MARKET SEGMENTATI ON & TARGET MARKET STRATEGIES

UNDERSTANDING SEGMENTATION

What is Market? PEOPLE BUT - not just ANY people, they have to have • Willingness to buy • Purchasing power (money) • Authority to buy

CUSTOMER / CONSUMER: Different people with different characteristics • Brand Preferences • Product – use behavior • Attitude & Perception

LEVEL OF DIFFERENCES

We need different marketing mix for different group of customers .

PROCTER & GAMBLE (MULTINATIONAL COMPANY)
– – – – 11 brands of Laundry Detergent 8 brands of Hand Soap 6 brands of Shampoos 4 brands of liquid washing detergents, toothpaste & coffee – 3 brands of floor cleaner & toilet tissue – 2 brands of disposable diapers & cooking oil

• TARGET MARKET - When the
seller/marketer design particular marketing mix & market segment for specific group of people

• Two (2) ALTERNATIVE TARGET MARKET STRATEGIES:
– Shotgun Approach (one program, broad target – treat the total market as a single unit) – Rifle Approach (Separate programs, pinpointed targets)

STEPS IN TARGET MARKET
• Market Segmentation • Market Targeting • Market Positioning MARKET SEGMENTATION Dividing a market in to distinct groups of buyers with different needs, characteristics, or behavior who might require separate product or marketing mixes.

MARKET SEGMENTATION
• With a large country • Many different types of people - it is too difficult to create a product that will satisfy everybody, that is why we focus on a segment of the total market - Success of the company depends upon the ability of the firm to segment its market effectively

• MARKET TARGETING The process of evaluating each market segment’s attractiveness & selecting one or more segments to enter. • MARKET POSITIONING Formulating competitive positioning for a product & detailed marketing mix.

– Build strong position in specialized market segments. – Allows firm to focus on specific needs. – Improves marketing mix for each segment. – Allows small firm to exist & compete the giants in the industry – Recognize the diversity of customers

BENEFITS OF MARKET SEGMENTATION

E.g: Nokia: 7320, N70, 3210 Sony Erickson: K500i, T610

MARKET SEGMENTATION

LIMITATION OF MARKET SEGMENTATION
• Segmentation can be expensive in terms of production and marketing of products to only those specific groups of the market. • Mass production offers economies of scale. • Standardisation of service offers: increased delivery speed and efficiency. • Increase in promotion, administrative and inventory Costs.

LEVELS OF MARKET SEGMENTATION
MASS MARKETING
No Segmentation

SEGMENT MARKETING NICHE MARKETING MICRO MARKETING
Complete Segmentation

MASS MARKETING
• Mass producing, Mass distributing, Mass promoting. • Very difficult to create single product/program that appeal to diverse group of customers. • Mass Marketing is dying. • “one size fits all”

SEGMENT MARKETING
• It recognizes that buyers differ in their needs, perceptions & buying behavior • It helps the company to serve the market more effectively. • Company face fewer competitors in the market if few competitors are focusing in this market.

FOR EXAMPLE: PLASTIC MONEY: • Debit card • Credit Card HOTELING PACKAGES: • Business traveler • Family traveler • Tourist Packages TV CHANNELS: • Geo Entertainment • Geo News

NICHE MARKETING
• It focuses on sub segments with distinctive traits that may seek a special combination of benefits. • Niches are smaller & normally attract only one or a few competitors. • Niching offer smaller companies an opportunity to compete with larger competitors by focusing on small markets.

• FOR EXAMPLE: Bank Al-falah Credit Card

Blue Silver Gold (not match (less than (greater than Salary criteria) Rs. 60,000/-) Rs. 60,000/-)

House Wife

Children

Chauffer

Butler

MICRO MARKETING
• Local Marketing • Individual Marketing (one-to-one marketing, Customized Marketing) • MASS CUSTOMIZATION It is the ability to prepare on a mass scale individually designed products to meet each customer’s requirements. E.g.: Personalized BMW “A broadcast medium to a Dialog medium”

• Identify the needs & wants of customers. (Objective is to identify needs not currently being satisfied) • Identify the different characteristics between market segments. (Identifying the characteristics that distinguish particular segments from others) • Estimate the market potential. (Marketers need to know if a market is viable before segmentation occurs)

MARKET SEGMENTATION PROCESS

CONDITIONS FOR EFFECTIVE SEGMENTATION
• The characteristics used to categorise customers must be measurable and the data obtainable & actionable. • The segment itself must be accessible with a minimum cost and waste. • A segment must be large enough to be profitable.

A USEFUL SEGMENTATION PROCESS MUST MEET ABOVE CONDITIONS:

BASES FOR CUSTOMER SEGMENTATION

BASIS FOR CUSTOMER SEGMENTATION:
DEMOGRAPHIC FACTORS
Psychographic Demographic

GEOGRAPHIC FACTORS BEHAVIORAL FACTORS: • OCCASION • BENEFIT ETC PSYCHOGRAPHIC FACTORS

• Occasion

Consumer Geographic Markets
Behavioral

Benefit

1 Demographic factors (age, income, Gender etc.)

BASIS FOR CUSTOMER SEGMENTATION

2 Geographic factors (cultural, regional, and national differences, Climate) 3 Psychographic factors (lifestyle, personality, Social class) 4 Behavioral factors: • benefit segmentation • Occasion segmentation • Usage rate etc

• GEOGRAPHIC LOCATION - based upon where people live (historically a popular way of dividing markets) • DEMOGRAPHIC - based upon age, gender and income level (very often used) • PSYCHOGRAPHIC / LIFESTYLES - based on people’s personality, interest, lifestyles E.g. people who like hard rock & pop music probably prefer soft drinks rather than juices

BASES FOR CUSTOMER SEGMENTATION CONT.

BEHAVIORAL SEGMENTATION • OCCASION – Based on different occasion when buyers get the idea to buy, actually make their purchase, or use the purchased item E.g. Mother’s day, Valentine day, Eid days • BENEFIT - based on the different benefits that consumers seek from the product E.g. people buy something because it causes a benefit i.e. Diet coke - less sugar, lose weight i.e. Extra white toothpaste - whiter teeth, better smile

• The reason why we study geographic segmentation is because WHERE people live has a big effect on their consumption patterns. • Additionally, WHERE people live in a city is also a reflection of their income level and we can make certain assumptions about their ABILITY TO SPEND based upon their address. • This helps marketer plan store locations and the location of other services.

GEOGRAHPIC SEGMENTATION

• CLIMATE: winter equipment and recreation are effected by geographic location you can sell more Air Conditioner in Hot climate areas than Northern areas of Pakistan clothing purchases are also effected by climate/geography

• Demographic Segmentation is the most common approach to Market Segmentation Variables are: • age • gender (male/female) • income • occupation • education • household (family - style) size

DEMOGRAPHIC SEGMENTATION

• AGE Age is another obvious way to divide the market into segments since so many products are based upon “time of life” • diapers for babies • toys for children • entertainment for “over 19” • Also, people have different consumption patterns at different ages

e.g. Milk products • children and teens drink a lot of milk • adults don’t • older adults need calcium, but don’t drink milk (they take pills) • GENDER (MALE/FEMALE) • gender is an obvious way to divide the market into segments since so many products are gender-specific.

• clothing • medical products • sports products/services • entertainment • INCOME • Segmenting markets on the basis of income and expenditure patterns e.g. High Income class ….. Afford Lexus, BMW, 5 star hotels, Bungalow in some Posh area

• HOUSEHOLD (FAMILY - STYLE) SIZE • Segmenting by the “stages in the family life cycle” • There are different buying characteristics of people in each stage of the family life cycle e.g. 0-5 young children, 6-19 school children, 20-34
young adults, 35-49 younger middle-aged, 50-64 older middle-aged, 65+ seniors, 80+ SUPER seniors

MARKET COVERAGE STRATEGIES
• TARGET MARKET

A set of buyers sharing common needs or characteristics that the company decides to serve • Target market should be compatible with organisation’s goals and images. • Marketing opportunity presented by the segment must match the company’s resources.

MARKET COVERAGE STRATEGIES
Company Company Marketing Marketing Mix Mix Market Market

A. (Aggregation) Undifferentiated Marketing

Company Mix 1 Company Mix 1 Company Mix 2 Company Mix 2 Company Mix 3 Company Mix 3

Segment 1 Segment 1 Segment 2 Segment 2 Segment 3 Segment 3

B. (Single segment) Differentiated Marketing

Company Company Marketing Marketing Mix Mix

Segment 1 Segment 1 Segment 2 Segment 2 Segment 3 Segment 3

C. (Multiple segments) Concentrated Marketing

• UNDIFFERENTIATED MARKETING A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. • DIFFERENTIATED MARKETING A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. • CONCENTRATED MARKETING A market-coverage strategy in which a firm goes after a large share of one or a a few submarkets.

POSITIONING
• Definition: the perception of a product or organisation in the consumer’s mind relative to their perception of other offerings in the same category about attributes, benefits & image of brand. E.g. Mehran – economy Honda City – Comfort Mercedes – Luxury BMW – Performance Volvo – safety

POSITIONING STRATEGIES
Product Product Class Class Away from Away from Competitors Competitors Product Product Attributes Attributes Benefits Benefits Offered Offered
D D B B FF

H H

G G C C A A

Against a Against a Competitor Competitor

EE

Usage Usage Occasions Occasions

Users Users

SELECTING A POSITION
• Positioning is the final step in the segmentation/targeting process. • Marketers must consider various factors in deciding what position they should seek.

• Competition—look for niche marketing. • Customers—seek product attributes. • The company—status of current image. • Repositioning—needs of target market changed? • The marketing mix—must support the selected position.

FACTORS OF CONSIDERATION

COMPETITIVE ADVANTAGE
• An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices – Not copyable – Give value to the company – Find in any part of the company – Buyers perceive as valuable

• Company can differentiate its offering in following ways: • PRODUCT DIFFERENTIATION
– Features – Performance – Style and design
Which hat is unique?

• SERVICES DIFFERENTIATION
– Installation – Repair service – customer training service

•IMAGE DIFFERENTIATION
– Nokia means Reliability – Motorola means quality – Sony Erickson means style & design

Image differentiation can be done by strong symbols. •PEOPLE DIFFERNETIATION
– – – – PIA – Graceful attendants TCS – Courteous staff GEO – competent & knowledgeable team Mcdonald – Professional & friendly

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