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Market Segmentation (Module 4)

Market Segmentation
 Usually, one product/marketing approach does not appeal to all
customers
 Market needs to be strategically divided into groups of
consumers with similar wants and needs
 Market Segmentation is the process of dividing consumers into
groups with similar wants and needs
 Undifferentiated Marketing: Instead of segmentation, company
targets consumers with a single offering
 Differentiated Marketing: Company targets different segments
using different marketing mixes
 Concentrated marketing: Company targets a single segment

Feasibility of Segmentation
 Market Segment must be:
Measurable: Data should be available to evaluate the attractiveness of
segmentation
Accessible: Segment should be accessible to the company
Substantial: Segment should be large and valuable
Unique: Segment should be distinguishable from other segments
Appropriate: Characteristics shouldn’t contradict the resources or the
objectives of the company
Stable: Company should be able to predict the behavior of the segment in
the future

The Bases for Segmentation

1. Geographic and Geodemographic:
 Geodemographic: Geographic and Demographic factors Combined
 One of the easier methods of segmentation
 Markets are divided into groups based on geography
 Countries, regions, cities, etc.

2. Demographic:
 Markets are divided into groups using demographic variables
 Age, Sex, Income, Education, etc.
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3. Behavioral:
 Markets are divided into groups based on behavioral measures:
attitudes, knowledge, loyalty, benefits sought, etc.
 Benefit segmentation: Segmenting consumers based on what
benefits they seek
 Example: a shoe manufacturer may segment its market as
those who seek style and those who seek quality
 User status: Segmenting consumers based on their user status
(users, non-users, potential users, etc...)
 Loyalty status: Consumers are segmented based on their loyalty
to the brand
4. Psychographic and lifestyle segmentation:
***Segmenting markets based on personalities, values, lifestyles, etc.
Market Targeting
 After Segmenting the market, decide which segment(s) should
be approached.
 The answer depends on a number of factors:
o The Size and Growth potential of the segments:
 Right size changes from company to company
 Attractiveness of the segments:

 Porter’s Five Forces of Competition can be used to measure

segment attractiveness
1. Degree of rivalry among Competition.,
2. Bargaining Power of Customers,
3. Bargaining Power of Suppliers,
4. Threats of New Entrants,
5. Threat of Substitute Products or Services
 Organization’s objectives and resources:
o The segment should match the company objectives
o The company should have the necessary resources

Breadth of Market Coverage

 Single Segment Concentration:
 Company focuses on a single segment
 Pursuing a single segment might be risky
 Selective Specialization:
 Focusing on several segments
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 Reduces risk associated with single segment concentration

 Product Specialization: Company specializes in a particular

product type and markets it to different segments
 Market Specialization: Company focuses on a segment and
satisfies its needs with various products
 Full Market Coverage: Company targets all (most) segments with
all the products they need
o Coverage approach to be selected depends on a
company’s current strategy, resources, and capabilities.

Product Positioning
 What place does the product occupy in the market?
 How is the product different from actual and potential
competitors?
 Ex: Omega watches and Swatch watches occupy different
places in the market

 Positioning is Designing an Image

 The following factors affect the Desired Image (position):
o (The product range, performance, prices, distribution
networks, advertising and promotion, customer profiles,
word of mouth, customers’ experiences, media used,
etc.)
Product Positioning
 Positioning has direct implications for the Marketing Mix
• Consider two companies, A and B:
 A produces low quality product, charges low prices, advertises
heavily, and distributes extensively
 B produces high quality products, charges high prices, advertises
very little, and distributes selectively
 It is apparent that A and B occupy different positions in the
market

 Consistency among the elements of the marketing mix

strengthens the positioning of a company:
o Identifying the possible competitive advantages
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o Deciding on the ones to be emphasized

o Implementing the positioning concept

Positioning as a Communication Strategy

***Ries and Trout argue that positioning is a Communication Strategy
o Even if the company identifies valuable competitive advantages,
it may fail to communicate these advantages properly, which
may lead to:
 Confused positioning: consumers are confused as to what
the company stands for because the company is making
too many claims about what it is or changing its claims
(repositioning) too often
 Over-positioning: consumers perceive company’s products
too expensive and fail to see the full range of products
 Under-positioning: company fails to communicate its
positioning clearly and therefore, the company’s position for
the consumer is vague
Repositioning: (Changing the Positioning of the Company)
 Dynamic nature of the market may require Repositioning
 Ex: Changes in the competition or consumer wants/needs
 Four strategies to Reposition :
1. Gradual repos: planned and continuous adaptation to the market
2. Radical repositioning: change in position due to a big gap
between what the market wants and what the brand offers
3. Innovative : shift to position not identified by competitors before
4. Zero posit.: maintaining same position over long period of time
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