Market Segmentation.

Small opportunities are often the beginning

of great enterprises.

Stages of marketing strategy.

o Mass marketing.
o Product – variety marketing.
o Target marketing.
o Niche marketing.
o Individual marketing.
1. Market segmentation consists of taking the total
heterogeneous market for a product & dividing it
into several submarket or segments, each of which
tends to be homogeneous in all significant aspects.

2. Market segmentation is the subdivision of a

market into homogeneous subsets of customer
where subset may conceivably selected as a
market target to be reached with distinct
marketing mix. The power of this concept is that in
an age if intense competition for the mass market
individual seller may prosper through creatively
serving specific market segment whose needs are
imperfectly satisfied by mass market offering.
 STP Process.

Market Target Market

segmentation marketing positioning
1. Identifying 3. Evaluate 5. Identify
segmentati the possible
on variable attractivene positioning
& segment ss of each concept of
the market. segment. each target
segment.
2. Develop 4. Select the 6. Select,
profiles target develop &
of markets. communicat
resulting e
segment. positioning
concept.
 A. Market segmentation.

1. The general approach to segmenting

the market.

No market segment Complete segment Segment by income

Segment by age Segment by age & income

2. Markets, market segment & niches.
3. Pattern of market segmentation.
o Homogeneous preference.
o Diffused preference.
o Clustered preference.

 Three options.
o Undifferentiated.
o Concentrated.
o Differentiated.
4. Market segmentation procedure.

a. Survey stage.
o Attributes & their important ratings.
o Brand awareness & brand rating.
o Product usage pattern.
o Attributes towards the product category.
o Demographics, psychographics, media
graphics.

b. Analysis stage.

c. Profiling stage.
Demographics, psychographics, media
habits.
5. Bases for segmenting consumer markets.

a. Consumer characteristics.
i. Geographic segmentation.
o Region.
o City or metro.
o Density – Urban, suburban, rural.
o Climate.

ii. Demographic segmentation.

o Age. o Family size.
o Gender. o Family life cycle.
o Income. o Occupation.
o Education. o Religion.
o Race. o Nationality.

iii. Psychographic segmentation.

o Social class. o Life style.
o Personality.

b. Consumer responses.
i. Behavioral segmentation.
o Occasion – regular, special.
o Benefits.
o User status – Nonusers, ex-users, potential
users, first time & regular.
o Usage rate.
o Loyalty status.
o Readiness stage.
o Attitudes towards the product
6. Bases for segmenting business market.
a. Demographic.
o Industry – which industry should we focus on?
o Company size – what size companies should
we focus on?
o Location – what geographical areas should we
focus on?

b. Operating variables.
o Technology – what customer technology
should we focus on?
o User/Nonuser status – Should we focus on
heavy, medium, light users or nonusers?
o Customer capabilities – Should we focus on
customers needing many or few services?
c. Purchasing approaches.

o Highly centralized or decentralized

purchasing organization – purchasing
function organization.
o Engineering dominated, financially
dominated – power structure.
o Strong relationships or go after most
desirable companies.
o Leasing, service contracts, system
purchase, sealed bidding – General
purchase policies.
o Companies seeking qualities, service, price
– purchasing criteria.
d. Situational factors.
o Urgency – needing quick & sudden delivery
or service.
o Specific application – certain application or
all application.
o Size of order – large or small orders.

e. Personal characteristics.
o Buyer sellers similarity – companies whose
people & values are similar to ours.
o Attitude towards risk – risk taking or risk
avoiding companies.
o Loyalty – companies that show high loyalty
to their suppliers.
 • Developing customer segment
profile.

Requirements for effective

segmentation.
o Measurable.
o Substantial.
o Accessible.
o Differentiable.
 B. Market targeting.
3. Evaluating the attractiveness of market
segment.
a. Segment size & growth.

b. Segment structure & attractiveness.

The company has to appraise the impact of long
run profitability of five groups.
 Threat of intense segment rivalry.
 Threat of new entrants.
 Threat of substitute products.
 Threat of bargaining power of buyer.
 Threat of bargaining power of supplier.

c. Company objectives & resources.

Attractiveness of the segment.
Exit barrier

Low High
Low Low & stable Low & risky
returns. returns.

High High & stable High & risky

returns. returns.
4. Selecting the market segment.

M1 M2 M3 M1 M2 M3 M1 M2 M3

P1 P1 P1

P2 P2 P2

P3 P3 P3

Single Segment Selective specialization Market specialization

M1 M2 M3 M1 M2 M3

P1 P1

P2 P2

P3 P3

Product specialization Full coverage

 Large firms can cover whole market by two
ways.
o Undifferentiated marketing.
o Differentiated marketing.

 Following costs are likely to be higher.

o Product modification cost.
o Manufacturing cost.
o Administrative cost.
o Inventory cost.

 Caution.
o Over segmentation.
o Counter segmentation or broadening customer base.
 Additional considerations in evaluating
& selecting segments.
a. Ethical choice of market targets.

b. Segment interrelationships & super

segments.
o On cost, performance & technology.
o Synergy as raw materials, manufacturing
facilities or distribution channels.
o Segment by segment invasion plan.
 C. Market positioning.
Positioning is the act of designing the company’s
image & value offer so that the segment’s
customers understand & appreciate what the
company stands in relation to it’s competitors.

 How can the firm identify sources of potential

competitive advantage?
 What are the major differentiating attributes
available to firm?
 How can the firm choose an effective positioning
in the market?
 How can the firm communicate it’s positioning to
the market?