UNIT-II

Market Segmentation and Targeting

Identifying Market Segments and Selecting Target Markets:
Market for product is big and diverse making it difficult for companies to be able to satisfy every
customer. Companies need to identify a certain set of customer within a market and work
towards satisfying them. This set of identification is market segment. Companies further need to
understand the intricacy of how this segment behaves and operates.

An approach known as target marketing is gaining prominence where companies identify the
market segment on similar needs and wants, select one of the market segments and then focus in
developing products and marketing program.

Earlier business operation was in the form of mass marketing. In mass marketing companies
produce a product in large quantities and serve this product to as many consumers as possible.
This made sense as markets were developing and not much variety was on offering. Now product
offerings have under gone radical change thanks to advertising and communication reach.
Therefore, companies look forward to marketing at segment, niches, local and individual level.

In segment marketing companies identify consumer with similar needs and wants. For
example, an airline is looking forward to providing no frills’ connectivity between metro cities
on US east coast compare. This segment is within airline industry but needs of customer is
different. T target audience is low budget travelers. However, customers within the segment look
for different attributes, for example, lunch or beverages as part of travel. Here companies can
offer this by charging the customer.

In niche marketing, companies target limited customer set. A niche market is worth
exploring where customers are willing to pay a premium for product, entry barriers are high and
market has growth potential. In local marketing, customers are local neighborhood, trading
stores, etc.

For example, many banks prefer local marketing for better understanding of client and provide
them right type of service. In individual marketing, companies look forward to satisfying needs
and wants of individual customer. Internet is facilitating the process of individual marketing,
where in customer log on to the site and creates products from available options. This process is
not feasible for high technology products like automobiles.

The market segmentation task has to follow a scientific process.

1. The first task is to group customer according to product and service they want.
2. The second task is to analyze customer by summarizing demographic, lifestyle and usage
pattern, which helps in the definition of market segment.
3. The third task is due diligence of the market for growth potential, competition and other
factors.
4. The fourth task is to profitability of market segment.
 5. The fifth task is to undertake positioning activity for pricing and marketing programs.
6. The sixth task is to explore different positioning and marketing strategies to explore the
market to its full potential.

There are various factors, which affect segmentation in a consumer market. Geographic is one
such factor, where a country is segmented on basis region, city, urban, rural and climate.
Demographically market is segmented on the basis of age, family size, gender, household
income, life stage, occupation, education, religion, race, generation and social class.

Further, segmentation can be done on the basis of lifestyle and personality traits. On an
individual level market can be segmented on the basis of attitude, belief and perception of
products, product awareness and usage pattern.

There are various factors, which affect segmentation in the business market. Demographic is one
such factor, which consists of type of industry, size of company and geographical location of the
company. Operational segmentation is on the technology class, customer consumption and
customer requirements.

Purchasing methodology includes segmentation based on purchase policy, purchase department

structure, relation with companies and market positioning of companies. The order Requirements
lets segmentation be based on nature of requirement and size of order. Personality trait
segmentation looks at loyalty and risk profile.

Companies have to finalize target market in which it wants to operate. After which segments
have to be identified based of various factors as discussed. Once segments are identified, in-
depth evaluation analysis has to be done come for a conclusion, whether to target one or several
segments.

Segmenting Consumer Markets:

How do we Segment Consumer Markets?
Market segmentation involves breaking it down into different groups or different segments that
are the same as each other but different from others well.
Below are some examples of Consumer Market Segments.
Behavioral Segments

One is approach to market segmentation involve consumer behavior. That is, how often do they
purchase, how much do they purchase, and which particular products do they purchase? In other
words, those are all different behaviors that consumers engage in. These are all good ways for us
to break out different segments.

Geographical Segments

Another way we can break down the market into different segments is by geography. We can
split it up by region or state or whatever makes sense. It might be different towns within a small
region that we operate in. Either way, if geographic differences are meaningful to our consumers
or our product, then that's a good way to segment the market.

Demographic Segments

Lastly a very common basis for segmenting the market is demographics. This is because these
things not only make consumers similar but it tends to affect the sorts of things that they
purchase or the ways they respond to advertisements. So, consumer ages or income levels or
levels of education or ethnic or cultural background. All of those things affect the way
consumers might respond to our marketing mix or our marketing strategy.

So demographics geography and consumer behavior are all different things that we could look at
when we figure out how we should segment our consumer markets.

Segmentation Basis:
Market Segmentation - Meaning, Basis and Types of Segmentation
What is Segmentation?

Segmentation refers to a process of bifurcating or dividing a large unit into various small
units which have more or less similar or related characteristics.

Market Segmentation

▪ Market segmentation is a marketing concept which divides the complete market set up
into smaller subsets comprising of consumers with a similar taste, demand and
preference.
▪ A market segment is a small unit within a large market comprising of like minded
individuals.
▪ One market segment is totally distinct from the other segment.
▪ A market segment comprises of individuals who think on the same lines and have similar
interests.
▪ The individuals from the same segment respond in a similar way to the fluctuations in the
market.

Basis of Market Segmentation

1. Gender

The marketers divide the market into smaller segments based on gender. Both men and
women have different interests and preferences, and thus the need for segmentation.

Organizations need to have different marketing strategies for men which would obviously
not work in case of females.

A woman would not purchase a product meant for males and vice a versa.
 The segmentation of the market as per the gender is important in many industries like
cosmetics, footwear, jewellery and apparel industries.

2. Age Group

Division on the basis of age group of the target audience is also one of the ways of
market segmentation.

The products and marketing strategies for teenagers would obviously be different than
kids.

Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams

Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products, Magazines,
apparels and so on

3. Income

Marketers divide the consumers into small segments as per their income. Individuals are
classified into segments according to their monthly earnings.

The three categories are:

High-income-Group
Mid-income-Group
Low-Income-Group

Stores catering to the higher income group would have different range of products and
strategies as compared to stores which target the lower income group.

Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to Vishal
Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to the lower
income segment.

4. Marital Status

Market segmentation can also be as per the marital status of the individuals. Travel
agencies would not have similar holiday packages for bachelors and married couples.

5. Occupation

Office goers would have different needs as compared to school/college students.

A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters
specifically to the professionals.
Types of Market Segmentation

▪ Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals. The individual’s
attitude, interest, value help the marketers to classify them into small groups.

▪ Behaviouralistic Segmentation

The loyalties of the customers towards a particular brand help the marketers to classify
them into smaller groups, each group comprising of individuals loyal towards a particular
brand.

▪ Geographic Segmentation

Geographic segmentation refers to the classification of market into various geographical

areas. A marketer can’t have similar strategies for individuals living at different places.

Nestle promotes Nescafe all through the year in cold states of the country as compared to
places which have well defined summer and winter season.

McDonald’s in India does not sell beef products as it is strictly against the religious
beliefs of the countrymen, whereas McDonald’s in US freely sells and promotes beef
products.

Target Market Selection

Target market represents a group of individuals who have similar needs, perceptions and
interests. They show inclination towards similar brands and respond equally to market
fluctuations.

Individuals who think on the same lines and have similar preferences form the target audience.
Target market includes individuals who have almost similar expectations from the organizations
or marketers.

Obese individuals all across the globe look forward to cutting down their calorie intake.
Marketers understood their need and came up with Kellogg’s K Special which promises to
reduce weight in just two weeks. The target market for Kellogg’s K Special diet would include
obese individuals.

Individuals who sweat more would be more interested in buying perfumes and deodorants with a
strong and lasting fragrance.
How to select the Target Market?
It is essential for the organizations or marketers to identify the set of people whom they want to
target? Marketers must understand the needs and expectations of the individuals to create its
target market.

The target audience must have similar needs, interests and expectations.

Similar products and brands should entice the individuals comprising the target market.

Same taglines and advertisements attract the attention of the target audience and prompt them to
buy.

To select a target market, it is essential for the organizations to study the following factors:

▪ Understand the lifestyle of the consumers

▪ Age group of the individuals
▪ Income of the consumers
▪ Spending capacity of the consumers
▪ Education and Profession of the people
▪ Gender
▪ Mentality and thought process of the consumers
▪ Social Status
▪ Kind of environment individuals are exposed to

Always remember you would never be successful if you try to impress everyone. Be specific.

Identify individuals who show similar characteristics. Put them in one group to create target
market within a broad market.

Let us go through the below example:

Why do people use soaps?

Some would use it against body odour

Some would use it to fight germs and infections
Some for a fair and spotless skin

In the above case the product is same but the needs of the individuals are different. Consumers
have different reasons as to why they use soaps.

Target Audience 1

Against body odour - Soaps with a strong and lasting fragrance.

▪ Marketing professionals
▪ Sales Representatives
▪ People exposed to sun for a longer duration
 ▪ Individuals travelling by public transport

Target Audience 2

To fight germs and infections - Soaps with medicinal properties

▪ Individuals working in hospitals, nursing homes and research centres

▪ Individuals working in unhygienic conditions

Target Audience 3

For a whiter skin - Soaps which improve the skin tone of individuals.

▪ Teenagers
▪ College students

Target Audience 4

For a younger looking skin - Soaps which help get rid of wrinkles and fine lines of ageing

▪ Individuals between age group 30 – 50 years or above

Individuals with identical requirements form the target audience. A 20 year old girl can’t be
targeted along with someone who is 50 years old.

Online matrimony sites target young individuals aspiring to get married. The organizations strive
hard to fulfill their expectations by providing suitable matches.

Other important factors like climatic conditions and geographical locations also play an
important role in deciding the target market.

Deodorants and perfumes sell like hot cakes in humid and warm places.

Target Market for Beverages

Bournvita, Complan, Maltova, Boost - Growing kids

Soft drinks (Pepsi, Coke) - Teenagers
Fruit Juice (Real, Tropicana) - Health conscious individuals
Energy Drinks(Red bull) - Professionals, Office goers

Segmentation and Targeting as a basis for Strategy Formulation:

Difference Between Segmentation and Targeting

In segmentation, the entire market of consumers is broken down into a number of groups. These
groups are segments that comprise consumers with similar characteristics. Of all these segments
the company chooses one segment to focus on, to offer their products. This is the process
of targeting.

We all know that, when all the consumers of the product are taken together, it makes up the
market for that product. But this is also true all the consumers are not the same. Therefore, the
consumers may differ in:

• Needs
• Motives
• Characteristics
• Buying habits.

With this, we can conclude that the market for the product is heterogeneous in nature. So, the
marketers can divide the entire market into submarkets. These sub-markets are homogeneous.

Comparison Chart of Segmentation Vs Targeting

BASIS FOR COMPARISON SEGMENTATION
Meaning Segmentation is the process of
classifying the market into
several approachable groups.
Concerned with Dividing up the market, by
grouping the customers with
similar needs.
Bases Need, Interest, Marital Status,
Sex, Buying Behavior, etc.
Stage of Target marketing First
TARGETING
Targeting is the process of
concentrating on a particular
segment of the market to offer
products, of all the segments
of the market.
Choosing the right segment
considering different factors.
Attractiveness of the segment
Second
Definition of Segmentation
Segmentation implies splitting the heterogeneous market into relatively distinct homogeneous
sub-market. To divide the market, specific criteria form the base.

These groups possess consumers, having common characteristics. The characteristics include
age, income, sex, personality traits, or behavior. It aims at determining the consumer groups
whose needs can be fulfilled with one common product. Above all, it ensures the concentration
of the efforts of the firm in an effective and economical manner.

This helps in tapping the market in a better manner. Besides, it also helps in optimizing products
and advertising them to consumer groups.

What is Market Segment?

Market Segment is that part of the entire market, wherein the consumers have one or more things
in common. And due to this reason, their product needs are the same.

It is a strategic marketing tool. This is used to determine the market and also to allocate
resources.

Important: The concept of segmentation was coined by Smith in the year 1957.

Assumptions of Market Segmentation

1. All the buyers are not the same.

2. Identification of consumers with similar characteristics. These can be background, need,
values, behaviors, and so forth.
3. There will be small sub-groups and often homogeneous in nature, as compared to the
market.
 4. It is easier for the marketer to satisfy a small group with similar customers than a large
group with diverse customers.

Requirements of Effective Segmentation

• Measurability: The segments have to be measurable. In other words, the quantification

of the segment should be possible so that the size can be estimated.
• Accessibility: Segmentation should be done in a manner that the marketer may get
through and serve the segments.
• Viability: Segments should be cost-effective as well as profitable to the marketer.
• Intensity: Attractiveness of segment is also ascertained by its intensity with regard to
inter-firm rivalry. A higher intensity indicates more competition between firms.
Therefore, it makes the segment unattractive for the marketer.

Definition of Targeting
After the creation of different segments, managers decide which segment is best to target. For
the purpose of targeting the company takes into account its ultimate objectives. In practice,
managers go for that segment that is highly profitable. But, the firm can also aim for that
segment that is less likely to attract competitors.
In other words, targeting is the process of choosing one segment, of all the segments, to aim for.
There are three strategic options are available to the marketers which are:

1. Concentrated Marketing: In this, the company focuses on a single segment at a time.

Another term used for this is niche marketing. In this, the marketer attempts to become
the blue-chip within that segment.
2. Differentiated Marketing: In this strategy, the marketer concentrates on more than one
segment at a time. Also, the company offers a differentiated marketing mix for each
segment. The alternative name of this is multi-segmented marketing.
3. Undifferentiated Marketing: In this, the marketer uses a ‘scattergun’ approach.
Therefore, the marketers offer one basic product that would serve the needs of people
belonging to different age groups and lifestyles.

The marketer’s decision about the adoption of strategy depends on these factors:

• Company’s Resources
• Product features and benefits
• Characteristics of the segment

Targeting Strategies
Standardization:
Here, the firm offers a similar product to different segments. For this, the same communication,
distribution, and pricing strategy are used.

Differentiation:
In this, the company differentiates its products to match the needs and expectations of different
segments of the market.

Focus:
It is a hybrid strategy. That is to say, it combines both standardization and differentiation
strategies. Also, the ‘core strategy’ remains unchanged, but differentiation is implemented to
fulfill the requirements of specific consumers.

Key Differences Between Segmentation and Targeting

The points listed below explain the difference between segmentation and targeting:

1. Segmentation is the practice of classifying the broad customer base into several sub-
groups. It may comprise both existing customers and prospective ones. In contrast,
targeting is the practice of evaluating the attractiveness of different segments and
choosing a segment to enter.
2. Segmentation is concerned with breaking down the heterogeneous market into sub-units.
These sub-units have consumers with homogeneous needs. However, in targeting, the
firm targets a particular segment considering various factors.
3. To divide the target audience into segments the marketers create groups. These groups
rest on shared characteristics like common needs, interests, lifestyles, or profiles. As
against, the attractiveness of the segment is the basis of targeting.
4. Segmentation is the first stage of target marketing. Whereas targeting is the second stage.

Bases for Market Segmentation

There are two approaches for segmentation of the market:

People-Oriented Approach

Here the segmentation relies on consumer characteristics. The bases can be:
 • Geographic Segmentation: In this, the segmentation of the consumer is location-
wise. The division is as per Country, State, Region (Urban or rural), Cities (Tier-I, Tier-
II, and Tier-III). This is because the climate, needs, preferences, and wants of people
living in different places vary. With that in mind, the company divides its market into
these segments geographically:
• Local Market
• Urban Market
• Rural Market
• Regional Market
• Global Market
Demographic Segmentation: Demography is concerned with the population of the country.
Here, many factors influence the needs, preferences, and usage rate of the consumers. The
demographic classification of the consumer can be done on the basis of:
• Age
• Sex
• Family Size
• Family Life Cycle
• Income
• Education
• Castes and Social Classes
• Occupation
• Nationality
• Religion
Psychographic Segmentation: Psychographic mean intrinsic virtues of an individual.
These characteristics form the basis of market segmentation. It may cover the following bases:
• Social Class
• Lifestyle
• Personality
 • Buying Motives

Product-Oriented Approach
Here, market segmentation depends on product characteristics. Also known as consumer
response segmentation or behavioral segmentation. The bases are:

• Occasions: There are certain products that consumers buy on specific occasions. Even,
the company advertises its products by associating its use with that occasion. These
occasions increase demand for that product. The products can be clothing, jewelry,
firecrackers, greeting cards, and so forth
• Benefits: Benefits derived by consumers from products are also a basis of segmentation.
It can be quality, services, economy, ease of use, safety, durability, warranty, and so
forth.
• User Status: User status also acts as a basis for dividing the market. They are:
• Non-users
• Ex-users
• Prospective users
• First-time buyers
• Occasional users
• Regular users.
Here, the company aims at converting all the users into regular users. And to do
so companies make use of different marketing techniques.
Usage Rate: The usage rate of different consumers vary. They include:
• Light users: Users are more in number but they buy a very little quantity.
• Medium users: Users are more in number and consume more quantity as
compared to the light users.
• Heavy users: Users are few in number but consume a very high quantity of that
product.
Loyalty Pattern: All the consumers are not the same in terms of loyalty. This means, there is a
varying degree of loyalty of consumers towards the brand. It is reflected through their buying
patterns. They are:
• Hard-core loyal
• Soft loyal
• Shifting loyal
• Brand switchers.
The company’s marketing efforts aim for increasing the number of hard-core
consumers.
Buyer Readiness Stage: The stages of readiness of consumers are different. They are:
• Unaware
• Aware
• Informed
• Interested
• Desirous
• Intended
Attitude towards products: The attitude of the buyers may differ greatly. This acts as a basis
for segmenting the market. The buyers include:
• Enthusiastic
• Positive
• Indifferent
• Negative
• Hostile.

Conclusion:

Above all, market segmentation deals with fragmenting consumers based on their needs. But,
targeting is all about selecting a segment of all the segments, to aim for.

Developing and Communicating a Positioning Strategy

In marketing, a positioning strategy highlights the unique features that distinguish a brand from
its competitors. It refers to how a brand wants to be thought of in the mind of customers relative
to competing brands. Learning more about positioning strategies can help you reach your target
audience.

What is positioning strategy?

Positioning is a marketing strategy, also referred to as product positioning, to promote your
product or service to customers relative to competing brands. The goal is to establish a single
defining characteristic for your brand in the consumer's mind. Effective positioning strategies
consider the brand's strengths and weaknesses, customer needs, and competitors' claims. Product
positioning allows a company or brand to illuminate areas where it can eclipse the competition.

3 keys to strategic positioning

Creating an image and shaping how consumers view a brand is a very purposeful and meticulous
act. Background research and an understanding of the market are crucial to your brand's success.
Product positioning begins well before creating brand identity and is crucial to branding. The
three keys to strategic positioning are often referred to as the three "C's":

1. Customer: Central to positioning is knowing your focus by identifying what the buyer
wants and needs. Research to see if there is a problem customers need a solution for and
what needs they might report via surveys, interviews and reviews. Listening to buyer
needs and placing a high importance on those needs is pivotal in getting customer
attention and loyalty.
2. Channel: Your channel, or sales team, is central to understanding customer needs and is
where you will likely find the majority of information for successful positioning. Your
channel is a direct connection to the customer, and through their experience, you can get
 information such as the customer profile, customer problems, competitive intelligence
and the purchase process. With experience in the entire sales cycle, channels will help
you identify brand strength to effectively focus your positioning strategy on what you do
well as a brand.
3. Competition: A final step in formulating a product position is paying attention to your
competition and its position. If yours is unique and easily differentiated from what is on
the market, then your positioning statement (your assertion of brand uniqueness) is
effective.

Seven types of positioning strategies:

There are several different routes to employ positioning strategies. Although there often needs to
be a central one, you can use several together for greater market reach and inform your
customers through different modes. The seven basic types of positioning strategies are:

1. Product characteristics or consumer benefits

In using this strategy for positioning, the focus is on quality. It addresses the brand's durability,
dependability or reliability and style. An example of positioning based on characteristics is when
toothpaste companies refer to the product as "refreshing" or "cavity-fighting." A slogan
like "stronger than steel" communicates strength and reliability in a market where similar
products exist but are differentiated through consistent product characteristics.

2. Pricing

This positioning strategy focuses on the relationship between price and quality and the
consumer's perception of the value of a product. In comparing jacket prices, a buyer might
assume that a jacket higher in price is higher in quality. Conversely, a lower-priced product will
position for affordability. Designer jeans boast quality because of cost, while department store
jeans are accessible to all.

3. Use or application

When a brand reaches a larger market or changes the purpose of the brand or product,
positioning may be based on its use or function. For example, a company that advertises its hot
tea during colder seasons begins to promote an iced version during the summer to alter its
brand's use to reach a larger market through modifying applications. Tape or adhesives often
used for home repairs can reposition the brand for decorative or craft projects. Widening the
reach accesses a different type of customer.

4. Product process

This is when a brand is associated with a specific user or class. Endorsements by famous
personalities or product influencers are examples. The athleticism exhibited by basketball players
who wear specific sneaker brands is expected to be associated with the brand in consumers'
minds. In purchasing that brand, the expectation is that all who wear it will be as athletic.
Another example is a shampoo, once specifically marketed only for babies, might change the
application to people with sensitive hair or scalps. Repositioning based on the application will
help a brand expand by sharing the market.

5. Product class

This consists of positioning two related products in the same product class simultaneously,
resulting in an increased customer base. By positioning dried milk as both a breakfast substitute
and a protein shake, the appeal is doubled to two different customer needs.

6. Cultural symbols

The objective of positioning based on a cultural symbol is to identify something like a symbol
significant to people that hasn't been used by competitors and harness it to associate your brand
with that symbol. Airlines have done this with cultural symbols to associate with royal treatment.

7. Competitors (relation to)

Using competitors as a frame of reference to differentiate a brand is another type of positioning.

Positioning your brand against competitors is an obvious challenge on quality and asserts that
your brand is superior with a competitive edge. For example, one chicken-based fast food
restaurant boasts a bovine mascot who encourages customers to eat chicken, aware that most
other fast-food chains market beef burgers.

Positioning in relation to or against competitors inferentially acknowledges similarities but

focuses on the differences, thus spotlighting your brand over the others.

-The End of Unit-2-

Thank You Students & GOD BLESS YOU.