Market Segmentation

Objectives:• Describe the characteristics of

markets and market segments.

• Discuss criteria for successful market segmentation.

• Discuss alternative strategies for selecting target markets.

Market Segmentation

MarketMarket

MarketSegmentMarket

Segment

MarketSegmentation

MarketSegmentation

People or organizations with needs or wants and the ability and

willingness to buy

People or organizations with needs or wants and the ability and

willingness to buy

A subgroup of people or organizations sharing one or more characteristics that cause them to

have similar product needs.

A subgroup of people or organizations sharing one or more characteristics that cause them to

have similar product needs.

The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

Reasons behind Segmentation-• Segmentation enables the identification of groups of

customers with similar needs, and the analysis of the buying behavior of these groups.

• Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment.

• Segmentation helps marketers satisfy customers wants and needs while meeting the organization’s objectives.

Criteria for Segmentation• Substantiality

– Segment must be large enough to warrant a special marketing mix.• Identifiability & Measurability

– Segments must be identifiable and their size measurable.• Accessibility

– Members of targeted segments must be reachable with marketing mix.• Responsiveness

– Unless segment responds to a marketing mix differently, no separate treatment is needed.

• Actionable

– Effective programs can be formulated for attracting and serving segments

Steps in Segmentation, Targeting, and PositioningSteps in Segmentation,

Targeting, and Positioning

1. Identify Basesfor Segmenting the Market

2. Develop Profilesof Resulting Segments

3. Develop Measuresof Segment Attractiveness

4. Select TargetSegment(s)

5. Develop Positioningfor Each Target Segment

6. Develop MarketingMix for Each Target Segment Market

Positioning

MarketTargeting

Market Segmentation

Levels of Market SegmentationLevels of Market Segmentation

Mass MarketingSame product to all consumers

(no segmentation)

Mass MarketingSame product to all consumers

(no segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

Micro marketingProducts to suit the tastes of individuals and locations

(complete segmentation)

Micro marketingProducts to suit the tastes of individuals and locations

(complete segmentation)

Niche Marketing Mahindra Corporate

Different products to subgroups within segments(more segmentation)

Niche Marketing Mahindra Corporate

Different products to subgroups within segments(more segmentation)

Local Marketing

Tailoring brands/ promotions to local customer groups

Individual Marketing

Tailoring products/ programs to individual customers

Market Segmentation Categories and Selected Variables

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESGeographic Segmentation ..ad clip\23309_201083_Print_inside_529x529.jpg

Climate

Density of area

City Size

Region North, East, West, SouthMajor metropolitan areas, small cities, towns

Urban, suburban, exurban, rural

Temperate, hot, humid, rainy

Demographic Segmentation ..\ad clip\idbi_bank_03012007.jpg

Income

Marital statusSexAge Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+

Male, femaleSingle, married, divorced, living together, widowed

Under Rs. 25,000, Rs.25,000-Rs. 34,999, Rs. 35,000-Rs.49,999, Rs.50,000-Rs.74,999, Rs.75,000-Rs.99,000 etc

Occupation

Education Some high school, high school graduate, some college, college graduate, postgraduate

Professional, blue-collar, white-collar, agricultural,

continued

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESPsychological Segmentation ..\ad clip\psychographic seg.jpg

Learning-involvement

Perception

Personality

Needs-motivation Shelter, safety, security, affection, sense of self-worth

Extroverts, novelty seeker, aggressive, low dogmatic

Low-risk, moderate-risk, high-risk

Low-involvement, high-involvement

Subcultures (Race/ethnic)

Religion

Cultures

(Lifestyle) Segmentation..\ad clip\woodland.jpg

Economy-minded, couch potatoes, outdoors enthusiasts, status seekers ad clip\ZOYA.jpg ..\ad clip\ALLEN SOLLY.jpg

Indian, Anglo-Indian

Hindu, Shikh, Jewish, Moslem, other

Punjabi, South-Indian, Bengali, Marathi

Family life cycle

Social class Lower, middle, upper

Bachelors, young married, full nesters, empty nesters

Attitudes Positive attitude, negative attitude

Sociocultural Segmentation ad clip\incredible_india_28032006.jpg ad clip\TIMES OF INDIA.jpg

continued

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESUse-Related Segmentation

Brand loyalty

Awareness status

Usage rate Heavy users, medium users, light users, non users

Unaware, aware interested, enthusiastic

None, some, strong

Use-Situation Segmentation

Location

Objective

Time Leisure, work, rush, morning, night ..\ad clip\kurkure.jpg

Personal, gift, fun, achievement ..\ad clip\naukri.jpg

Home, work, friend’s home, in-store

Person Self, family members, friends, boss, peerBenefit Segmentation Convenience, social acceptance, long lasting, economy,

value-for-the-money

Bases for Segmenting Business MarketsBases for Segmenting Business Markets

Basesfor Segmenting

BusinessMarkets

Basesfor Segmenting

BusinessMarkets

GeographicBuyer

Characteristics

SituationalFactors

OperatingCharacteristics

PurchasingApproaches

Developing Segment Profiles

• Need to develop a profile or description of the “typical” customer in a segment.

• Segment profile might include demographics, location, lifestyle, and product-usage frequency.

Target Market Marketers evaluate the attractiveness of each potential

segment and decide in which they will invest resources to try to turn them into customers

A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

Targeting

• To determine which, if any, of the segments uncovered should be targeted

• Evaluation of Market Segments - DAMP– Distinct – is each segment clearly different from other segments?– Accessible – can buyers be reached through appropriate promotional

programmes and distribution channels?– Measurable – is the segment easy to identify and measure?– Profitable – is the segment sufficiently large to provide a stream of

constant future revenues and profits?

Market TargetingEvaluating Market Segments

Market TargetingEvaluating Market Segments• Segment Size and Growth

– Analyze sales, growth rates and expected profitability for various segments.

• Segment Structural Attractiveness– Consider effects of: Competitors, Availability of Substitute

Products and, the Power of Buyers & Suppliers.

• Company Objectives and Resources– Company skills & resources relative to the segment(s).– Look for Competitive Advantages.

POSITIONING

Positioning: Al Ries & Jack Trout

• Positioning is owning a piece of consumer’s mind

• Positioning is not what you do to a product; it’s what you do to the mind of the prospect

• You position the product in the prospect’s mind • You concentrate on the perceptions of the

prospect, not the reality of the product

Positioning

Developing a specific

marketing mix to

influence potential

customers’ overall

perception of a brand,

product line, or

organization in

general.

Positioning for Competitive Advantage: Strategies

Positioning for Competitive Advantage: Strategies

Against aCompetitor

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Against aCompetitor

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UsageOccasions

..\ad clip\scorpio.jpg

UsageOccasions

..\ad clip\scorpio.jpg

Away fromCompetitors

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Away fromCompetitors

..\ad clip\outlander.jpg

ProductAttributes..\ad clip\i10.jpg

ProductAttributes..\ad clip\i10.jpg

ProductClass ad clip\polo.jpg

ProductClass ad clip\polo.jpg

BenefitsOffered

..\ad clip\spark.jpg

BenefitsOffered

..\ad clip\spark.jpg

User Class..\ad clip\Mahindra Quanto.jpg

User Class..\ad clip\Mahindra Quanto.jpg

BB

AA

EEDD

CCHHGG

FF

Positioning in B2B Market• Product differentiation

– Feature, Conformance, Performance, Durability, Reliability, Style, Design ad clip\Ozone Safe.jpg

• Service differentiation– Delivery, Installation, Customer Training, Consulting services,

Repair, Replacement ..\ad clip\HCL.jpg

• Personnel differentiation– Empathy, Competency, Credibility, Reliability, Responsiveness,

Communication ..\ad clip\MINT.jpg

• Image differentiation– Symbol, People, Events, Media, Community ..\ad clip\dell.jpg

Point of Parity (POP) &

Point of Difference (POD)

POP & POD

• Points-of-Parity-Shared brand values–Necessary–Competitive

Identifying & Choosing POD

• Desirable ( Customer Perspectives)– Personality Relevant– Distinctive & Superior– Believable & Credible

• Deliverable ( Firm Perspectives)– Feasible– Profitable– Pre-emptive, defensive & Difficult to attack

• Differentiating ( Competitive Perspectives)– Unique

Positioning Guidelines• Get the key consumer Insight: Find the GAP to

occupy• Main unique proposition/promise that the

brand is going to offer/fulfill• Make it specific, short and tangible• Keep the positioning up-to-date