CHAPTER: 9

(PHILIP KOTLER)

IDENTIFYING MARKET SEGMENTS & SELECTING

TARGET MARKETS
Small opportunities are often the beginning of great enterprises.
Target marketing requires 3 major steps.
Segmentation
Targeting
Positioning
1. Market Segmentation
Identifying distinct group of buyers who might require separate
products and/or marketing mixes.
Dividing the whole market in different components based upon certain logical
factor
Buyers in any market differ in their wants, resources, locations, buying attitutes, and
buying practices,

2. Market Targeting
Selection of one or more market to enter (target).
Select the segment or segments to enters
3. Market Positioning
Establish & communicate, the product distinctive benefits in the
market.
Position the market offering in the minds of target customers
A product position is the way the product is defined by consumer on important
attributes-the place the product occupies in consumers minds relative to competing
products. Products are made in factories, but brands happen in the minds of
consumers
Mass Marketing Concept (undifferentiated marketing)

Manufacturer is engage in the

mass production, mass
distribution and mass promotion of
one product for all buyers
e.g. Coke, Pepsi “one size fits all”
Ford company similarly sells
(One product and
color sold for many years)

Mass marketing have an effect of lower cost, lower prices & higher
margins.
Using an undifferentiated marketing strategy a firm might decide to ignore
differences and target the whole market with one offer such a strategyfocuses
🞂 Mass marketing differentiated(segmented
marketing) concentrated (niche) marketing
🞂 micromarketing(local or individual marketing)
🞂 All are very difficult but mass marketing are more
complicate to satisfy all consumers.
 MARKET SEGMENTATION

Segmentation is done because, there are number of buyers which

constitute the market and buyer differs in many ways.

LEVELS OF MARKET SEGMENTATION

Segmentation can be done on four different levels
▪Segments
▪Niches
▪Local areas
▪Individuals (Individual Segmentation).
 1-Segment Marketing
▪ Marketing segment is a large identifiable group within a
market.
▪ Segments are made due to buyer differences in wants,
purchasing power, geographical buying attitudes and habits
i.e. customization (Variation).
▪ Consumer belonging to the same segment is assumed to be
quite similar in needs and wants.
▪ Yet they not identical some need additional features and
benefits.

▪ Segmented marketing(differentiated marketing); a market

coverage strategy in which a firm decides to target several
market segments and designs separat offers for each
2-Niche Marketing
▪Niche is more narrowly defined group, typically a small market whose needs are not
being well served.
▪Marketers usually defines niches by dividing a segment into sub segment. (Who has
got some distinctive set of traits with in a group (segment).
▪Segments are large and thus attract many competitors on the other hand; Niches are
fairly small
and normally attract only one or a few
competitors.
In recent year a consumer grown health
Consious and demand carbonated drink then
Demand shift so pipso developed a niche market
And come with a AMP energy drink and purchased
The Soba and izze brands of enhanced waters and
Juices.

▪ e.g Toyota 1.6 GLi Auto transmission.

◦ Niche are priced more for time specialty
3-Local Area Marketing
Target marketing is shifting towards
local marketing just to satisfy
individual needs in the market.
There are many disadvantages but variation in product will satisfy the
individual customer needs.
Tailoring brands and promotions to
The needs and wants of local customer
Segments cites neighborhoods and
Even specific stores

4-Individual Marketing
▪ Ultimate level of segmentation leads to Segmentation of one. It is also
known as “Customized marketing”
▪ One to one marketing. (Job shop concept) eg:tailors
▪ (Expensive but effective)
Mass customization
is the ability to prepare on a mass basis individually designed products and
communications to meet each customer’s requirements. Concept of individuality.

Self marketing is a form of individual marketing.

▪It is a form individual marketing in which customer takes more
responsibility of deciding which product and brands to buy.
🞂A person gets information from the internet and get the views of
people. (With no sales people involved for promotion of the
product) and then decides on his own to buy the product or not.
🞂So he has taken more responsibility for taking decision in buying
the product. He has done more self marketing e.g. orders via phone
and computers.

Mass customization is the process of delivering market goods and services that are
modified to satisfy a specific customer's needs. Mass customization is a marketing and
manufacturing technique that combines the flexibility and personalization of custom-made
products with the low unit costs associated with mass production. Other names for mass
 PATTERNS OF MARKET SEGMENTATION
Patterns in segments can be defined by preference in it i.e. (preference
segment) if products are offered what will they buy.
▪Homogeneous segments in which nearly all buyers have same preferences.
▪Diffused segments customer preferences are scattered throughout the space.
▪Clustered preferences market might reveal distinct preferences clusters
called natural market segments.
In this type company entering into the segment has three
options.
1. It might position in the center hoping to appeal to all
groups
2. It might position in the largest market segment
(concentrated marketing).
3. It might develop several brands each position in a different
segment.

If first firm only introduces one brand, competitor will enter and
introduce brands in other segments.
Undifferentiated Marketing (mass marketing)
is a strategy in which market segments differences are
ignored and one product or service is offered to the
entire market.
Concentrated Marketing (niche)
is a strategy whereby a product
is developed and marketed for
a very well defined and specific
segment of the consumer
Population.
For example, within the market for women's shoes are many different
segments or niches.
 Market Segmentation procedure
(3 step approach, used for segmentation: survey, analysis and profiling stage

STEP 1:SURVEY STAGE

▪Customer survey is done, and as the aim is to know motivations, attitudes and
behavior.
▪Researcher do exploratory and focus group interviews.
▪After knowing this researcher make questionnaires to collect the data on.
▪ Attributes and theirs importance,
▪ Brand awareness and Brand ratings,
▪ Product usage patterns,
▪ Attitudes towards product category,
▪ Demographics, geographic, psychographics and media graphics of
the respondents.
▪ All general data concerned with customer preferences.
 STEP 2 ANALYSIS STAGE

▪ For analysis different statistical techniques are used e.g.

Factor analysis to remove highly correlated variables,
Cluster analysis
▪ dividing a big data in to specified no of groups such that
data in each group is homogeneous.
▪ (Game theory, multiple regression, mathematical
programming queuing model etc.)
STEP 3 PROFILE STAGE

🞂 Group is than defined terms of profile it shows.

🞂 Profile includes attitudes behavior demographics;
psychographics etc are basis for profile making).
🞂 Market segmentation is done once, must be change
periodically because of change in market segments

🞂 e.g. PC first marketed those people who admired speed and power but
now, market segment is changed and like other companies (dell and gate
way) they are offering e-mail and user friendly packages which is now
priority for the segment.
▪ One way to discover new segments is to investigate the
attributes that consumer examine in choosing a brand, Process
is known as market partitioning.
▪ brand dominant price/type/brand dominant hierarchy
▪ If consumer first decide on the manufacturer and then on its
car division is (brand dominant hierarchy ( Japanese car than
Toyota than Corolla).
▪ Similarly segments can be made like
▪ price dominant
▪ type dominant etc:
 Basis for segmenting consumer markets
Two factors are considered
Consumer Characteristics
Geographic
Demographic
Psychographics.

Consumer Responses
benefits sought
(satisfaction)
use on occasions (brands)
These two factors are the cause of segmentation of consumer markets
(Researcher divide market on these two above mentioned variables ).
Geographic segmentation

▪ Nations
▪ States
▪ Regions
▪ Geographical units
▪ Countries
▪ Cities
Dividing the market into different
Geographical units such as nation,
States, regions, geographical units
Countries, cities, or even neighborhoods
A company may decide to operate in
Or few geographical areas or operate
In all areas but pay attention to
Geographical differences in need and
Wents.
For example wallmart operates virtually every
Where but has developed his special format
 Demographic Segmentation (dividing the market into segments based on
variables such as age, gender, family size, family life cycle, income, occupation, education,
religion, race, generation, and nationality) demographic factors are the most popular bases for
segmenting groups.one reason is that consumer needs, wants, and usage rates often vary closely
with demographic variables. Anothers is that demographic variables are easier to measure than
most other types of variables. Even when marketers first define segments using other bases such
as benefits soughts or behavior, they must know a segment’s
Demographic characteristics to assess the size of the
Target market and reach it efficiently.

Age
Family size (influential/position)
Family life cycle stage
(old, young, children).
Income
Occupation
Education
Religion
Race
Generation (has its own characteristics)
Nationality
Psychographic/Behavioral
Segmentation
Divides buyers into different
Segments based on social
Class, lifestyle, or personality
Characteristic. People in the same demographic group can have
very different psychographic characteristics

▪ Life styles
▪ Personalities
▪ People exhibit more life styles is shown by division of classes.
▪ Brand personalities corresponds to consumer personalities
▪ Example: ford motors has different personality than Chevrolet.
▪ Occasion
▪ Buyers can be distinguished on the basis of occasions they
develop to buy a product or need is developed (massage,
promotion, children, acquisition of home).
▪ For example most consumers drink orange juice in the morning, but orange
growers have promoted drinking orange juice as a cool, healthful refresher at other
times of the days. By contrast, coca-cola “Good Morning’’ compaign attempts to
increase Diet coke consumption by promoting the soft drink as an early morning
pick-me-up
▪ Some holidays, such as Mothers day and fathers day were originally promoted
partly to increase the sale of candy, flower gifts and many marketers prepares
special offers and ads for holiday occasions
▪ Benefits
▪ Derived from products can be different i.e. benefits from
traveling.
▪ To meet the family, Adventure, Education, Shopping (fun)
▪ User Status
▪ Non user
▪ Ex-user
Behavioral Segmentation (must read page 196 )
▪ Consumers are divided on the basis of knowledge of product.
▪ Attitude towards product
▪ Use of product
▪ Response to a product

Behavioral variables
▪ Occasion Loyalty status
▪ Benefit Buyer readiness stages
▪ User status Attitude
▪ Usage rate
Usage Rate
▪ Light
▪ Medium
▪ Heavy

Loyalty Status

▪ Hard core loyal represent the class of buyers in the market.

(lower, middle and upper).
▪ Split loyal will tell the product largest competitors.
▪ Shifting loyal’s will tell product weaknesses
Buyer Readiness Stage.

▪Unaware Aware
▪Informed Interested
▪Desire of the product Intentions to buy

Attitude
Enthusiastic. Positive
Indifferent Negative Hostile
 MULTI-ATTRIBUTE SEGMENTATION (GEO-
CLUSTERING)

▪ Average consumer concept is gone

▪ Limiting target market to big size has failed
▪ now manufacturer is turning to small potential market with
different buying habits.

GEO-CLUSTERING
One of the most promising development in multi attribute
segmentation is geo-clustering it reflects socioeconomic status
and life style of a neighborhood inhabitants
e.g Cal traits Inc has developed a geo-clustering approach called PRIZM.
Potential rating index by zip Markets,
It classifies over 500,000 US residential
into 62 distinct life style grouping.
Clusters have different
titles called PRIZM.
Blue blood estates, home town retired, winners circle Latino
America, cashmere and country club, baby boomers, etc.
In the cluster the average buying habits are the same.

Example baby boomers:

These ageing baby boomers live the good life in the suburbs in farm houses,
they like to by Mercedes, read Golf digest and buy high end TV’s.
(average income $ 22,900.)
TARGETING MULTIPLE SEGMENTS:
🞂Company first try to target one market and than
expand.
🞂Easily accessible market to penetrate
🞂then geographical market
🞂extensive distribution strategy (distributing a product
on grocery stores)
Bases for segmenting business markets

MODEL -1
Robertson and Barich identified three business segments.

1-FIRST TIME PROSPECT

Customer who have not yet purchased. They want to buy from the sales person
they know and they rely on.
2-NOVICES.
Who have already purchased a product. they need manuals hot lines, a high level
of training and knowledge able sales reps.
3-SOPHISTICATES:
Customer who wants speed in R&M product customization, and high technical
support.
MODEL-2
Rangan ,Moriarty and swartz.
4 Business segments (Introduced)
A- PROGRAMMED BUYERS:
Product is not very imp to their operation they by as a routine purchase item,
paying full price and receiving below average service. (highly profitable
segments for vendors).
B- RELATION SHIP BYERS
Product is moderately imp, they are knowledge able about competitive
offerings.
They get a small discount and a modest amount of service.
They prefer vendor service.
C- TRANSACTION BUYERS
Product is very imp, to their operations.
They are price and service sensitive.
They receive about 10% discount and above average service.
They are knowledgeable for competitive offerings and ready to switch for
better price even at the sacrifice of services.
D- BARGAIN HUNTERS
Byers who see the product as V- imp
demand deepest discount and
highest service they are aware of
alternative suppliers, bargain
hard, and are ready to switch of
the slightest dissatisfaction.
Company needs here buyers for
volume purposes as they are not
much profitable.
One his to be careful as many buyers are
Cross shopper.
1) Cross dresser 2) Cross eater
(Shop an expensive suit but look for cheap under garments)
REQUIREMENTS FOR EFFECTIVE SEGMENTATION
Not all segmentation are effective
market must be;

Measurable
Substantial (large + profitable enough to serve)
Accessible (effectively reached and served )
Differentiable (conceptually distinguished segments and Married
and unmarried people if corresponds to the product in a similar
manner then they are in a same segment)
Actionable (effective programs can be made to serve the segment)
Market Targeting
Once the segments are defined now its upto the company that which one is to
target first.
Process of evaluation and targetting marketing segments.
1- EVALUATION THE MARKETING SEGMENTS:
▪Size, growth, profitability
▪Over all attractiveness of the segment
▪Objective and resources
2- SELECTING THE MARKETING SEGMENTS;
In many segments which or how many segment must be focused can be decided
by; (5 patterns of target marketing selection)
▪ Single segment concentration
▪ Selective specialization
▪ Product specialization
▪ Mkt specialization
▪ Full market coverage
A- SINGLE SEGMENT CONCENTRATION:
E.g VW concentrates on small Car mkt
More profitability
More knowledge of segments need
higher risk also.
B- SELECTIVE SPECIALIZATION:
Number of segments are selected
money maker segments (mostly)
There is minor synergy presents in the segment difference
Diversified risk
Multi segment coverage.
C- PRODUCT SPECIALIZATION:
Making a product which will be sold on many segments
Product/failure can cause damage.

D- MKT SPECIALIZATION
One group
Satisfying their all needs .
E- FULL MARKET COVERAGE:
All customer group are target
large firms do this.
3-Mass Marketing ( undifferentiated)
Firm ignores differences and goes after the whole market with one marketing
offer.
Buyers needs are given preferences then the buyer differences.
Mass marketing and mass distribution is needed. eg Coca-Cola , Pepsi
(Standardization concept).
DIFFERENTIATED MARKETING:
Firm target different segment
with different strategy for each segment
customization concept
But cost of the product is higher
Product modification cost, manufacturing
cost, Administrative cost, inventory cost
promotion cost.
Additional consideration in evaluating
and selecting segments
4-ETHICAL CHOICE OF MARKETING
TARGETS
Segment interrelationships and super segments.
When selecting more then one segments.
should pay attention on segments relation ships in technology, cost,
performance.
SUPER SEGMENTS
Is a set of segment sharing some exploitable similarity?
Toothpaste aqua fresh
Anti cavity
Whites teeth
Fresh breath.
So the company must target those people in a segment which exactly demands
these 3 things
5- SEGMENT BY SEGMENT INVASION PLANS
To hide from competitor your next segment move.
One segment should be largest and capture that
Than go towards other
1st penetrate slowly into the competitor that they do not get aware
& then seeing the situation and opportunity give a full attack on
segment.
6- INTERSEGMENT CO-OPERATION
Many segment for example
segments Manager

Manger S1 ------------------------------- Manager S2

Co-operation