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 STP Analysis:- The ‘Mass Market’ consists of numerous micro

markets, each with its own wants, perceptions, preferences, and

buying criteria.

 Hence the companies must Design and Deliver offerings for well-
defined target markets.

 This realization inspired a new view of business processes that

places marketing at the beginning of the planning process.

 Instead of emphasizing making and selling, companies now see

themselves as part of a value delivery process.

 The value creation and delivery sequence can be divided into three
phases. The first phase, choosing the value, represents the
‘homework’ marketing must do before any product exists.

 The marketing staff must segment the market, select the

appropriate target market, and develop the offering’s value
 The formula ‘Segmentation, Targeting, Positioning (STP)’ is the
essence of strategic marketing.

 Once the business unit has chosen the value, the second phase is
providing the value.

 Marketing must determine specific product features, prices, and


 The task in the third phase is communicating the value by

utilizing the sales force, sales promotion, advertising and other
communication tools to announce and promote the product.

 It is also the case that the value delivery process begins before
there is a product and continues while it is being developed and
after it becomes available.
 Concept of Market Segmentation:- A Market Segment consists
of a group of customers who share a similar set of Needs and

 The marketer’s task is to identify them and decide which one(s)

to target.

 Segment marketing offers key benefits over mass marketing.

 The company can offer better design, price, disclose and deliver
the product or service and also can fine-tune the marketing
program and activities to better reflect competitors’

 Business – to – business marketing suggests that the marketers

should offer flexible market offerings to all members of a
 A flexible market offering consists of two parts:-

• A naked solution containing the product and service elements

that all segment members value, and

• Discretionary options that some segment members value.

Ex:- Automobile companies in India offer different versions of
the same model with different features.
Similar is the case in case of Airlines or Railways.

 We can characterize market segments in different ways. One way is

to identify preference segments.

 Homogeneous preferences exist when all consumers have

roughly the same preferences; the market shows no natural
 At the other extreme, consumers in diffused preferences vary
greatly in their preferences.

 Finally, clustered preferences result when natural market

segments emerge from groups of consumers with shared

 Segmentation of Consumer Markets:- Some researchers try to

define segments by looking at descriptive characteristics:-
Geographic, Demographic, and Psychographic.

 Then they examine whether these customer segments exhibit

different needs or product responses.
Ex:- What is the different attitudes of ‘professionals, ‘blue
collars’ and other groups towards say purchasing of a new car.
 Other researchers try to define segments by looking at
behavioral considerations, such as Consumer Responses to
benefits, Use Occasion, or Brands.

 The researcher then try to find out whether different

characteristics are associated with each consumer-response
Ex:- Do people who want ‘quality’ rather than ‘low price’ say in
an automobile purchase differ in their geographic, demographic and
psychographic makeup?

 Regardless of which type of segmentation scheme we use, the key is

adjusting the marketing program to recognize customer
1. Geographic Segmentation:- Calls for division of the market into
different geographical units such as Nations, States, Regions,
Countries, Cities, or Neighborhoods.

 In the South Asian context, it assumes more importance due to

Variations in consumer Preferences and Purchase habits across
different regions, across different countries and across
different states in these countries.

 The market potential values of India’s towns were calculated

on the five indicators such as number of consumers, the means
these consumers have, their consumption behavior, awareness
levels and the availability of marketing–support
infrastructure. The findings were that 16% of towns (out of 784
towns with a population of over 50,000 people which account for
77% of the urban population) account for 80% of the market-
potential value.

 These types of patterns suggest the need to prioritize the

geographical focus of marketing efforts.
 Issues relating to logistics for serving the diverse geographical
market segments also need attention from marketers. Many
companies use sophisticated models and software to plan physical
distribution and to develop route plans for their sales people to
efficiently serve wide geographical markets.

 Geographical markets also vary in their product requirements.

Ex:- Air Coolers and Air Conditioners. Food habits. Etc.

2. Demographic Segmentation:- Here we divide the market into

groups on the basis of variables such as age, family size, family life
cycle, gender, income, occupation, education, religion, race,
generation, nationality and social class.

 Demographic variables are highly popular with the marketers as

they are often associated with consumer Needs & wants and
they are easy to measure.
a. Age and Life-Cycle Stage:- Consumer wants and abilities change
with age. Hence, age and life-cycle stages are important variables to
define segments.
Ex:- Johnson & Johnson’s baby products , which are highly
popular in almost all the South Asian countries, are classic examples
of products for infants and children. Television channels in India
indicate segmentation based on age and life cycle.

b. Life Stage:- Persons in the same part of the life cycle may differ
in their life stage.
 Life stage defines a person’s major concern, such as getting
married, deciding to buy a home, sending the child to the school,
taking care of older family members, marrying off their children,
planning for retirement, and so on.
 These life stages presents opportunities for marketers who can help
people cope with their major concerns.

c. Gender:- Men & women have different attitudes and behave

differently, based partly on genetic makeup and partly on
 A research study examining how men and women shop found that
men often need to be invited to touch a product, whereas women are
likely to pick it up without prompting.
Men often like to read product information; women may relate to
a product on a more personal level.

 Gender differentiation has long been applied to product categories

such as clothing, hairstyling, cosmetics and magazines. Some
products have been positioned as more masculine or feminine.
Ex:- Park Avenue now known as Parks, the brand of ready-made
apparel from Raymond is positioned as a masculine brand, whereas
the company introduced a range of women’s apparel under the brand
 Shopping behavior of men and women also vary.
Ex:- Men prefer to drive motorcycles whereas for women there
are specific brands of scooters, like Hero Honda Pleasure, Honda
Activa etc.
 Media have emerged to make gender targeting easier. A large
number of women’s magazines in various language make it easy for
marketers to reach the target customers more easily and vise versa.

 But in today’s world it’s not enough to tout a product as masculine or

feminine. Hyper-Segmentation is now occurring within both
male and female personal care segments.

c. Income:- Income segmentation is a long-standing practice in a

variety of products and services.

 Income determines the ability of consumers to participate in

the market exchange and hence this is a basic segmentation

 However, income does not always predict the best consumers

for a given product. Even, if two consumers have similar income
levels, each may own different types and brands of products
based on a host of factors such as lifestyle, attitudes, and
 Given the nature of income distribution in India and South Asia,
opportunities exist for companies to serve the requirements of
different income classes.
Ex:- The target segments of Surf Excel and Nirma.

d. Generation:- Each generation is profoundly influenced by the

times in which it grows up – the music, movies, politics, and
defining events of that period.
 Demographers call these generational groups cohorts.
Members share the same major cultural, political, and economic
experiences and have similar outlooks and values.
 The younger generations play significant roles, not only as
consumers, but also as initiators and influencers of buying
Ex:- A study reveals that 63% of the children in the age group of
8 to 14 years, are involved in purchase decisions for a wide range of
product categories such as clothes, televisions, and automobiles.
 Different generational cohorts also influence each others.
For instance, parents are getting influenced by what
demographers are calling a “Boom - Boom effect’. The same
products that appeal to 21 – year – olds are appealing to youth –
obsessed baby boomers.

e. Social Class:- Social class has a strong influence on preferences

in cars, clothing, home furnishings, leisure activities, reading
habits, and retailers, and many companies design products and
services for specific social classes.

 The caste system prevalent in India sometimes even transcends the

income level. As a consequence, market segmentation schemes
become a very complex process.

 This complexity of the Indian market has prompted the

development of ‘Socioeconomic classification’ as a viable
method to segment markets.
 Consumption behavior in India is found to be influenced by the
socioeconomic factors governed by the person’s educational as
well as occupation.
Ex:- Senior–level executives with higher educational
qualifications exhibit different purchase preferences and habits
compared to a person with a similar income level, but a different
occupation and lower education level.

3. Psychographic Segmentation:- Psychographics is the science of

using psychology and demographics to better understand

 In psychographic segmentation buyers are divided into different

groups on the basis of psychological / personality traits,
lifestyle, or values.

 Values and Life styles significantly affect Product and Brand

choice of consumers.

 Religion has a significant influence on values and lifestyles.

 The strict norms that consumers follow with respect to food habits
or even dress codes can be representative examples in this regard.
Ex:- A significant number of people in India are vegetarian.
And these things are so strong that McDonald’s has to
change it’s menu for the first time when they started their
operation in India.
The market for wristwatches provides another illustration
of segmentation based on lifestyle parameters. Titen watches have a
wide range of sub–brands within their Titan range such as Edge,
Regalia, Nebula, and Raga, to appeal to different lifestyle
The company’s range of watches under the ‘Fasttrack’ brand
appeals to the youth segment.
The company has another value–for–money brand, ‘Sonata’,
targeted at people who want to own good–looking watches at
affordable prices.
4. Behavioral Segmentation:- In behavioral segmentation, marketers
divide buyers into groups on the basis of their knowledge of,
attitude toward, use of or response to a product.

a. Decision Roles:- People play five roles in a buying decision:-

Initiator, Influencer, Decider, Buyer and User. This is especially
useful for designing the communication strategy.
Ex:- In pharmaceutical products, doctors prescribe medicines
and the pharmaceutical companies influence doctors’ prescription
behavior by providing technical information about the products;
patients’ relatives buy medicines and the patient uses the product.
Men choose their shaving equipments and women their
cosmetics. Women, play a significant influencing and deciding role
for kitchen appliances.

b. Behavioral Variables:- Many marketers believe behavioral

variables – Occasions, Benefits, User status, Usage rate, Buyer–
readiness stage, Loyalty status, and Attitude – are the best
starting points for constructing market segments.
I. Occasions:- Greeting card brands such as Archies and Hallmark
make cards for different occasions.
The Amul brand of chocolates is promoted as ‘a gift for
someone you love’.
A number of durables are heavily promoted during the festive

II. Benefits:- Buyers are classified according to the benefits they

 Many product categories offer different products targeted at
people who seek different sets of benefits.
Ex:- Shampoos, offer benefits such as basic cleaning of hair,
conditioning effects, medicinal properties, and suitability to hair
Brands such as Clinic, Head & Shoulders, Sunsilk offer different
variants addressed to diverse benefit segments.
 Since benefits that consumers seek from the same product or
service category varies, this segmentation approach is a very
useful tool in identifying market opportunities and for deciding the
value proposition that can be offered.
III. User Status:- Every product has its Non-users, Ex-users,
Potential users, First–time users and Regular users.
Ex:- Blood banks cannot rely only on regular donors to supply
blood; they must also recruit new first–time donors and contact ex–
donors, each with a different marketing strategy.
 The key to attracting potential users, or even possibly non-users,
is understanding the reasons they are not using. i.e. to find out
that do they have deeply held attitudes, beliefs, or behaviors or
just lack knowledge of the product or brand benefits and
 Included in the potential–user group are consumers who will
become users in connection with some life stage or life event.
Ex:- Mothers–to–be are potential users who will turn into heavy
users of the infant and child products.

 Market share leaders tend to focus on attracting potential

users because they have the most to gain.

 Smaller firms focus on trying to attract current users away from

the market leader.
IV. Usage Rate:- Markets can be segmented into light, medium and
heavy product users.

 Heavy users are often a small percentage of the market but

account for a high percentage of total consumption.
Ex:- In the mobile phone service market, heavy users account for
a significant proportion of the revenue earned by the service
providers and hence mobile service providers target this segment by
giving special packages or offers to retain their patronage.

V. Buyer–Readiness Stage:- Some people are unaware of the

product, some are aware, some are informed, some are
interested, some desire the product and some intend to buy.

 To help characterize how many people are at different stages

and how well they have converted people from one stage to
another, some marketers employ a marketing funnel.

 The relative numbers of consumers at different stages make a big

difference in designing the marketing program.
VI. Loyalty Status:- Marketers usually envision four groups based on
brand loyalty status:-

• Hard – Core Loyals:- Consumers who buy only one brand all the

• Split Loyals:- Consumers who are loyal to two or three brands.

• Shifting Loyals:- Consumers who shift loyalty from one brand to


• Switchers:- Consumers who show no loyalty to any brand.

 A company can learn a great deal by analyzing the degrees of

brand loyalty.

 Hard–core loyal can help identify the products’ strengths; Split

loyal can show the firm which brands are most competitive with
its own; and by looking at customers who are shifting away from
its brand, the company can learn about its marketing
weaknesses and attempt to correct them.
VII. Attitude:- Five attitudes about products are:- Enthusiastic,
Positive, Indifferent, Negative, and Hostile.
Ex:- Door–to–door workers in a political campaign use voter
attitude to determine how much time to spend with that voter. They
thank enthusiastic voters and remind them to vote; they reinforce
those who are positively disposed; they try to win the votes of
indifferent voters; they spend no time trying to change the attitudes
of negative and hostile voters.

 Combining different behavioral bases can help to provide a

more comprehensive and cohesive view of a market and its
c. The Conversion Model:- The Conversion Model measures the
strength of consumers’ psychological commitment to brands
and their openness to change.

 To determine how easily a consumer can be converted to

another choice, the model assesses commitment based on
factors such as consumer Attitudes toward, and Satisfaction
with current brand choices in a category and the importance of
the decision to select a brand in the category.

 The model segments users of a brand into four groups based on

strength of commitment, from low to high, as follows:-

i. Convertible (most likely to defect).

ii. Shallow (uncommitted to the brand and could switch – some are
actively considering alternatives).

iii. Average (committed to the brand they are using, but not as strongly
– they are unlikely to switch brands in the short term).
iv. Entrenched (strongly committed to the brand they are currently
using – they are highly unlikely to switch brands in the foreseeable

 The model also classifies nonusers of a brand into four other

groups based on their ‘balance of disposition’ and openness to
trying the brand, from low to high, as follows:-

i. Strongly Unavailable (unlikely to switch to the brand – their

preference lies strongly with their current brands).

ii. Weakly Unavailable (not available to the brand because their

preference lies with their current brand, although not strongly).

iii. Ambivalent (as attracted to the brand as they are to their current

iv. Available (most likely to be acquired in the short run).

 Segmentation of Business Markets:- The Business Market can
also be segmented with some of the same variables we use in
consumer markets, such as geography, benefits sought, and
usage rate, but at the same time business marketers also use other
variables like operating variables and personal characteristics
of the buyers.

 Some major questions are to be answered in determining the

segments and customers the business marketers want to serve.
Ex:- A rubber–tire company for instance can sell tires to
manufacturers of automobiles, trucks, farm tractors, or aircraft.
Within a chosen target industry, a company can further segment
by company size. The company might set up separate operations for
selling to large and small customers.
 These questions base can be as follows:-

 Demographic:-

• Industry: Which industries should we serve?

• Company Size: What size companies should we serve?
• Location: What geographical areas should we serve?

 Operating Variables:-

• Technology: What customer technologies should we focus on?

• User or Nonuser Status: Should we serve heavy users, medium
users, light users or nonusers?
• Customer Capabilities: Should we serve customers needing many
or few services?
 Purchasing Approaches:-

• Purchasing–function Organization: Should we serve companies

with highly centralized or decentralized purchasing organization?

• Power Structure: Should we serve companies that are engineering

dominated, financially dominated, and so on?

• Nature of Existing Relationship: Should we serve companies with

which we have strong relationship or simply go after the most
desirable companies?

• General Purchasing Policies: Should we serve companies that

prefer leasing? Service contract? Systems purchases? Sealed bidding?

• Purchasing Criteria: Should we serve companies that are seeking

quality? Service? Price?
 Situational Factors:-

• Urgency: Should we serve companies that need quick and sudden

delivery or service?

• Specific Application: Should we focus on certain application of our

product rather than all applications?

• Size of Order: Should we focus on large or small orders?

 Personal Characteristics:-

• Buyer–Seller Similarity: Should we serve companies whose people

and values are similar to ours?

• Attitude Toward Risk: Should we serve risk–taking or risk–avoiding


• Loyalty: Should we serve companies that show high loyalty to their

 Within a given target industry and customer size, a company can
segment further by purchase criteria.
Ex:- Govt. laboratories need low prices and service contracts for
scientific equipment; university laboratories need equipment that
requires little service; and industrial laboratories need equipment
that is highly reliable and accurate.

 Business marketers generally identify segments through a

sequential process.
Ex:- Consider an aluminum company. The company first
undertook macro segmentation.
It looked at which end–use market to serve: automobile,
residential, or beverage containers.
It has to choose the best customer size and chose large
The second stage consisted of microsegmentation. The company
distinguished among customers buying on price, service, or quality.
 Effective Segmentation Criteria:- To be useful, market segments
must rate favorably on five key criteria:-

I. Measurable:- The size, purchasing power, and characteristics of the

segments can be measured.

II. Substantial:- The segments are large and profitable enough to

serve. A segment should be the largest possible homogeneous
group worth going after with a tailored marketing program.
It would not pay, for ex: For an automobile manufacturer to
develop cars for people who are less than four feet tall.

III. Accessible:- The segments can be effectively reached and served.

IV. Differentiable:- The segments are conceptually distinguishable

and respond differently to different marketing–mix elements
and programs. If married and unmarried women respond similarly
to a sale on perfume, they do not constitute separate segments.

V. Actionable:- Effective programs can be formulated for attracting

and serving the segments.
 Additional Considerations:- Two other considerations should
also be considered in evaluating and selecting segments. These are:-

1. Segment–By–Segment Invasion Plans:- A company would be wise

to enter one segment at a time and the competitors must not know to
what segment(s) the firm will move into next.

 A company’s invasion plans can be upset or let down when it

confronts blocked markets. The invader must then figure out a way
to break in, which usually calls for a Megamarketing approach.

 Megamarketing is the strategic coordination of economic,

psychological, political, and public relations skills, to gain the
cooperation of a number of parties in order to enter or operate
in a given market.
Ex:- Entry of Pepsico in India.
2. Ethical Choice Of Market Targets:- Some consumers may resist
being labeled.
Ex:- Elderly consumers who don’t feel their age may not appreciate
products that identify them as “old”.

 Marketers can also generate public controversy. The public is

concerned when marketers take unfair advantage of vulnerable
groups (such as children) or disadvantaged groups (such as inner–
city poor people) or promote potentially harmful products.
Ex:- Toy companies, Child products and chocolates through
celebrities etc.

 Hence it is extremely important for the Marketers to target

segments carefully to avoid consumer backlash.

 Socially responsible marketing calls for targeting that serves not

only the company’s interests, but also interests of those
 Target Market Identification:- Target marketing includes three
activities:- Market segmentation, Market targeting and Market

 We can target markets at four levels:- Segments, Niches, Local

Areas, and Individuals.

 Market segments are large, identifiable groups within a market.

 A Niche is a more narrowly defined group.

1. Segment Marketing:- A Market Segment consists of a group of

customers who share a similar set of Needs and Wants.

 The marketer’s task is to identify them and decide which one(s) to


 Segment marketing offers key benefits over mass marketing. The

company can offer better design, price, disclose and deliver the
product or service and also can fine-tune the marketing
program and activities to better reflect competitors’
 Business–to–business marketing suggests that the marketers
should offer flexible market offerings to all members of a

 A flexible market offering consists of two parts:- a Naked

Solution containing the product and service elements that all
segment members value, and Discretionary Options that some
segment members value. Each option might often carry an
additional charge.
Ex:- Automobile companies in India offer different versions of
the same model with different features. Similarly in the case of
Airlines or Railways.

 We can characterize market segments in different ways. One way is

to identify preference segments.

 Homogeneous preferences exist when all consumers have

roughly the same preferences; the market shows no natural
 At the other extreme, consumers in diffused preferences vary
greatly in their preferences.

 If several brands are there in the market, they are likely to position
themselves throughout the space and show real differences to
match differences in consumer preference.

 Finally, clustered preferences result when natural market

segments emerge from groups of consumers with shared

2. Niche Marketing:- A niche is a more narrowly defined customer

group seeking a distinctive mix of benefits.

 Marketers usually identify niches by dividing a segment into a

Ex:- Ezee, from Godrej, is a fabric-washing product for woolen
clothes. Because of its mildness, customers use this detergent to
wash delicate clothes that could get damaged if harsh and strong
detergents are used instead.
 Several television channels today are niche focused.
Ex:- Aastha and QTV, that focus on religion and spirituality.
STAR Cricket, directed exclusively at cricket lovers in South Asia.

 Niche marketers aim to understand their customers’ needs so well

that the customers willingly pay a premium.
Ex:- Ayurvedic products and ‘all-natural’ products usually
command a premium.

 As marketing efficiency increases, niches that were seemingly

too small may become more profitable.
Ex:- when every Apparel Company in India was classifying
women’s clothing into L, XL and XXL sizes, it was Revolution
Clothing Pvt. Ltd. that pioneered the concept of ‘plus sized
fashion’ in India. The idea not only forced the established players
to follow suit, but also gave women pride and self–confidence, while
helping Revolution notch up millions in revenue.
 The low cost of setting up shop on the internet has led to many
small business start–ups aimed at niches.

 These firms have realized that the best recipe for internet success
is to choose a hard–to–find product that customers don’t need
to see and touch.

3. Local Marketing:- Target marketing is leading to marketing

programs tailored to the needs and wants of local customer
groups. In trading areas, neighborhoods, even individual stores.
Ex:- Many banks in India have specialized branches that
exclusively cater to the to the corporate customers and some
branches to the NRI customers.
There are some ‘In–City’ courier companies in many cities
that specialize in delivering mail and packets on the same day
within a specified geographical area, usually within the city.
The movie Spiderman 3 was released in India in five
different languages, including Bhojpuri and owing to such local
marketing, the movie broke a number of collection records for a
foreign movie released in India.
 Local marketing reflects a growing trend called Grassroots
marketing, as the marketing activities concentrate on getting
as close and personally relevant to the individual customers as
Ex:- Big giants like Nike also initially targeted customers through
grassroots marketing such as by sponsoring local school teams.

 Those who favor localized marketing see national advertising

as wasteful because they feel that it fails to address local needs.

 At the same time those against it argue that it drives up

Manufacturing and Marketing costs by reducing economies of
scale and magnifying logistical problems.

 A brand’s overall image might be diluted if the product and

message are different in different localities.
4. Individual Marketing:- The ultimate level of segmentation and
targeting leads to “Segment in One”, “Customized Marketing”
or “One–to–One Marketing.” Now a days, customers are taking
more individual initiative in determining What and How to buy.

 Customerization combines operationally driven mass

customization with customized marketing in a way that
empowers consumers to design the product and service
offering of their choice.

 The firm no longer requires prior information about the customer,

nor does the firm need its own manufacturing.

 The firm provides a platform and tools and ‘rents’ out to customers
the means to design their own products. A company is
customerized when it is able to respond to individual
customers by customizing its products, services, and messages
on a one-to-one basis.
 Customization is certainly not the cup of tea for every company.
It may be very difficult to implement for complex products such as
automobiles. (Exception is BMW).

 Customization can also raise the cost of the goods by more than
the customer is willing to pay.

 Some customers don’t know what they want until they see the
actual products.

 At the same time they also cannot cancel the order after the company
has started to work on the product. Moreover these type of products
may be hard to repair and have a little resale value.

 In spite of this, customization has worked well for some of the

Ex:- Paint companies Asian Paints, Nerolac, Jenson & Necholson,
and Berger Paints, follow the mass-customization strategy in paint
retailing which is pretty successful.