Kotler on Marketing

“Don’t buy
market share.
Figure out how
to earn it.”

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Dr. H. Gayathri
Dr. H. Gayathri
 Market Segmentation and Market Targeting

Market segmentation is the process of disaggregating

the total market into a number of sub-markets.
 
 Market consists of buyers who will differ in one
or more respects,
 
 They may differ in their wants, purchasing
power, geographical locations, buying attitudes
and buying practices. These variables can be used to
segment the market.
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Dr. H. Gayathri
Dr. H. Gayathri
  Requirements for effective segmentation.

 Measurable, accessible, actionable, substantial

and differentiable.

 Evaluating the market segments.

 Segment size and growth.
 
 Segment structural attractiveness.
 
 Company objective and resources.

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Dr. H. Gayathri
Dr. H. Gayathri
  Evaluating and Selecting the Market Segments
 Single – segment concentration.
 Selective specialization.
 Product specialization.
 Market specialization.
 Full market coverage.

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Dr. H. Gayathri
Dr. H. Gayathri
  Preference segments:

 Homogeneous preferences

 Diffused preferences

 Clustered preferences 

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Dr. H. Gayathri
Dr. H. Gayathri
  Niche Marketing

 Local Marketing

 Customerization

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Dr. H. Gayathri
Dr. H. Gayathri
 Bases for Segmenting Consumer Market :

 The marketing firm may have to investigate

different segmentation variables in order to gain an
insight into the structure of the overall market.

 Generally the organizations use a combination of

variables in order to define a precise market
segment.
 Geographic Segmentation
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Dr. H. Gayathri
Dr. H. Gayathri
 Demographic Segmentation :
 It is one of the most straight forward and
meaningful bases for segmenting consumer
markets. The demographic variables are :

 Age & life – cycle stage

Gender
Generation
 Social class / income
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Dr. H. Gayathri
Dr. H. Gayathri
  Psychographic segmentation :

 Life style

 Personality

 Values

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Dr. H. Gayathri
Dr. H. Gayathri
 Behavioural Segmentation – Here, the buyers
are divided into groups on the basis of their
knowledge of, attitude toward, use of, or
response to a product.

 Many marketers believe that behavioural

variables like occasions, benefits, user status,
usage rate, loyalty status, buyer – readiness stage,
and attitude are useful for segmenting.
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Dr. H. Gayathri
Dr. H. Gayathri
  Occasions - Buyers are distinguished
according to the occasions

a) When they develop a need

b) When they purchase a product
c) When they use a product

e.g. : Airline, Fruit juices etc.

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Dr. H. Gayathri
Dr. H. Gayathri
 Segmentation by usage – consumption rates
for many consumer products are not evenly
distributed across all household. Hence,
meaningful segments could be defined in terms
of usage of the product itself.
 
 If a firm can identify heavy users – it may be
able to develop special marketing strategy aimed
at winning more of them to the brand. 
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Dr. H. Gayathri
Dr. H. Gayathri
  E.g., heavy users of beer/cigarettes/supari’s etc.
in a particular country could be of working class,
between 25 – 50 years of age, watch television more
than 2 1/2 hours per day and may prefer to watch
regional programme,
 
 Consumer profiles such as this are obviously
helpful to the marketing firm in developing pricing
and communication strategies,
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Dr. H. Gayathri
Dr. H. Gayathri
 Loyalty Status – A market can also be
segmented according to the degree of consumers
brand loyalty. Kotler has divided them into 4
groups. According to loyalty status :
 
a. Hard-core loyals : undivided loyalty to one brand
eg., AA, A,A,A
 
b. Split loyals : Divided loyalty between 2 or 3
brands
eg., A, B, B, A, B
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Dr. H. Gayathri
Dr. H. Gayathri
c. Shifting loyals : Consumers shift loyalty from
one brand to another
 
d. Switchers : No brand loyalty at all, instead
switches from one brand to
another. eg. B, E, C, A, D

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Dr. H. Gayathri
Dr. H. Gayathri
  A company may usually attract switchers, at
least in the short term, by price reductions or
other forms of sales promotions.
 
 A careful analysis of brand loyalty categories
can tell the firm a lot about its present marketing
strategy and can point the way to improvements.

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Dr. H. Gayathri
Dr. H. Gayathri
 For eg., from an analysis of ‘shifting loyals’ the
firm may learn about possible inadequacies in its
marketing programme that are causing people to
switch brands.

 Attitude : Five groups are Enthusiastic, Positive,

Indifferent, Negative and Hostile. Understanding
attitudes helps in formulating communication
strategies.

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Dr. H. Gayathri
Dr. H. Gayathri

  Benefit Segmentation :
 Benefit segmentation uses casual rather than
descriptive variables to group consumers,

 Different people buy the same or similar

products for different reasons, e.g, some people
buy a car purely as a means of transport, while
others as a status symbol or as an extension of
their personality.
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Dr. H. Gayathri
Dr. H. Gayathri
  In using benefit segmentation, the marketing firm

needs to determine the major benefits people are

seeking from a particular product class, to identify

the profiles of the people seeking each benefit and

recognize the existing competitors products that

are close to delivering each of the benefits, e.g.

toothpaste.

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Dr. H. Gayathri
Dr. H. Gayathri
  Some of the benefits sought may not be serviced

by existing products – and this will give the firm

the opportunity of capitalizing on an unsatisfied

market segment.

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Dr. H. Gayathri
Dr. H. Gayathri
 Industrial Segmentation
Variables Examples
Organizational
variables New task, modified or straight re-buy;
Purchasing stage in the purchasing, decision
situation/phase process
Customer Product life-cycle stages (i.e.
experience stage introduction, growth, and maturity) as
it relates to customer adoption process
(i.e., early and late adopters)

Customer Dependence on supplier in

interaction needs implementing decision-making process
or supplier’s knowledge compared to
customer’s knowledge
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Dr. H. Gayathri
Dr. H. Gayathri
 Product Innovative firms versus followers
innovativeness
Organizational Extent of operating, technical, or financial
capabilities capabilities
Purchases situation Material requirement planning or just-in-
variables time systems
Inventory Degree of perceived risk (i.e., cost, usage
requirements factors, or time)
Purchase importance Market-based prices, bids, or leasing
preferences
Purchase policies
Supplier reputation, technical services,
Purchasing criteria reliability, flexibility, etc.
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Dr. H. Gayathri
Dr. H. Gayathri
Structure of the Key influencers and decision makers
buying center (e.g., engineering, marketing, plant
managers, and R&D)
Individual Demographics (e.g., age and
variables experience), personality, non-task
motives, perceptions, and risk
Personal
takers/avoiders
characteristics

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Dr. H. Gayathri
Dr. H. Gayathri
 Categories of Buyers’ Choice Criteria

Criteria Explanation
1. Performance criteria These criteria evaluate the extent to
which the product is likely to maximize
performance in the application(s)
envisaged for it.
2. Economic criteria These criteria evaluate the anticipated
cost outlays associated with buying,
storing, using, and maintaining the
product.
3. Integrative criteria These criteria evaluate the willingness
of suppliers to cooperate and go beyond
minimal standards in providing services
to integrate their efforts in accordance
with the buyers’ requirements.
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Dr. H. Gayathri
Dr. H. Gayathri
 4. Adaptive criteria These criteria evaluate the extent to
which the buying firm may have to
adapt its plans to accommodate
uncertainty about the capability of the
supplier to meet the buyer’s
requirements for production and
delivery.
5. Legalistic criteria These criteria evaluate the impact on
the buying decision of legalistic or
quasi-legalistic constraints (e.g.
government regulations, company
policies and practices)
Source: Donald R.Lehmann and John O’Shaughnessy, “Decision Criteria Used in Buying Different Categories
of Products.” Journal of Marketing, 38 (April 1974)

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Dr. H. Gayathri
Dr. H. Gayathri
 Industrial Market Segmentation
Characteristic Segment by Question
Demographi Which industry to focus on?
Industry
c Can we produce enough for
Company Size large needs?
Location What geographical areas? 
Operating Technology What Customer technologies?
Variables
User / Nonuser Heavy, medium, light
Status nonusers?
Customer Needing many services, few?
Capabilities  

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Dr. H. Gayathri
Dr. H. Gayathri
Purchasing Purchasing Centralized or decentralized?
Approaches Function
national account vs. field
 
oriented
 Power Structure
  Engineer dominated, finance,
etc.?
Nature of Existing
relationships Strong relationships or most
desirable companies?
Purchasing
Policies Leasing, service, price, bid?
Purchasing
Criteria Quality, service, price?
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Dr. H. Gayathri
Dr. H. Gayathri
 Situational Urgency Quick delivery or Service
Factors
Specific Certain or all
Application applications?

Size of order Large or small orders?

Personal Buyer-Seller Values similar to ours?

Similarity

People Attitudes toward Risk-taking,

Risk risk-avoiding customers?

Purchases Loyalty High loyalty to suppliers?

 
Source : Thomas V. Bonoma and Benson P. Shapiro.
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Dr. H. Gayathri
Dr. H. Gayathri