Unit II

MARKET SEGMENTATION

It is the process of dividing a broad heterogeneous consumer or business market, normally

consisting of existing and potential customers, into smaller and defined homogenous sub-groups
of consumers based on shared characteristics such as demographics, interests, needs, or location.
The member of these groups share similar characteristics and usually have one or more than one
aspect common among them which makes it easier for the marketer to craft marketing
communication messages for the entire group.

A market segment needs to be homogeneous. There should be something common among the
individuals in the segment that the marketer can capitalise on. Marketers also need to check that
different segments have different distinguishing features which make them unique. But
segmenting requires more than just similar features. Marketers must also ensure that the
individuals of the segment respond in a similar way to the stimulus. That is, the segment must
have a similar type of reaction to the marketing activities being pitched. A good market segment
is always externally heterogeneous and internally homogeneous.

Importance of Market Segmentation:

Companies often deal with customers who belong to different age groups, have varied interests,
and are motivated by different triggers. Segmenting these potential customers into different
groups helps marketer:

 To identify the needs, priorities, buying motives, and preferences of the customers.
 To make a customer orientation approach for the company.
 To define marketing goals, targets, and strategies.
 To identify areas for potential customers.

This helps companies in the following ways:

 Efficient targeted digital advertising: Allows companies to create better-target

advertising according to age, interests, location, and spending patterns, among other
things.
 Creating clear and specific marketing messages: Marketing segmentation helps
companies understand the needs and expectations of their targeted group; this lets them
communicate directly with their target audience.
 Effective marketing efforts: Understanding the target audience can help companies
develop marketing mix and strategies that clients will be more responsive to.
 Attracting potential customers: Direct marketing messages enable companies to reach
out to the right clientele and potentially convert them into customers.
 Increasing profits: The process can save time, resources, and money in marketing
campaigns, and ultimately enhance a business’s profitability.

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  Differentiate from the competition: Clear marketing messages can make the brand
stand out in the market.
 Increasing brand loyalty: Understanding the target customers can help companies
connect with their clients and build brand loyalty.

Bases Of Market Segmentation

Segmenting is dividing a group into subgroups according to some set bases. These bases range
from age, gender, etc. to psychographic factors like attitude, interest, values, etc.

1. Gender: Gender is one of the most simple yet important bases of market segmentation.
The interests, needs and wants of males and females differ at many levels. Thus,
marketers focus on different marketing and communication strategies for both. This type
of segmentation is usually seen in the case of cosmetics, clothing, and jewellery industry,
etc.
2. Age Group: Segmenting market according to the age group of the audience is a great
strategy for personalized marketing. Most of the products in the market are not universal
to be used by all the age groups. Hence, by segmenting the market according to the target
age group, marketers create better marketing and communication strategies and get better
conversion rates.
3. Income: Income decides the purchasing power of the target audience. It is also one of the
key factors to decide whether to market the product as a need, want or a luxury.
Marketers usually segment the market into three different groups considering their
income. These are:
 High Income Group
 Mid Income Group
 Low Income Group

This division also varies according to the product, its use, and the area the business is operating
in.

4. Place: The place where the target audience lives affect the buying decision the most. A
person living in the mountains will have less or no demand for ice cream than the person
living in a desert.
5. Occupation: Occupation, just like income, influences the purchase decision of the
audience. A need for an entrepreneur might be a luxury for a government sector
employee. There are even many products which cater to an audience engaged in a
specific occupation.
6. Usage: Product usage also acts as a segmenting basis. A user can be labelled as heavy,
medium or light user of a product. The audience can also be segmented on the basis of
their awareness of the product.
7. Lifestyle: Other than physical factors, marketers also segment the market on the basis of
lifestyle. Lifestyle includes subsets like marital status, interests, hobbies, religion, values,
and other psychographic factors which affect the decision making of an individual.

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Types Of Market Segmentation

1. Geographic Segmentation: Geographic segmentation divides the market on the basis of

geography. This type of market segmentation is important for marketers as people
belonging to different regions may have different requirements. For example, water
might be scarce in some regions which inflates the demand for bottled water but, at the
same time, it might be in abundance in other regions where the demand for the same is
very less. People belonging to different regions may have different reasons to use the
same product as well. Geographic segmentation helps marketer draft personalized
marketing campaigns for everyone.
2. Demographic Segmentation: Demographic segmentation divides the market on the
basis of demographic variables like age, gender, marital status, family size, income,
religion, race, occupation, nationality, etc. This is one of the most common segmentation
practice among marketers. Demographic segmentation is seen almost in every industry
like automobiles, beauty products, mobile phones, apparels, etc and is set on a premise
that the customers’ buying behaviour is hugely influenced by their demographics.
3. Behavioural Segmentation: The market is also segmented based on audience’s
behaviour, usage, preference, choices and decision making. The segments are usually
divided based on their knowledge of the product and usage of the product. It is believed
that the knowledge of the product and its use affect the buying decision of an individual.
The audience can be segmented into –
 Those who know about the product or those who don’t know about the product –
non-users
 Ex-users
 Potential users
 Current Users
 First time users
 Light users
 Heavy users

On the basis of brand loyalty customers can be segmented as brand loyal, brand-neutral, or
competitor loyal.

4. Psychographic Segmentation: Psychographic Segmentation divides the audience on the

basis of their personality, lifestyle and attitude. This segmentation process works on a
premise that consumer buying behaviour can be influenced by his personality and
lifestyle. Personality is the combination of characteristics that form an individual’s
distinctive character and includes habits, traits, attitude, temperament, etc. Lifestyle is
how a person lives his life. Personality and lifestyle influence the buying decision and
habits of a person to a great extent. A person having a lavish lifestyle may consider
having an air conditioner in every room as a need, whereas a person living in the same
city but having a conservative lifestyle may consider it as a luxury.

[Note: HUL divides its potential customer base into 3: striving, aspiring and affluent]

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TARGETING

Targeting in marketing is a strategy that breaks a large market into smaller segments to
concentrate on a specific group of customers within that audience. It defines a segment of
customers based on their unique characteristics and focuses solely on serving them. Target
marketing involves breaking a market into segments and then concentrating your marketing
efforts on one or a few key segments consisting of the customers whose needs and desires most
closely match your product or service offerings. It can be the key to attracting new business,
increasing sales, and making your business a success. Instead of trying to reach an entire market,
a brand uses target marketing to put their energy into connecting with a specific, defined group
within that market.

Target market refers to a specific and well-defined consumer segment within the business’s
serviceable market which the business wants to sell its products and services and direct its
marketing efforts to. The purpose of evaluating market segments is to choose one or more
segments to enter. Target market selection is the choice of which and how many market
segments the company will compete in. When selecting their target markets, companies have to
make a choice of whether they are going to be focused on one or few segments or they are going
to cater to the mass market. The choice that companies make at this stage will determine their
marketing mix and positioning plank.

Five Different Types of Targeting

1. Behavioral Targeting (aka audience targeting)

Behavioral targeting is the practice of segmenting customers based on web browsing behavior,
including things like pages visited, searches performed, links clicked, and products purchased. If
you add mobile and physical store data into the mix, that can also include things like location,
and in-store purchases. Visitors with similar behaviors are then grouped into defined audience
segments, allowing advertisers to target them with specific, relevant ads and content based on
their browsing and purchase history. An oft cited example of behavioral targeting is retargeting
ads.

2. Contextual Targeting

Contextual targeting involves displaying ads based on a website’s content. Think: placing an ad
for dishware on a recipe site, or an ad for running shoes on a running forum. It’s kind of like the
digital version of placing a print ad in a niche magazine. It works based on the assumption that
someone reading a page about running is likely to also be interested in your ad for sneakers.

3. Search Retargeting

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Search retargeting is when you serve display ads to users as they browse the web based on their
keyword search behavior. Campaigns are set up with keywords that you choose and that are
relevant to your business or products. For example, if you are a furniture retailer, you might want
to serve display ads to users who have searched for “leather couch”, or “leather sectional”. This
kind of advertising is successful because it uses intent to connect with shoppers. The shopper
may or may not know about you, but they are showing interest in a product or solution that you
offer. Think of this as an upper funnel, prospecting strategy.

4. Site Retargeting

Site retargeting, also known as just “retargeting”, involves showing display ads to users who
visited your site and then left without completing a purchase to browse elsewhere. It differs from
search retargeting in two important ways: it is not keyword based, and it is targeting people who
are already familiar with your brand, or who at least have visited your site once and showed
interest in your offerings. Because of this brand recognition, the ROI of site retargeting is often
extremely high. Think of this as a lower funnel, conversion focused strategy.

5. Predictive Targeting

Predictive targeting uses all of the web browsing data from behavioral targeting, layers in 3rd
party data (if available), and applies powerful AI and machine learning to analyze the data and
predict future buying patterns based on past behaviors. The AI that powers predictive targeting
can make connections between behaviors, identify similar and related products for upselling and
cross-selling, and zero in on the shoppers most likely to convert at any given time—all in an
instant. And the more data it analyzes, the more it learns and the better its models become.

Importance of Targeting

Targeting in marketing is important because it’s a part of a holistic marketing strategy. It impacts
advertising, as well as customer experience, branding, and business operations. When your
company focuses on target market segmentation, you can do the following:

1. Speak directly to a defined audience

Marketing messages resonate more deeply with audiences when readers can relate directly to the
information. Brands that have a large, varied market of customers often struggle with creating
marketing campaigns that speak directly to their audience. Because their viewers are very
different, few slogans or stories can resonate with each person on a personal level. Through
target marketing, you can alleviate this problem and focus on crafting messages for one specific
audience.

2. Attract and convert high-quality leads

When you speak directly to the people you want to target, you are more likely to attract the right
people. Your marketing will more effectively reach the people most likely to want to do business

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with you. When you connect with the right people, you are then more likely to get high-quality,
qualified leads that will turn into paying customers.

3. Differentiate your brand from competitors

When you stop trying to speak to every customer in your market and start focusing on a smaller
segment of that audience, you also start to stand out from competitors in your industry. When
customers can clearly identify with your brand and your unique selling propositions, they will
choose you over a competitor that isn’t specifically speaking to or targeting them. You can use
your positioning in marketing to make your brand more well-known and unique.

4. Build deeper customer loyalty

The ability to stand out from competitors by reaching your customers on a more personal, human
level also creates longer-lasting relationships. When customers identify with your brand and feel
like you are an advocate for their specific perspectives and needs, they will likely be more loyal
to your brand and continue to do business with you over a longer period of time.

5. Improve products and services

Knowing your customers more intimately also helps you look at your products and services in a
new way. When you have a deep understanding of your target audience, you can put yourself in
their shoes and see how you can improve your offerings. You can see what features you can add
to better serve your customers.

6. Stay focused

Finally, the benefit of using targeting in marketing is that it also serves to help your brand and
team. Target marketing allows you to get more specific about your marketing strategies,
initiatives, and direction of your brand. It helps you clarify your vision and get everyone in the
organization on the same page. You have more direction when it comes to shaping upcoming
plans for both marketing and the business as a whole. A focused approach helps you fully
optimize your resources, time, and budget.

POSITIONING

Positioning means the process by which marketers try to create an image or identity in the minds
of their target market for their product, brand, or organization. Brand positioning is at the heart
of marketing strategy. It is the act of designing the company’s offer and image so that it occupies
a distinct and valued place in the target customer’s minds. A good brand positioning helps to
guide marketing strategy by clarifying what a brand is all about, how it is unique, how it is
similar to competitive brands, and why consumers purchase it. Thus, in simple words brand
positioning refers to the position or image which a brand enjoys in the minds of present and
potential customers.

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It also includes activities like determining the market segments towards which major marketing
effort will be directed on behalf of a product and suggesting methods to differentiate products
from competing ones. Thus, the whole process is meant to bring together the market segments
and products. The process can be used to retain existing products and services as well as to
introduce new ones. The strategies used for this purpose are product differentiation and
segmentation. These strategies are often employed by the firms who want to engage in non-price
competition in markets characterised by imperfect or monopolistic competition. Both the
strategies involve financial investment in promotional programmes.

Product differentiation means making the product different in some manner from the
competitive products. It is an important product strategy in a competitive market. A marketer
cannot control the price of his product which is identical in all respects to the products of
competitors.

Product differentiation can offer the following advantages:

(i) It helps in facing competition.

(ii) It facilitates some control over the price of the product.

(iii) It enables the marketer to create brand loyalty.

(iv) Awareness of differences in the product helps to boost the firm’s goodwill.

(v) It provides ideas for advertising.

However, product differentiation tends to increase the problem and costs of advertising and sales
promotion. Firms with limited product line find product differentiation particularly useful.

Bases of Positioning/Positioning Strategies:

1. Positioning by product attributes and benefits

It is to associate a product with an attribute, a product feature, or a consumer feature. Sometimes

a product can be positioned in terms of two or more attributes simultaneously. The price/quality
attribute dimension is commonly used for positioning the products. A common approach is
setting the brand apart from competitors on the basis of the specific characteristics or benefits
offered. Sometimes a product may be positioned on more than one product benefit. Marketers
attempt to identify salient attributes (those that are important to consumers and are the basis for
making a purchase decision).

2. Positioning by Price/Quality

Marketers often use price/quality characteristics to position their brands. One way they do it is
with ads that reflect the image of a high-quality brand where cost, while not irrelevant, is
considered secondary to the quality benefits derived from using the brand. Premium brands

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positioned at the high end of the market use this approach for positioning the product. Another
way to use price/quality characteristics for positioning is to focus on the quality or value offered
by the brand at a very competitive price. Although price is an important consideration, the
product quality must be comparable to, or even better than, competing brands for the positioning
strategy to be effective.

3. Positioning By Use or Application

Another way is to communicate a specific image or position for a brand to associate it with a
specific use or application. Surf Excel is positioned as stain remover ‘Daag achhe hai!’

4. Positioning By Product Class

Often the competition for a particular product comes from outside the product class. For
example, airlines know that while they compete with other airlines, trains and buses are also
viable alternatives. Manufacturers of music CDs must compete with the cassette industry. The
product is positioned against other product, while not exactly the same, and provide the same
class of benefits. Air India tagline in around 1971 was, “your palace in the sky”.

5. Positioning By Product User

Positioning a product by associating it with a particular user or group of users is yet another
approach. Example: Microsoft positions its Surface Pro Tablet as ideal for students.

6. Positioning By Competitor

Competitors may be as important to positioning strategy as a firm’s own product or services. In

today’s market, an effective positioning strategy for a product or brand may focus on specific
competitors. This approach is similar to positioning by product class, although the competition is
within the same product category in this case. For example in 2013 Reckitt Benckiser lauched
Dettol Kitchen with an ad campaign comparing it with HUL’s vim.

7. Positioning By Cultural Symbols

This is an additional positioning strategy wherein the cultural symbols are used to differentiate
the brands. Examples are Humara Bajaj and Tata Tea. Each of these symbols has successfully
differentiated the product it represents from competitors.

Repositioning: refers to the process of changing a target market's understanding or perception of

a product or service. A product's positioning involves what customers think about its features and
how they compare it to competing products. There are four generic repositioning strategies.

 Same product and target market, change in the image of the product
 Product repositioning (modifying the product for target market)
 Intangible repositioning (same product different segment)
 Tangible repositioning (both product and target market are changed)