1.

Market Segmentation
It is the first step in selecting a target market. It is to study the industry in which the firm intends to
compete, and determine the different potential target markets in that industry. It is important because a
new firm typically only has enough resources to target one market segment, at least initially. Markets can
be segmented in a number of different ways: product type, price point, customers served. What do the
people who buy the product have in common with one another? Market can be segmented and targeted on
the basis of at least five criteria:
a. Demographic Characteristic: Consumers are segmented in terms of demographics like gender, age,
education etc.
b. Psychographic Variable: Life styles, usage rate of product, or degree of loyalty are another way of
distinguishing the customers.
c. Geographic Variable: Consumers are segmented in term of geographical places. For example,
targeting customers within a range of 5 km radius for the business.
d. Behavioral Variable: This method focuses on the ways and situation in which customers might use
the product. For example, in birthday, heavy users, light users etc.
e. Individual or Business: It is to segregate market in term of customer in public domain or business
domain. That is business to customer, or business to business.
To test whether firm segmented the market successfully, the requirements for successful market
segmentation are as follows:
 Homogeneity of needs and wants appears within the segment.
 Heterogeneity of needs and wants exists between the segments.
 Differences within the segment should be small compared to differences across segments.
 The segment should be distinct enough so that its members can be easily identified.
 It should be possible to determine the size of the segment.
 The segment should be large enough to be profitable.
2. Selecting a Target Market
When selecting segments to target, it is often a very useful strategy to diversify and have more than one
client base, the business owner must carefully assess how much effort to devote to each. It is to consider the
difference between potential and actual customer sales. That means once a firm has segmented the market,
the next step is to select a target market. Generally, a new venture firm doesn’t target an entire segment of a
market because many market segments are too large to target successfully. Instead, most firms target a
niche market within the segment. So, in this point the firm focused on narrow group of customers with
similar nature and interest. This narrow group of customers is known as niche market. By focusing on a
clearly defined market, a firm can become an expert in that market and then be able to provide its
customers with high levels of value and service. Focusing on a clearly defined market requires a firm to
know what not to do along with what to do. However, a firm’s choice of target markets must also be in
related with its business model, the backgrounds, skills of its founders and other employees.
3. Establishing a Unique Position (Market Positioning)
Market positioning is the process of creating a favorable image of the product against the competitor’s
products in different market. A firm’s position is defined by its products or services. After selecting a target
market, the firm’s next step is to establish a “position” into the mind of the target customer. It is to make the
product image different from competitors. Thereby, a firm establishes a unique position in its customers’
minds by consistently drawing attention to two or three of its product’s attributes that define the essence of
what the product is how it is different from the other competitors.
Once a company has identified its position and primary points of differentiation, a helpful technique is to
develop a product attribute map, which illustrates a firm’s positioning strategy relative to its major rivals.
Further, firms often develop a tagline to reinforce the position they have staked out in their market, or a
phrase that is used consistently in a company’s literature, advertisements, promotions, stationery, and even
invoices, thus becomes associated with the company. For example, CG Wai-Wai have “hami
sabaiko WaiWai” (our own Wai Wai); Ace travel have ‘your travel partner’, Shikhar Shoes have ‘Style with
Excellence’.