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CHAPTER FOUR
MARKET SEGMENTATION,
TARGETING AND POSITIONING
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Market Segmentation, Targeting and

Positioning
• What are the different levels of market
segmentation?
• How can a company divide a market into
segments?
• How should a company choose the most
attractive target markets?
• What are the requirements for effective
segmentation?
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The Process of Target Marketing

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Process (cont…)
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1.MARKET SEGMENTATION
• Market segmentation is the process of dividing
the total, heterogeneous market for a product
in to distinct and meaningful groups of
buyers, each of which tends to be homogenous
in all significant aspects.
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Market Aggregation Vs. Market segmentation

Market aggregation
The total market is viewed as a single unit as one mass,
aggregate market.
The objective of aggregation is to fit the market to the
product

Market Segmentation
Views a market as being composed of many smaller,
homogenous units
The objective is to fit the product to the market believing that
each segment calls for a different product, promotional
appeal, or other element in the marketing mix.
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Rational for Segmentation

• buyers are too numerous,

• buyers are too widely scattered,
• buyers are too varied in their needs and buying
practices
• Companies themselves vary widely in their
abilities to serve different segments of the
market.
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Benefits of Market Segmentation

• Market segmentation is a customer - oriented
philosophy.
• Specifically, it has the following benefits
▫ Investing money and effort to most profitable market.
▫ Designing and developing products, which match
with the market demand as it focuses on selected
target markets;
▫ Choosing the best promotional activity and channel
of distribution at a relatively lower cost
▫ It helps to determine an appropriate marketing mix
strategy for a segment.
▫ Flexibility of organizational resources and programs
in the time of fierce competition can be done at a
lower cost.
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Levels of Market Segmentation

• Mass Marketing: same product to all consumers
(no segmentation)
• Segment Marketing: different products to one
or more segments
• Niche Marketing: different products to
subgroups within segments
• Micromarketing: Products to suite the tastes of
individuals or locations
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Bases for Segmenting Consumer

Markets
 Geographic: Nations, states, regions or cities
 Demographic: Age, gender, family size and life
cycle, or income
 Psychographic: Social class, lifestyle, or personality
 Behavioral: Occasions, benefits, uses, or responses
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Geographic Segmentation
• It divides the market into different
geographical units such as nations, regions,
states, counties, or cities
• Ex.- Mcdonalds globally, sell burgers aimed at
local markets, for example, burgers are made
from lamb in India rather then beef because of
religious issues. In Mexico more chilli sauce is
added and so on.
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Demographic Segmentation
• Divides the market into groups based on variables
such as age, gender, family size, family life
cycle, income, occupation, education,
religion, race, generation, and nationality
• Demographic variables have long been the most
popular bases for distinguishing customer needs
and preferences for certain reasons.
▫ customer wants, preferences and usage rates are highly
associated with demographic variables.
▫ they are easily quantifiable and accessible than most other
types of variables.
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Demographic (cont…)
• Age: Some products are marketed to specific age groups
for example nappies for babies, toys for children, clothes for
teenagers and so on.
• Income: Some products are marketed to consumers
with different income levels
• Family: Some products are marketed to consumers
with special family consideration
▫ Family Life Cycle
▫ Bachelor, marriage, married with children, retired, etc.
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Demographic (cont…)
• Gender segmentation is commonly used within
the cosmetics, clothing and magazine industry.
• Education: Some products are marketed to
consumers with certain educational levels
• Ethnicity: Some products are marketed to
consumers from specific ethnic backgrounds
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Behavioral Segmentation
• divides buyers into groups based on their
knowledge, attitudes, uses, or responses to a
product
• Purchase Occasion
• Benefits sought
• User status
• Usage rate
• Loyalty status
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Behavioral (cont…)
• Purchase occasion: with regard to time such as regular
and special occasion. For example, air traveler for
vacation, family or business.
• Benefits sought: from the product in relation to
individual interest such as low price, durability, general
product quality and so on.
• User status: with respect to the existence and
potentiality of customers such as non-users, ex-users,
potential and regular users of a product.
• Usage rate: with respect to the size of purchase such as
light users, medium users or heavy users.
• Readiness stage of the customers to buy a product
depending on their information, interest, intention and
degree of awareness of a product.
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Behavioral (cont…)
Loyalty status
• Hard-core loyals: Consumers who buy only
one brand all the time
• Split loyals: Consumers who are loyal to two or
three brands
• Shifting loyals: Consumers who shift loyalty
from one brand to another
• Switchers: Consumers who show no loyalty to
any brand
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Segmentation of business markets

• Organizational size
▫ Annual sales turn over
▫ Number of employees
▫ Volume of production
• Industry sector
▫ Banking (service)
▫ Manufacturing
▫ Mining, and others
• Geographical location
▫ Domestic and
▫ Export markets
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Requirements for Effective Segmentation

Measurable • Size, purchasing power, profiles

of segments can be measured.

Accessible • Segments must be effectively

reached and served.

Substantial • Segments must be large or

profitable enough to serve.

Differential • Segments must respond

differently to different marketing mix
elements & actions.

Actionable • Must be able to attract and serve

the segments.
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2.MARKET TARGETING

• Targeting is the process of :

▫ assessing the relative worth of different market

segments and

▫ selecting one or more segments in which to

compete- these become the target segment
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Selecting Target Market Segments

• The following are possible market coverage
strategies:
▫ Single segment concentration- One product for
one market segment
▫ Selective specialization- different products to
different selected markets
▫ Product specialization- One products for different
markets
▫ Market specialization- different products for the
same single market
▫ Full coverage- different products for all markets
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Target Market Selection

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Target Market Selection

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Target Market Selection

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Market Targeting
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Target market selection

 Undifferentiated marketing targets the whole market
with one offer.
• Mass marketing and focuses on common needs rather than
what’s different
 Differentiated marketing targets several different
market segments and designs separate offers for each.
• Goal is to achieve higher sales and stronger position
• More expensive than undifferentiated marketing
− Extra marketing research
− Forecasting, sales analysis, promotion, planning, and channel
management
− Extra promotion, advertising
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Target market selection

 Concentrated marketing targets a small share
of a large market; the marketer goes after a large
share of one or a few niches.
• Niche marketing is appealing when
Limited resources
Greater knowledge of consumer needs in the niches
Special reputation
• More effective and efficient
• Higher-than-normal risks
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Target market selection

 Micromarketing is the practice of tailoring products
and marketing programs to suit the tastes of specific
individuals and locations.
• Local marketing
• Individual marketing
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Target market selection

Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups (cities, neighborhoods and
stores).
• Benefits of local marketing
• Increased marketing effectiveness in competitive markets
• More customer-specific offerings
• Challenges of local marketing
• Increased manufacturing and marketing costs
• Less economy of scale
• Logistics
• Dilution of company image
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Target market selection

 Individual marketing involves tailoring products and
marketing programs to the needs and preferences of
individual customers.
 Also known as:
• One-to-one marketing
• Mass customization
• Markets-of-one marketing
 Mass customization is the process through which firms
interact one-to-one with masses of customers to design
products and services tailor-made to meet individual needs.
• Has made relationships with customers important in the new
economy
• Provides a way to distinguish the company against competitors
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Choosing a Market-Coverage Strategy

• The choice depends on:

 Company resources
 Product variability
 Product life-cycle stage
 Market variability
 Competitor’s marketing strategies
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3.MARKET POSITIONING
• Positioning is the identification of a particular
appeal that the firm can make to customers in
each target segment, which is designed to
convenience customers to choose that firm over
its rivals
• Product position is the way the product is
defined by consumers on important attributes—
the place the product occupies in consumers’
minds relative to competing products
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Choosing a Differentiation and Positioning

Strategy
• Steps in product positioning strategy:
1. Identifying a set of possible competitive
advantages to build a position
2. Selecting an overall positioning strategy
3. Choosing the right competitive advantages
▫ Competitive advantage is the advantage over
competitors gained by offering greater value either
through lower prices or by providing more benefits
that justify higher prices
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Positioning strategy selection (cont…)

Step 1: Identifying a set of possible competitive
advantages to build a position by providing
superior value from:
• Product differentiation on features,
performance, style or design
• Service differentiation through speedy,
convenient, or careful delivery
• Channels - coverage, expertise, and performance
• People – hiring and training better people
• Image – company or brand image
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Positioning strategy selection (cont…)

Step 2: Choosing the Right Competitive Advantages
• A difference is worth establishing to the extent that it satisfies
the following criteria:
• Important – delivers a highly valued benefit to target
buyers
• Distinctive – offers in a more distinctive way
• Superior – superior to other ways
• Communicable – visible to buyers
• Preemptive – cannot easily be copied
• Affordable – buyers can pay for the difference
• Profitable- help company to make normal profit
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Selecting an Overall Strategy

Step 3: Selecting an Overall Strategy
• Value proposition is the full mix of benefits upon which
a brand is positioned.
• More for more
• More for the same
• Same for less
• Less for much less
• More for less
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Developing a Positioning Statement

• Positioning statement states the product’s
membership in a category and then shows its point-
of-difference from other members of the category.
• “To (target segment and need), our (brand) is
(concept) that (point of difference).”
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End