Marketing and Segmentation

Lecture 4
Market Segmentation & Targeting
MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.
Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Key Learning:
• What is Segmentation?
• Understanding different Levels of market segmentation
• How to divide a market into segments
• Learning the key requirements for effective segmentation
• What is targeting?
• How to choose the most attractive target markets

What is Market Segmentation
A market segment consists of a group of customers who
share a similar set of needs and wants.
Market Segmentation is a process of defining and
subdividing a large homogenous market into clearly
identifiable segments having similar need, wants or
demand characteristics.

Background: Marketing?
Markets and Trade have a long history. But Marketing does not exist as a
term until the early 1900.
Some antecedents of Marketing are:

 First departmental store in 1650 by Mitsui Family in Japan.
 First newspaper advertisement (coffee) in England in 1652.
 First brand named product was soap (Pears) in 1870.
 First packaging a laundry soap in England in 1880.

 First marketing research by Curtis Publishing in 1911.

Market: Segmentation
Today, Mass Marketing is largely replaced by a 3 step strategy
Market Matching Strategy SEGMENTATION
Dividing the marketplace into

submarkets that require different
marketing mixes.
POSITIONING
Placement of the products by creating a

differentiation in the eyes of customers
and competitors
Process of reviewing market
segments and deciding which
one(s) to pursue

Market Segmentation: Definition
Group consumers according to their similarity
related to a particular product category.
The process of dividing a market into distinct subsets

(segments) of consumers with common needs or
characteristics and selecting one or more to target with
a distinct marketing mix.
A process used to divide large heterogeneous markets into small

markets that can be reached more efficiently and effectively with
products and services that match their unique needs.

Market Segmentation: Why we need it?
▪ Better market segmentation creates profitable customers
▪ Market segmentation allows you to;

▪ Target the right segment to approach
▪ Which means you can position your offer more effectively
▪ Which leads to better marketing mixes
▪ Which leads to your customers choosing your offer
▪ Word of mouth (and telling their friends).

Ford Motors: Any Color you like, as long as its Black.
The Model T Ford is regarded as the
first car to be built in 1908, using a
production line.

Henry Ford wanted to produce
quickly. So Black paint was used,
that dries more quickly so the only
colour one could have was Black.
Soon Ford lost share to companies
that offered other colours.

Market Segmentation
If you’re not segmenting, then

you’re not marketing

Targets GEN Y Consumers: TOYOTA Scion
Reference: 2009 Pearson Education, Inc.

Targets Women: DOVE

How?: Segment consumer markets
Geographic
Demographic
Psychographic
Behavioral

Market Segmentation: Variables

Market Segmentation: Variables

Behavioral Segmentation
Decision Roles Behavioral Variables

• Initiator • Occasions
• Influencer • Benefits
• Decider • User Status
• Buyer
• Usage Rate
• User • Buyer-Readiness
• Loyalty Status
• Attitude

Segmentation: Can you identify the target segment?
Identify variables?
Age: ?
Gender: ?
Population: ?
Psychographic: ?
Social Class: ?
Life Style: ?
Personality: ?
Life stage: ?
Income: ?
Education: ?
Religion: ?
Culture: ?
Country: ?
Segmentation: Can you identify the target segment?
Identify variables?
Age: ?
Gender: ?
Population: ?
Psychographic: ?
Social Class: ?
Life Style: ?
Personality: ?
Life stage: ?
Income: ?
Education: ?
Religion: ?
Culture: ?
Country: ?
Segmentation: VALS
VALS "Values, Attitudes And Lifestyles" is a research methodology used for
psychographic market segmentation. Market segmentation is designed to guide
companies in tailoring their products and services in order to appeal to the people most
likely to purchase them.
VALS was developed in 1978 by social scientists (Arnold Mitchell and his colleagues).
It was immediately embraced by advertising agencies. VALS draws heavily on the work
of Harvard sociologist David Riesman and psychologist Abraham Maslow.
Arnold Mitchell used statistics to identify attitudinal and demographic questions that
helped categorize adult American consumers into one of nine (9) lifestyle types:
survivors (4%), sustainers (7%), belongers (35%), emulators (9%), achievers (22%),
I-am-me
MRKT 209 – Spring (5%),
2019 - College experiential
of Business Administration (7%), societally conscious (9%), and integrated (2%).
(CBA), IAU.
The survey done among 1,635 Americans and their partners, who responded to an SRI
International survey in 1980.

Segmentation: VALS

Define: Targeting
Targeting refers to picking a specific group or small set of groups to which a

business will advertise.
The idea behind the concept of Targeting, is based on the idea that, because
it's not really possible to make or do something that will please everyone, a
business has to specialize.
Segmentation VS Targeting: Segmentation breaks up an entire market into
different groups, targeting is the process of selecting exactly which one of the
groups will be the focus of advertising efforts

Market Targeting: Effective Segmentation Criteria

Market Targeting: Michael Porter’s 5 Forces

Market Targeting: Michael Porter’s 5 Forces
These forces determine the intrinsic long run attractiveness of a market or market segment.

Targeting: Evaluating & Selecting the Market Segments
Two decisive factors are:
▪ Overall attractiveness of the segment (Business potential/ Profitability)
▪ Company’s objective and resources (Market size, resource required)


Possible Levels of Segmentation
Marketers have a range of possible levels that can guide their target market
decisions. Different approach is applied to each of the below four levels.

Marketing
FULL MARKET FULL MARKET SINGLE-SEGMENT INDIVIDUAL

COVERAGE COVERAGE CONCENTRATION MARKETING
When a company try to
serve all customers with all
the products they may
need. They cover the
whole market as
differentiate or
undifferentiated
marketing.

Marketing
FULL MARKET MULTIPLE

SEGMENT SINGLE-SEGMENT INDIVIDUAL
COVERAGE
SPECIALIZATION CONCENTRATION MARKETING
Sells a certain product to

several different market
segments. Building strong
reputation
MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.on specific
product area. Product
maybe supplanted by
entirely new technology.
Firm concentrates on
serving many needs of a
customer group. Building
strong reputation among
this customer group.
Customer group may suffer
budget cuts or shrink in size

Marketing

COVERAGE
Markets to only one

segment.
Example: Porsche on
sports cars and
Volkswagen on small
cars.
Deep knowlegdge on
segment’s need Strong
market presence.
Operating economies by
specializing its
production, distribution
and promotion.

Marketing

COVERAGE
Segments of one. One to
one marketing Major
source- Internet
Customerization mass
customization that
empowers consumers to
design products and
services according to
their needs. Firms
provide platform and
tools and rents to
customers the means to
design their own product.
Raises costs

Key learning of the topic:
Marketing is based on three critical activities, segmentation, targeting and positioning. Markey segments
are identifiable distinct groups within a market.
The major segmentation variable for the consumer market are geographic, demographic, psychographic
and behavioral. these are applicable singly or in combination. To be profitable marketers use all three
segments must be measurable, substantial, accessible, differentiable and actionable.
A market can be target at four levels; mass, multiple segments, single (niche) and individuals. Only the
big and financially very secure companies adopt this approach. Many companies target multiple
segments defined in various ways such as various demographic groups who seek the same product
benefit.
Niche marketing is a narrowly defined target market. Today due to Globalization and internet niche
marketing is more applicable and becomes feasible for many businesses.
Today more companies are practicing mass and individual customization. The future is likely to see
more individual consumers take the initiative in designing products and brands.
Marketers must target carefully, avoid any controversy or unfair advantage of any vulnerable group such
as children. All marketing related activities must be socially acceptable and in a responsible manner.

Marketing and Segmentation

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Lecture 4

Market Segmentation & Targeting

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Some antecedents of Marketing are:

 First brand named product was soap (Pears) in 1870.

 First packaging a laundry soap in England in 1880.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Market Matching Strategy SEGMENTATION

Dividing the marketplace into

Placement of the products by creating a

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

The process of dividing a market into distinct subsets

a distinct marketing mix.

A process used to divide large heterogeneous markets into small

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

▪ Market segmentation allows you to;

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

If you’re not segmenting, then

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Reference: 2009 Pearson Education, Inc.

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Decision Roles Behavioral Variables

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Targeting refers to picking a specific group or small set of groups to which a

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

Two decisive factors are:

▪ Overall attractiveness of the segment (Business potential/ Profitability)

▪ Company’s objective and resources (Market size, resource required)

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

MRKT 209 – Spring 2019 - College of Business Administration (CBA), IAU.

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

FULL MARKET FULL MARKET SINGLE-SEGMENT INDIVIDUAL

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

FULL MARKET MULTIPLE

Sells a certain product to

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

FULL MARKET MULTIPLE

Markets to only one

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

FULL MARKET MULTIPLE

Market Planning & Applications – MBA 2020 - IU Dr. Ahmad Faraz

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