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MARKET

SEGMENTATION AND
TARGETING

WHAT IS A MARKET?

A set up where two or more parties engage in exchange of goods, services


and information is called a market. Ideally a market is a place where two or
more parties are involved in buying and selling.
The two parties involved in a transaction are called seller and buyer.
The seller sells goods and services to the buyer in exchange of money.
There has to be more than one buyer and seller for the market to be
competitive.

Monopoly - Monopoly is a condition where there is a single seller and many


buyers at the market place. In such a condition, the seller has a monopoly with
no competition from others and has complete control over the products and
services.
In a monopoly market, the seller decides the price of the product or service
and can change it on his own.

Monopsony - A market form where there are many sellers but a single buyer is
called monopsony. In such a set up, since there is a single buyer against many
sellers; the buyer can exert his control on the sellers. The buyer in such a form
has an upper edge over the sellers.

TYPES OF MARKET

Physical Markets - Physical market is a set up where buyers can


physically meet the sellers and purchase the desired merchandise from
them in exchange of money. Shopping malls, department stores, retail
stores are examples of physical markets.
Non Physical Markets/Virtual markets - In such markets, buyers purchase
goods and services through internet. In such a market the buyers and
sellers do not meet or interact physically, instead the transaction is done
through internet.
Auction Market - In an auction market the seller sells his goods to one
who is the highest bidder.
Market for Intermediate Goods - Such markets sell raw materials (goods)
required for the final production of other goods.
Black Market - A black market is a setup where illegal goods like drugs
and weapons are sold.
Knowledge Market - Knowledge market is a set up which deals in the
exchange of information and knowledge based products.
Financial Market - Market dealing with the exchange of liquid assets
(money) is called a financial market.

Financial markets are of following types:


Stock Market - A form of market where sellers and buyers
exchange shares is called a stock market.
Bond Market - A market place where buyers and sellers are
engaged in the exchange of debt securities, usually in the form
of bonds is called a bond market. A bond is a contract signed by
both the parties where one party promises to return money with
interest at fixed intervals.
Foreign Exchange Market - In such type of market, parties are
involved in trading of currency. In a foreign exchange market
(also called currency market), one party exchanges one countrys
currency with equivalent quantity of another currency.
Predictive Markets - Predictive market is a set up where
exchange of good or service takes place for future. The buyer
benefits when the market goes up and is at a loss when the
market crashes.

WHAT IS
SEGMENTATION ?
Segmentation refers to a process of bifurcating or
dividing a large unit into various small units which
have more or less similar or related characteristics.

MARKET SEGMENTATION

Market segmentation is a marketing concept


which divides the complete market set up into
smaller subsets comprising of consumers with a
similar taste, demand and preference.
A market segment is a small unit within a large
market comprising of like minded individuals.
One market segment is totally distinct from the
other segment.
A market segment comprises of individuals who
think on the same lines and have similar interests.
The individuals from the same segment respond in
a similar way to the fluctuations in the market.

MARKET SEGMENTATION
Geographic segmentation divides the market
into different geographical units such as
nations, regions, states, counties, or cities

MARKET SEGMENTATION
Demographic segmentation divides the market
into groups based on variables such as age,
gender, family size, family life cycle,
income, occupation, education, religion,
race, generation, and nationality
Demographic segmentation is the most popular
segmentation method because consumer
needs, wants, and usage often vary closely
with demographic variables and are easier
to measure than other types of variables

MARKET SEGMENTATION
Age and life-cycle stage segmentation is the
process of offering different products or
using different marketing approaches for
different age and life-cycle groups
Gender segmentation divides the market
based on sex (male or female)
Income segmentation divides the market into
affluent or low-income consumers

MARKET SEGMENTATION
Psychographic segmentation divides buyers
into different groups based on social class,
lifestyle, or personality traits

MARKET SEGMENTATION
Behavioral segmentation divides buyers
into groups based on their knowledge,
attitudes, uses, or responses to a
product

Occasion
Benefits sought
User status
Usage rate
Loyalty status

MARKET SEGMENTATION
Occasion segmentation divides buyers into
groups according to occasions when they get
the idea to buy, actually make purchases, or
respond to a product
Benefit segmentation requires finding the
major benefits people look for in the
product class, the kinds of people who look
for each benefit, and the major brands that
deliver each benefit

MARKET SEGMENTATION
User status divides buyers into ex-users,
potential users, first-time users, and regular
users of a product
Usage rate divides buyers into light, medium,
and heavy product users
Loyalty status divides buyers into groups
according to their degree of loyalty

THE PROCESS OF SEGMENTING


MARKETS

Step 1: Identify segmented markets


The first step of the market segmentation process is
to identify the segmented markets. It is important to
select the segmenting strategy that most accurately
categorizes consumers according to your product or
service.
For example, suppose that your company
manufactures infant safety seats. The decision to
use the age-oriented strategy to segment the market
may not be effective because people become
parents at different ages. Promotions and advertising
directed toward twenty-something parents may not
appeal to older couples with children.

THE PROCESS OF SEGMENTING


MARKETS

Step 2: Analyze each segment


Step two of the market segmentation process is to analyze
each segment. After identifying potential market
segments, it is important to research and analyze the
consumers that comprise each segment. You must
determine the similarities that connect the members of
each segment, and identify the differences that separate
one segment from another.
During the analyzing step, you should outline the buying
habits, product usage rates, attitudes, and lifestyle
choices that represent a typical customer in each segment.
Demographic and geographic information will provide a
clear customer profile to help you determine the market
segment best suited for your product or service.

THE PROCESS OF SEGMENTING


MARKETS

Step 3: Evaluate market opportunities


The third step of the process is to evaluate your market
opportunities. The customer profiles you create help you
identify the market segments that offer the sufficient
benefits you need to achieve company goals and objectives.
When evaluating each segment, you should consider your
ability to reach the targeted consumer, the number of
potential customers within the segment, your ability to
measure the segment's progress, and the segment's
compatibility with your company's mission.
During this step, you must also forecast your company's
market share possibility in each segment. By defining the
sales potential, you can justify the need to secure the
necessary resources to implement your marketing strategy.

THE PROCESS OF SEGMENTING


MARKETS

Step 4: Select target segments


The fourth step of the market segmentation
process is to select the appropriate target
segments. The research, examination, and
evaluation of the market segments allow you
to evaluate the profit potential of each
segment. Once you select one or more target
segments, you can develop products and
marketing strategies to satisfy your
customers' needs

REQUIREMENTS FOR EFFECTIVE


SEGMENTATION
To be useful, a market segment must be:

Measurable
Accessible
Substantial
Differentiable
Actionable

REQUIREMENTS FOR EFFECTIVE


SEGMENTATION
Measurable examples include the size,
purchasing power, and profiles of the
segments
Accessible refers to the fact that the market
can be effectively reached and served

REQUIREMENTS FOR EFFECTIVE


SEGMENTATION
Substantial refers to the fact that the markets
are large and profitable enough to serve
Differentiable refers to the fact that the
markets are conceptually distinguishable
and respond differently to marketing mix
elements and programs
Actionable refers to the fact that effective
programs can be designed for attracting and
serving the segments

SELECTING TARGET MARKETS

Undifferentiated marketing
Differentiated marketing
Concentrated marketing
Micromarketing

SELECTING TARGET MARKETS


Undifferentiated marketing targets the whole
market with one offer

Mass marketing
Focuses on common needs rather than whats
different

Differentiated marketing targets several


different market segments and designs
separate offers for each

Goal is to achieve higher sales and stronger


position
More expensive than undifferentiated marketing

SELECTING TARGET MARKETS


Concentrated marketing targets a small share
of a large market

Limited company resources


Knowledge of the market
More effective and efficient

Micromarketing is the practice of tailoring


products and marketing programs to suit the
tastes of specific individuals and locations

Local marketing
Individual marketing

SELECTING TARGET MARKETS


Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups

Cities

Neighborhoods

Stores

SELECTING TARGET MARKETS


Local Marketing

Benefits:

Increased marketing effectiveness in competitive


markets
More customer-specific offerings

Local marketing

Challenges:

Increased manufacturing and marketing costs


Less economy of scale
Logistics
Dilution of company image

SELECTING TARGET MARKETS


Individual marketing involves tailoring
products and marketing programs to the
needs and preferences of individual
customers
Also known as:

One-to-one marketing
Mass customization
Markets-of-one marketing

SELECTING TARGET MARKETS


Mass customization is the process through
which firms interact one-to-one with
masses of customers to design products and
services tailor-made to meet individual
needs. Has made relationships with
customers important in the new economy.

Provides a way to distinguish the company


against competitors