MARKET

IDENTIFICATION
Ch. 4
Market Identification

● It is a strategic marketing approach and process that is intended to

define the specific customer of a product
● There are three strategic approaches that will define the specific
market of the product.
 Market
Market Targeting Market Positioning
Segmentation

WHO IS THE
MARKET?

The three entrepreneurial marketing strategies to identify the market.

Market Segmentation

Market Identification – Lesson 1

Market Segmentation

It is an entrepreneurial marketing strategy primarily designed to divide the

market into small segments with distinct needs, characteristics, or behavior
(Kotler & Armstrong, 2014).

Since the entire market cannot be readily served because the customers are
heterogeneous, the entrepreneur has to find ways to cater to homogeneous
customers only and it is usually done by market segmentation.
Market Segmentations
Heterogeneous Market
● Differences among customers.
● Each customers has different
preferences.
● Typically harder to be able to sell
because of its very specific market.
Homogeneous Market
● The members of each individual
grouping are distinct from the other
groups.
● Groups that has similar interests,
preference, needs, wants, and other
related variables.
● Better market because of the potential
growth of a certain market and it being
more consistent.
Market Segmentation

● The identified market segment will be the market that can be served better
by the entrepreneurial venture based on its competencies.
● This approach is sometimes called niche entrepreneurial marketing.
● The commonly used methods for segmenting the market are:
○ Geographic Segmentation,
○ Demographic Segmentation,
○ Psychological Segmentation, and
○ Behavioral Segmentation.
1. Geographic Segmentation
● The total market is divided 1.
according to geographical 2.
locations in the Philippines 3.
● When the entrepreneur divides 4.
the total market into a smaller 5.
segment using geographical
segmentation, the following
variables must be considered:
CLIMATE
DOMINANT ETHNIC GROUP
CULTURE
DENSITY (either rural or urban)
CLASSIFICATION OF THE
GEOGRAPHICAL UNIT (e.g. first
class, second class, etc.)
Demographic Segmentation

● The market is divided based on the 1. Gender

demographic variables of the 2. Age
consumers. 3. Income
● It is the easiest way to segment the
4. Occupation
market.
5. Education
● There exists a direct relationship
6. Religion
between demographic variables and
the needs and wants of customers. 7. Ethnic Group
● The common demographic variables 8. Family Size
are the following:
Psychological Segmentation

● The market is divided in terms of 1. Needs and Wants

what the customer thinks and 2. Attitude
believes. 3. Social Class
● It is based on the following 4. Personality Traits
variables: 5. Knowledge and Awareness
6. Brand Concept
7. Lifestyle
Behavioral Segmentation

● For example entrepreneurs who 1. Perception

have constructed athletic 2. Knowledge
gymnasiums may have divided 3. Reactions
the market based on the health 4. Benefits
benefits that their users will 5. Loyalty
derive from them. 6. Responses
● The market is divided based on
the following variables:
Points to Consider in Segmentation

● Market segmentation is a strategy that can assist the entrepreneur in

identifying the particular homogeneous segment to serve.
● The following factors must be considered in segmenting the market:
a. Accessibility of the market segment – The segment must be accessible
to the business.
b. Size of the market segment – The segment must be large enough to
provide wealth to to entrepreneurial venture.
c. Distinction of the market segment – The segment must be easily
differentiated from the total market.
 Market Targeting
Market Identification – Lesson 2
Market Targeting

● Market targeting is a stage in market identification process that aims to

determine the set of buyers with common needs and characteristics.
● In the market targeting phase, the entrepreneur has already divided the total
market and is now in the process of
● 1. evaluating each market segment and
● 2. selecting the target market or segments to serve.
Market Segment Evaluation

● The entrepreneur, after segmenting the market, does not simply select any
marker segment to serve. He or she must instead conduct a proper and
critical evaluation of every segment. While doing so, he/she must consider
the following important factors:
1. Size of the segment and its expected growth
2. Existing and probable structure of the segment
3. Capability of the segment
Size and Growth of the Segment

● The size of the segment or its growth are the two frequently asked details
every time a new business is about to be opened
● The size and growth of a segment are considered favorable indicators for
doing business in that particular location.
● Small entrepreneurial ventures in terms of capital base may find such
environment unfavorable even though the size of the industry is large
enough and the segment is growing
Structure of the Segment

● Another important factor that the entrepreneur must consider in evaluating which segment to
serve are the existing and expected structures of the segment
● The entrepreneur may use Michael Porter’s five forces of competition in evaluating the
present and future structures of the segment:
1. WHAT is the level of competition in the market segment? Are there strong and aggressive
competitors?
2. ARE THERE existing and potential substitute products? Are the barriers to substitute
products strong?
3. WHO are the present and potential buyers in the segment? Is the bargaining power of the
buyers strong in the segment?
4. HOW strong is the bargaining power of the suppliers in the segment?
Capability of the Business

● Another factor that must be carefully evaluated by the entrepreneur is the

internal environment of the business, including its resources
● Does the business have the required competency to take advantage of the
existing opportunity? The answer must be a resounding yes, Otherwise the
entrepreneurial venture may not be able to succeed in its chosen market
segment.
Segmentation Matrix

● The segmentation process is easily facilitated through the use of segmentation matrix
● The size of the segment is usually expressed in terms of estimated product demand,
while the expected growth may be expressed in terms of potential profitability of the
segment
● The forces of the competition may be classified as strong, moderate, or weak. The
force is considered strong if the barriers to it is generally weak or low. In contrast, the
force is considered weak when the barriers are strong
Market Segmentation Selection

● The number of segments to serve determines the appropriate entrepreneurial

marketing strategy to use
● The basic entrepreneurial marketing strategies relative to the selected segment are
the following:
1. Individual or one-on-one marketing
2. Segmentation marketing (differentiated or concentrated) marketing
3. Mass or undifferentiated marketing
● One end of the tunnel is the individual or one-on-one marketing strategy, while the
other end is the mass or undifferentiated marketing strategy. Between these two
ends is segmentation marketing
Individual or One-on-One Marketing

● The business provides a product that is suited or fitted to the particular need
of the consumers
● It is based on the concept that the consumers have different needs and
wants
● For example, tailoring shops use one-on-one strategy marketing since they
make clothes for specific people based on their respective requests
Differentiated Marketing

● Differentiated marketing is a variation of the segmentation marketing

strategy
● The entrepreneur covers several segments of the total market and designs a
particular product for each segment based on the market segment
evaluation and the capability of the business
● The basic concept of differentiated marketing is for business to exist in
almost all segments but to serve few customers only in each segment
Concentrated Marketing

● Concentrated marketing or sometimes called niche marketing is another

variation of segmentation marketing where the business selects only a few
segments but intends to serve a large number of customers in the chosen
segments. This set of customers is niche
Mass or Undifferentiated Marketing

● Undifferentiated marketing strategy takes into consideration the fact that

the customers have common needs and wants
● The entrepreneur does not have to differentiate them according to their
needs and wants but rather assumes that his or her product will cater to all
types of customers in general
● This type of entrepreneurial marketing strategy is usually applicable when
the product is a simple commodity that can actually be used by all types of
customers regardless of their differences in geographical location,
demographic profile, and psychological and behavioral concerns
Market Positioning
Market Identification – Lesson 3
Market Positioning

● The term positioning refers to the act of occupying a certain place.

● In entrepreneurship, it may either refer to the act of placing the business in
the specific place in the industry or placing the product in a certain place in
the market.
● There are conceptual differences between business positioning and product
or market positioning.
Business Positioning and Market Posistioning

Business Positioning Market Positioning

● Refers to the process of ● Refers to the process of
determining the place of the arranging a product to occupy a
business in the industry. distinct and desirable place in
● Important to conduct industry relation to other competing in the
analysis of the different forces mindset of the target consumers.
that are strong in industry to ● Last stage in the product
determine the correct position of identification process.
the proposed venture.
(Kotler & Armstrong, 2014)
Differentiating Market Positions

● The foremost objective of market positioning is to have a distinct place in

the minds of the target consumers.

How is the product viewed by the consumers in the market? Is it a superior or

inferior product? Is it reasonably priced or not?

● The process of determining the market position of the product:

a. The entrepreneur determines if the market position is distinct.
b. The entrepreneur evaluates the advantages of every market positions.
c. The entrepreneur decides on the market position.
Differentiating Market Positions

● The first logical step in market positioning is to determine that the product is
truly differentiated from competitors, specially the value and benefits the
customer will gain.
● There are two major dimensions that will differentiate the products from its
competitors. “Lower price ” and “more benefits” than those being sold at a
higher price
Differentiating Market Positions

● Filipino consumers are generally price-conscious. The first thing that we

check when we go shopping is the price of the product. We prefer to buy
products that are reasonably priced. Thus, when the price of the product can
hardly be lowered, the entrepreneur should be able to define its substantial
benefits.
● If the product is more expensive than its competitor it should be stated how
it has more value and benefits to the customers.
● It must be stated clearly on the packaging and promotional materials of the
product.
Positioning or Perceptual Map

● Market positioning is usually done with the help of the positioning or

perceptual map.
● The map shows the position of similar products competing in the market as
perceived by customers.
Positioning or Perceptual Map

H
I
P G
R H
I
C L
E O
W
L O W H I G H

Q U A L I T Y

Perceptual Map of Product Price and Quality

Evaluating the Benefits of Every Market Position

● Once the target position has been evaluated, the entrepreneur determines the
advantages, benefits, and attributes of the product.
● It must at least have one attribute which is considered distinct from other
products.
● For example, a powder detergent may take pride in the following taglines that
describes its attributes and the same time can be easily recalled by
consumers:
○ Banayad sa kamay,
○ Ang bango - bango, and
○ Amoy rosas.
Evaluating the Benefits of Every Market Position

The following criteria may be considered in identifying the attributes of benefits

to be promoted:

1. Identifiable – The benefit or attribute is easily associated with the product.

2. Beneficial – The attribute provides valuable benefits to the target consumers
3. Distinctive Advantage – The attribute is distinct to the product and can be
hardly copied by competitors
4. Efficient and Rewarding – The cost in attaching the attribute or value to the
product is not higher than the expected benefits in terms of profit.
Deciding on the Market Position

● The last phase of market positioning after differentiating the product from
the others in terms of benefit or attribute is to make a decision on where to
position the product.
● There are two basic dimensions that must be considered in deciding the
market position of the product:
○ PRICE
○ QUALITY
Deciding on the Market Position

In addition, the entrepreneur may also consider the following guide questions in
deciding the market position of the product:

1. Will the product be sold at a higher price due to its attributes and benefits?
2. Will the product be sold at the same price as the competitor’s price in spite of
the benefits?
3. Will the product be sold at the same price as the competitor’s because they
have similar benefits?
4. Will the products be sold at a lower price because it offers less benefits?
5. Will the product be sold at a higher price even if it offers less benefits?
Deciding on the Market Position

● Normally a product sold at a lower price is expected to be of inferior quality

and offers less benefits, in contrary a product sold at a higher price is
expected to be of better quality and offers more benefits.