Market Segmentation

Involves
• Profiling & dividing buyers based on their
needs & wants
• Selecting one or more markets to serve
• For each target segment establish, develop,
communicate & deliver right benefits through
company’s market offering
 Benefits

• Identify the right customers based on organisational

capabilities and leverage core competencies
• Helps business focus its marketing efforts and better
use of resources
• Develop the right marketing plan for the chosen
customers and achieve customer delight & longer
relations
• Create a basis for strong ‘branding’ through right
positioning
• To find newer opportunities among changing needs.
 Bases for Segmentation
• Customer characteristics – geography/
demography/ psychography / behavioral
• Multi-variate – using more than one bases for
segmentation
• Inter-market segmentation – using same
criterion of segmentation across the world.
 Segmenting Consumer Markets
1. Geographic Segmentation: operate in few
geographical areas – attending to
geographical differences in needs & wants
2. Demographic segmentation: divides the
market into segments based on variables
such as age, life-cycle stage, gender, income,
occupation, education, religion, ethnicity, and
generation & social class.
3. Psychographic segmentation divides a market
into different segments based on lifestyle, or
personality characteristics.
 VALS Segmentation strategy
• SRI Consulting Business Intelligence’s VALS framework.
• The dimensions used are consumer motivation & consumer resources
• Consumers are inspired by one of three primary motivations : ideals,
achievement, and self-expression
• Higher resources:
• Innovators are successful, sophisticated, people with high self-esteem.
• Purchases often reflect cultivated taste for relatively upscale, niche-oriented
products and services
• Thinkers are motivated by ideals. They are mature, satisfied, comfortable, and
reflective people who value order, knowledge, and responsibility. They tend to
be well educated and actively seek out information in the decision-making
process. They are well-informed about world and national events and are alert
to opportunities to broaden their knowledge.
• They seek durability, functionality & value in products
• Achievers: Motivated by the desire for achievement, Achievers have goal-
oriented lifestyles and a deep commitment to career and family. They favor
premium products that demonstrate success to their peers
• Experiencers are motivated by self-expression. Young, enthusiastic, and
impulsive consumers, who seek variety and excitement. They spend
more on fashion, entertainment and socializing
• Lower Resources:
• Believers-conservative, conventional people with concrete beliefs based
on traditional, established codes: family, religion, community, and the
nation They prefer familiar products and are loyal to established brands
• Strivers are trendy and fun loving who are resource constrained.
• Money defines success for Strivers, who don't have enough of it to meet
their desires.
• They favor stylish products that emulate the purchases of people with
greater material wealth .
• Makers express themselves and experience the world by working on it—
building a house, raising children, fixing a car, and have enough skill and
energy to carry out their projects successfully. They seek products with a
practical or functional purpose.
• Survivors live narrowly focused lives. Elderly, passive people who are
concerned about change. They are loyal to their favorite brands.
4. Behavioral segmentation divides a market into
segments based on consumer knowledge, attitudes,
uses of a product, or responses to a product.
•Behavioral Segmentation
• Occasions
• Benefits sought
• User status: non users, ex-users, potential,
regular
• Usage rate: light, medium, heavy eg: 3 kg packing
• Loyalty status: hard core, shift, split, switchers
• Multi-variate segmentation
Using more than one variable to segment the market.
Eg: clothes
• Inter-market segmentation
Segments of consumers across different markets with
similar needs. Used by Trans-national marketers with
highly standard product and product adaptation is
not easily possible or not necessary.
 Criteria for effective segmentation

• Measurable: The size, purchasing power, and profiles

of the segments can be measured.
• Accessible: The market segments can be effectively
reached and served.
• Substantial: The market segments are large or
profitable enough to serve.
• Differentiable: The segments are conceptually
distinguishable and respond differently to different
marketing mix elements and programs.
• Actionable: Effective programs can be designed for
attracting and serving the segments.
 Market Targeting
1. Evaluating Market Segments
• Segment size and growth
• Segment structural attractiveness
• Company objectives and resources
2. Selecting Target Market Segments
• A target market is a set of buyers who share common needs
or characteristics that the company decides to serve.
Selecting Target Market Segments
•Undifferentiated marketing targets the whole
market with one offer.
– Mass marketing
– Designs as product & a mktg program that appeal
to max buyers
•Differentiated marketing targets several different
market segments and designs separate offers for
each.
• Goal is to achieve higher sales and stronger
position
• More expensive than undifferentiated marketing
•Concentrated marketing targets a large share
of a smaller segment/ niche.
• Limited company resources
• Knowledge of the market
• More effective and efficient
• Strong market position
• Highly profitable
• But riskier
•Micromarketing is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and locations.
– Local marketing
– Individual marketing
•Local marketing involves tailoring brands and promotion to the needs
and wants of local customer segments.
– Cities
– Neighborhoods
– Stores
•Individual marketing involves tailoring products and marketing programs
to the needs and preferences of individual customers.
• Also known as:
– One-to-one marketing
– Mass customization
 Selecting Target Market Segments
• Choosing a targeting strategy depends on
– Company resources
– Product variability
– Product life-cycle stage
– Market variability
– Competitor’s marketing strategies
 Differentiation & Positioning
• Positioning
• Value proposition
• Position maps
• Identifying & choosing competitive advantages
to build a position
• Selecting an overall positioning strategy
• Communicating and delivering the chosen
position to the market
Positioning Process
1. Know you targets well
2. Choose the competitive frame of reference.
3. Know your USP.
4. Identify & choose potential PoP & PoD.
5. Develop the brand Mantra & Communicate
the brand position.
• Important: The difference delivers a highly valued benefit to target buyers.

• Distinctive: Competitors do not offer the difference, or the company can offer it in a more
distinctive way.

• Superior: The difference is superior to other ways that customers might obtain the same
benefit.

• Communicable: The difference is communicable and visible to buyers.

• Preemptive: Competitors cannot easily copy the difference.

• Affordable: Buyers can afford to pay for the difference.

• Profitable: The company can introduce the difference profitably.

 Selecting a Positioning Strategy
1. More for More: upscale product at higher cost eg:
Louis Vuitton, Benz
2. More for the Same: upscale discounter: eg: Target
3. The same for Less: powerful value proposition eg:
Amazon offers premium pdts at non premium
prices
4. Less for much less: meeting customers lower
performance reqts at a much lower price. Eg: ALDI
5. More for Less: winning value proposition,
 Communicating and Delivering the Chosen Position

•Choosing the positioning is often easier than

implementing the position.
•Establishing a position or changing one usually
takes a long time.
•Maintaining the position requires consistent
performance and communication.