap analysis will uncover:o Market needs for existing services not fulfilled
o Other needs where no services currently exist.
THE PROCESS OF MARKETS SEGMENTATION
In identifying market segments, three stages are involved:1. Survey
2. Analysis and
3. Profiling
Survey Stage
The researchers initially conduct informal interviews with groups of consumers to find out their;
-

Motivation
-

Attitudes and

Behaviour.

Based on the preliminary work, the researcher conducts more formal research by use of a
structured questionnaire using a representative sample of consumers.
Information sought includes;
a. The importance and rating consumers give to certain attributes of products
b. The extent to which people are aware of the existence of different brands of the
product
c. If brands awareness exists, how people rate different brands
d. How, when, where and by whom the product is used.
e. Attitudes towards the products category.
f. Demographic, psychographic, behavioural and geographic profiles of consumers
of the products.

Analysis stage
The researcher can then use appropriate statistical methods to analyze data in order to categorize
the segments based on the identified characteristics.
Profiling stages
Each segment is profiled with respect to its distinguishing attitudes behaviour,
demographics, psychographics and geographical habits.
Segment characteristics and make-up vary over time, so the procedures have to be
periodically carried out.
STAGES IN IDENTIFYING MARKET SEGMENTS

SURVEY

ANALYSIS

PROFILING

WHEN SHOULD SEGMENTATION BE EMPLOYED?

A marketer should ask himself the following questions if market segmentation is to work
effectively. The answer to each must be yes.
a) Can the market be identified?
The marketer should be able to identify which consumers are members of a particular
market segment. There must be some common characteristics that the consumers have.
b) Can the market identified be measured?
The characteristics that are common to a group of consumers should be measured in
terms of size, purchasing power and other characteristics.
c) Is the market substantial?
The market should be large enough to generate sales volumes that ensure profitability,
otherwise it will not be economical to design a unique marketing mix for it. i.e., is the
market worth the effort?
d) Is the market accessible?
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That is, can the market be reached effectively using promotion as well as distribution?
e) Is the market responsive?
Market segments must be defined in their willingness to purchase a product in response
to variations in the marketing mix.
f) Compatibility with corporate image
The market must be compatible with the firms objectives and corporate image.
If the six criteria for effective segmentation are met, marketers should then choose some means
(bases or variables) for segmenting the market.
VARIABLE FOR SEGMENTING CONSUMERS MARKETS
The following variables are commonly used to segment consumer markets.
Geographic,
Demographic,
Psychographic and
Behavioral variables
Geographic segmentation
This calls for dividing the market into different geographical units such as.
-

Nations

States

Regions West, north, Central , South etc

Countries,

Cities or

Neighborhoods

Attention should be paid to variations in geographical needs and preferences.

Geographical segmentation assists the seller to position retail outlets in most appropriate
locations as well as simply in identifying the needs on the basis of the consumers own location.

Demographic segmentation
This consists of dividing the market into groups on the basis of demographic variables such as:
Age, sex, family size, family life, cycle, income, education, occupation, religion, race and
nationality.
These variables are the most popular for distinguishing customer groups because,
-

Consumers wants and preferences are closely related to them.

They are easier to measure than most other variables.

a) Age
Consumers needs and wants change with age. Hence the market should be segmented as
young, old etc.
b) Gender
This can be employed to segment such market for clothes deodorants, lotions, magazines,
etc. thus the markets can be for men or women, males or female.
c) Family life cycle (FLC)
The product needs for a household very according to marital status and the present ages
of children. Thus family life cycle can be divided into:-

Single

Young, married with no children

Young, married with youth children

Older married with children, etc

d) Income
Marketers can segment the market according to the distribution of income.
e) Occupation
Variables include; bankers, teachers, farmers, clerks, students, housewives, secretaries,
etc. A marketer can choose to specialize in the needs of one occupation group or more.
f) Education
E.g.
- Some primary education
- Some high school education
- College education
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- University education etc.

g) Religion e.g. Muslims, Christians etc.
h) Race e.g. white, black etc
i) Nationality e.g. Asians, Africans etc.
j) Ethnicity groups
k) Generation- Each consumer is profoundly influenced by the generation in which he/she
grows up. This influences ones inclination to Music, politics etc.
Psychographic segmentation
Psychographics are psychological profiles of different consumers developed from research,
sometimes referred to as AIO (Attitudes,Interests and Opinion profiles)
In psychographic segmentation, buyers are divided into different groups on the basis of their:-

Social class

Lifestyle and /or

Personality characteristics

People within the same demographic group can exhibit very different psychographic profiles.
Consumers can thus be sub-divided on the basis of the following psychographic variables.
i.

Social class
Social class has a strong influence on peoples preferences. Marketers designing products
and or/ services for specific social classes build in those features that appeal to the target
social class.

ii.

Lifestyle
Consumers lifestyles are derived from their activities, interests and opinions. Each lifestyle group is influenced by different marketing mixes.

iii.

Personality
Types of personality groups may include;
-

Comparative authoritarian

Ambitious

Alertness to change
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Self-confident

Prestige conscious

Self image

Self concept

Behavioral segmentation
Buyers are divided into groups on the basis of their
-

Knowledge

Attitude

Behaviour

Use or

Response to a products

In this respect, behavioral variables that are used to segment consumer markets include;-

i.

Occasions

Benefits

User status

Usage rate

Loyalty status

Buyer readiness stage

Attitude

Individual segmentation

Occasions
Buyers can be distinguished according to occasions when they
-

have a need

purchase a product or

use a product

E.g. Occasions when public transport is used mostly.

ii.

Benefits
Buyers are classified according to the different benefits they seek from a product.
Benefit segmentation requires determination of:-

The major benefits that people seek from the product

The kind of the people who look for such benefits

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iii.

The major brands that deliver each benefit.

User status
Many marketers can be segmented into
-

Non users

Ex- users

Potential users

First time users and

Regular users of a product.

All these people require different marketing approaches.

iv.

Usage rate
Market can be segmented into

v.

Light,

Medium and

Heavy users of a group of products

Loyalty status
A market can be segmented by customer loyalty patterns. According to the loyalty status,
the buyers can be divided into:
- Hard core loyal Consumers who buy one brand all the time
Soft core loyal Consumers who are loyal to two or three brands
Shifting loyal Consumers who shift from favouring one brand to another.
Switchers Consumers who show no loyalty to any brand

A company should study the characteristics of its hard-core customers e.g. whether middle class,
larger families etc. By studying soft-core loyal, the company can pinpoint which brands are most
competitive with its own. By looking at customers who are shifting away from its brands, a
company can learn about its marketing weakness. The company should be aware that what
appears to be brand loyalty purchase may reflect:

Habits

Indifference,

low prices,

Non- availability of other brands

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vi.

Buyer readiness stage

At any given time, people are so different that;
-

Some people are aware

Some are informed

Some are interested,

Some are desirous of buying

Some intend to buy

All these make a big difference in designing the marketing programme.

vii.

Attitude
People in a market can be classified according to their degree of enthusiasm for a
product.
Five attitude- classes can be distinguished e.g.

viii.

Enthusiastic,

Positive

Indifferent

Negative and

Hostile

Volume segmentation
Involves grouping businesses by size and individual type.

Conclusion
Market segmentation reveals the market segment opportunities open to the firm
It has now to evaluate the various segments and decide on how many and which ones to
serve.s
In evaluating the segments, the firm should look at:
i.

The segment size and growth

ii.

Segments structural attractiveness, this is determined by:

-

Threat of intense segments rivalry

Threat of new entrants.

Threat of substitute products

Threat of growing bargaining power of buyers

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iii.

Threat of growing bargaining power of suppliers

Company objectives and resources.

Selecting the market segments

The company can go for;
i.

Single segment concentration

ii.

Selective specialization Selects a number of segments

iii.

Product specialization makes one product and sells to a variety of customers groups.

iv.

Market specialization firm concentrates on serving many needs of a particular customer

groups E.G Kenya uniforms

v.

Full market coverage serves all customer groups with all the products that it might
need.

MARKET TARGETING
INTRODUCTION
Market segmentation reveals the market segments opportunities facing the firm.
The firm therefore has to evaluate the various segments and
Decide on how many and which ones to serve.
EVALUATING THE MARKET SEGMENTS
In evaluating different market segments, the firm must look at the following factors.
Segment size and growth
Marketing segment has to be right size. Size can be measured in terms of sales
volume.
Companies should not only concentrate on sales volume but also on the growth
potential of the segment.
Segments structural attractiveness
A segment might have desirable size and growth characteristics and still not be profitable.
- It should evaluate the long run profitability of the market segments.
- It has to appraise its impact on profitability. Michael Porter has identified five forces
that determine the intensive long run attractiveness of the whole market or any other
segments within it.
Industry competitors
Potential entrants
Existence of substitute products
Bargaining power of buyers and
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 Bargaining power of suppliers.

The five threats they pose are: Threat of intense segment rivalry
A segment is unattractive if it already contains strong or aggressive competitors.
Threat of new entrants
A segment is unattractive if it is likely to attract new competitors who will bring in new
capacity, substantial resources and a drive for market share growth.
Threat of substitute products
A segment is unattractive if there exists actual or potential substitutes of the product.
Threat of growing bargaining power of buyers
A segment is unattractive if the buyers possess strong or increasing bargaining power,
are interested in low prices but high quality.
Threat of growing bargaining power of suppliers
A segment is unattractive if the suppliers possess a strong or increasing bargaining power.
They can raise prices or reduce the quality and quantity of products and services offered.

Company objectives and resources

- Even if the segment has positive size and growth and it is attractive, the
company has to consider its own objectives and resources.
- A segment can be dismissed because it does not fit in the companys
long- run objectives.
- Even if a segment fits the companys objectives, it must consider
whether it has the required skills and resources to succeed in that
segment.
Segment interrelationships
Segments selected should be inter-related in terms of costs, performance and technology
for effectiveness.
SELECTING THE MARKET SEGMENTS
From the results of segment evaluation, the company may select one or a few segments worth
entering.
It must decide which ones and how many to serve.
Five possible market coverage strategies should be considered:1. Concentrated marketing / Single segment concentration
The company selects only a single segment to concentrate on. This is because:
- The company may have a natural match to the segments success
requirements,
- The company may have very limited resources
- It might be a segment with no competitor
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Can be a segment that is a logical launching pad for further segment

expansion.
e.g. Volkswagen has concentrated on a small car market.
Advantages:- A firm achieves strong market position in the segment owing to its
greater knowledge of the segments needs and special reputation it builds.
- A firm enjoys many operating economies through product specialization,
distribution and promotion.
- It can earn high return on interest.
Disadvantages:- A particular segment can turn sour
- Competitors may decide to enter same market.
2. Selective specialization
(Multi-segment coverage)
- A firm selects a number of segments
- Each of which is attractive and matches its objectives and resources.
Advantages:-

A firms risks are diversified and even if the segment is unattractive it

can still make profits in other segments
It may result in synergistic effects
Promotion costs are lowered
More customers are captured.

Disadvantages:- Losses
- Expensive
- Needs more resources
3. Product specialization
A firm concentrates on making one product and selling it to a variety of customers groups.
This strategy works when;
- Demand is continuous
- There are homogenous goods
- Same resources are used.
Advantage: - A firm avoids putting all eggs in one basket.
Disadvantage
-

a lot of expenditure on advertisements.

4. Market specialization
A firm concentrates on serving many needs of particular customer group.
5. Full market coverage
Here, the firm attempts to serve all customer groups with all the products that they may
need. Large firms can cover a whole market in two broad ways, namely:- Undifferentiated marketing and
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Differential marketing

Undifferentiated marketing
(Market Aggregation)
The firm ignores market segments differences and goes after the whole market with one product
offer.
Focus
It focuses on what is common in the needs of buyers rather than what is different.
Design
It designs a product and marketing programme that will appeal to the broadest number of buyers.
Reliance
It relies on mass distribution and mass advertising.
The aim is to give a product a superior image in peoples minds.
Advantages:-

The narrow product line keeps down production, inventory and

transportation costs.
The absence of segmentation lowers the cost of marketing research and
product management.
The undifferentiated advertising programmes keep down advertising
costs.

Disadvantages:-

Lack pf personal touch.

New entrants
There may be intense competition in the large market segments
It may be unprofitable operating in large segments.

Differentiated marketing
Here, the firm operates in most segments of the market but designs tailored programmes for each
significantly different segment.
Advantages:-

Creates more total sales than undifferentiated marketing

Customer satisfaction is higher
Better defined marketing programmes

Disadvantages:It increases the cost of doing business e.g.

- Products modification,
- Production
- Administrative,
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Inventory
Promotion and
Distribution costs.

MARKET POSITIONING
Meaning
This is the act of designing a companys offering and image to occupy a distinctive place in the
target markets minds.
i.e. The act of creating differences between a companys offers and those of competitors.
A difference is worth establishing to the extent that is satisfies the following criteria.
1) Important : - the difference delivers a highly valued benefit to a sufficient number of
buyers
2) Distinctive: - the difference is delivered in a distinctive way.
3) Superiror: the difference is superior to other ways of obtaining the benefit.
4) Pre-emptive: the difference cannot be easily copied by competitors.
5) Affordable The buyer can afford to pay for the difference.
6) Profitable The Company will find in profitable to introduce the different product.
Positioning strategies:1) Attribute positioning
A company positions itself on an attribute e.g. size number of years in existence.
2) Benefit positioning
A product/firm is positioned as the leader in a certain class benefits.
3) Use or application positioning
Positioning a product as the best for some use or application
4) User positioning
Positioning a product as the best for some user group. e.g. Bic pen, food for
consumption.
5) Competitor positioning
The product claims to be better in some way than a named competitors product.
6) Product category positioning
The product is positioned as the leader in certain products category
7) Quality or price positioning
The product is positioned as offering the best value for the stated price.
How many differences to promote
1) Single benefit positioning
e.g. best quality , best service, lowest price, best value, safest, fastest most convenient ,
most advanced technology.
2) Double benefit positioning
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May be necessary if two or more firms claim to be the best on the same attributes
3) Triple benefits positioning
e.g. Smithkline Beecham promotes its aqua fresh toothpaste as offering these benefits.
- Anti- cavity protection
- Better breath
- Whiter teeth.
The challenge is to convince the consumers that the products offer all three.
As companies increase their number of claims for their brands, they risk disbelief and
loss of clear positioning.
Companies must avoid four major positioning errors.
1) Under Positioning
When buyers have only a vague idea of the brand
The brand is seen as just another entry in a crowded marketplace E.G When Pepsi
introduced its clear crystal Pepsi in 1993 (U.S.A) customers were distinctively
unimpressed. They didnt see clarity as an important benefit of a soft drink.
2) Over Positioning
Buyers may have too narrow an image of the brand.
3) Confused Positioning
Buyers might have a confused image of the brand resulting from the company making too
many claims or changing brand positions too frequently e.g. omo
4) Doubtful Positioning
Buyers might find it hard to believe the brands claims in view of the products features,
prices or manufacturers.

Individual Assignment (20 marks)

Select an industrial firm of your choice and:
i. Explain the variables it uses to segment its market.
ii. The pricing methods it uses for its products/services
iii. The benefits that would accrue to the firm from
marketing planning
iv. Prepare a marketing plan for that firm

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