Segmentation, Targeting and Positiong

Market Segmentation:
Market Segmentation is a technique for developing effective marketing strategies
and can be defined as ‘ the process of separating out distinctive groups of buyers
with similar needs and mind sets into manageable clusters – in order to develop
more focused marketing strategies’.
Segmentation of buyers can be done for B to B markets at two levels; the company
level (the type of company, size etc) and also at the individual level (type of
decision maker, psychological type.)
Segmentation helps in:
• More focused marketing strategies
• More effective product development and marketing programs
• More effective organization structure, especially for sales, service,
distribution.
A specific technique of segmentation is to take two dimensions and plot them
against each other. For example take two variable age and income levels

Age group Income level

Low Medium High Very high
Children
Teenagers
Young adults
Families-young children
Families- teenagers
Families- empty nesters
Elderly
For each of these segments it is possible to do a motivation hygiene factor analysis
to characterize the distinctive turn-ons and turn-offs
Key questions to be answered are:
• What are you going to do with your segmentation anyway, once you got it?
• Is your segmentation genuinely unique?
• Does 20% of the market segments represent 80% of the market value?

The process of STP:

Market Segmentation Market targeting Market

positioning
1. Identify segment variables 3 Evaluate attractiveness 5.Identify possible
and segment the market of each segment positioning
concepts

2. Develop profiles of 4.Select target segment 6. Select & develop

resulting segments and communicate the
chosen concept

Procedure for market segmentation

1. Survey stage: exploratory interviews, focus groups for qualitative information

and questionnaire to collect data on attributes and their importance rating,
brand awareness and brand rating, usage patterns, attitudes to product
category, demographics geographic, psychographics, media graphics of the
respondents
2. Analysis stage, using factor analysis to remove highly correlated variables and
apply cluster analysis to
 create specified no. of maximum different segments
3. Profiling stage. Profiled in terms of distinguishing attitude, behavior,
demographic, psychographic, media patterns.

One way to discover new segments is to investigate the hierarchy of attributes

the consumers examine
while choosing a brand

Segments to be effective must be measurable, substantial, accessible,

differentiable and actionable.
Key parameters for segmentation are: geographic, Demographic, psychographic,
Behavioral
(Occasion for use, user rate, and benefits sought, loyalty, buyer readiness, and
attitude to product.

Basis for segmenting business markets:

* Demographics (industry, company size, location)

* Operating variable (technology, user/non-user, customer requirements)
* Purchasing approaches (tender based, preferred supplier basis, invite bids for
every purchase)
* Purchase criteria (quality, price, service on which of these should we focus.)
* Situational factors (Urgency, specific applications, size of order…)
* Personal characteristics (Buyer, seller similarity, similar values)
* Power structure (who dominates, purchase, finance ..)

Market Targeting:
1. Identify market segment
2. Evaluate the opportunities in each and choose for targeting

Two factors:
1. Segment attractiveness
2. Company’s objectives and resources

Market attractiveness: parameters are chosen, weights assigned and each segment
evaluate.

Weight rating Value

Market size
Market growth rate
Historical profit margin
Completive intensity
Technological requirements
Social political legal aspects
Impact o environment
Energy requirements
and so on

Business strength can be measured in terms of market share, growth, product

quality, brand equity
distribution network, promotional strength, unit costs and so on. Weights should be
assigned, rating and value calculated as above.

Selecting the market segment:

 • Single segment concentration e. g. small car segment
• Selective specialization e.g. focus on govt. business
• Product specialization e.g. microscopes
• Market specialization
• Full market coverage, all customer groups, with products they may need e. g.
coke, IBM

Undifferentiated Marketing:
Ignoring segment differences and going after the whole market with one offer.
Design a product, a program to appeal to a broad market segment.
May lead to a superior image.

Differentiated Marketing:
A firm operates in several segments with different marketing programs for each
segment e.g. IBM

Undifferentiated, differentiated and

Concentrated marketing

• Ignore segment differences

• Go after the whole market with one offer to appeal to broadest market
segment
• Enormous cost economies in production, distribution and promotion because
of standard product
• Is rare because of competition

In a single market segment focus a firm can save costs by focusing marketing
mix
only in that segment.