Segmenting and

Targeting Markets

Learning Objective

Describe the characteristics of

markets and market segments.

A Market is...
(1)

people or organizations with

(2)

needs or wants, and

(3)

with the ability and

(4)

the willingness to buy.

A group of people that lacks any one of

these characteristics is not a market.
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Marketing Tasks:

1.Developing Marketing strategies and plans: Planning

2.Capturing marketing insights: MR
3.Connecting with customers: CRM
4.Building strong brands: Branding and Positioning
5.Shaping marketing offerings: 4Ps
6.Delivering and communicating value : IMC
7.Creating long term growth: Development and Sustainability

Market Segmentation
Market
Market

People
People or
or organizations
organizations with
with
needs
needs or
or wants
wants and
and the
the ability
ability and
and
willingness
willingness to
to buy
buy

Market
Market
Segment
Segment

A
A subgroup
subgroup of
of people
people or
or
organizations
organizations sharing
sharing one
one or
or more
more
characteristics
characteristics that
that cause
cause them
them to
to
have
have similar
similar product
product needs.
needs.

Market
Market
Segmentation
Segmentation

The
The process
process of
of dividing
dividing aa market
market
into
into meaningful,
meaningful, relatively
relatively similar,
similar,
identifiable
identifiable segments
segments or
or groups.
groups.
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Market Segmentation
1 Increased

sensitivity towards the consumer for the Best Fit

2 Helps firm to achieve leverage

3 Helps in appropriate product development
4 Facilitates proper choice of target market
5 Helps in customizing the product to the market need
6 makes marketing effort more efficient and economical
7 Aligns distribution and promotion efforts for maximum benefit

Learning Objective

Discuss criteria for successful

market segmentation.

Criteria for successful

segmentation:
1.

Heterogeneous

2.

Substantial

3.

Actionable

4.

Accessible

5.

Measurable
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Heterogeneou
s

Clear differences in consumer

preferences for a product must
exist.

Substantial
The proposed market segment
must have enough size and
purchasing power to be profitable.

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Actionable
Companies must be able to
respond to difference in
preferences with an appropriate
and profitable marketing mix.

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Measurable
Difference in preferences for a
product must be identifiable and
capable of being related to
measurable variables.

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Accessible
The proposed market segment must be
readily accessible and reachable with
targeted programs.

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Segmenting means dividing markets into

homogenous groups based on similar
characteristics or traits.

To divide a market into segments, firms use

segmentation variables that describe the
characteristics of each part of the market.

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Segmentation Variables
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation
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Demographic Segmentation
Age

Income Level
Family life cycle

Household Structure

Gender

Ethnicity

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Family Life cycle:

1. Initiator
2. Influencer
3. Decider
4. Purchaser
5. Consumer

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What are some of the ethical and legal

issues involved in targeting sensitive groups
such as children and seniors?

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Segmentation Variables
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation
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Geographic Segmentation

When an organization localizes its marketing

efforts to accommodate the unique needs of
specific geographic regions

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Segmenting Consumer
Markets
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation
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Psychographic Segmentation

Grouping customers together based on

social class, lifestyles and psychological
characteristics (attitudes, interests and
opinions)

Useful but more difficult to identify and

measure compared to demographic variables

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Social Class
Consuming Class:
value for money
Rich:
Money
for value

Aspirants: New
entrants

Climbers : This is all

I can afford

Destitute:
Hand to
mouth
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Segmenting Consumer Markets

Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation
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Benefits-Sought
Segmentation
Markets can be

segmented based on the

benefits that consumers
desire from using a
specific product

-> Specific product benefit

->Convenience
->Social Acceptance
->Value for money

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Segmenting Consumer
Markets
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation
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Situation Segmentation

Purchase situation or occasion

Physical surroundings
Social surroundings
Temporal perspective

How much time to make a purchase?

Task definition
Pre purchase attitude

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Segmenting Consumer
Markets
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation
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Behavior/Usage
Segmentation
Brand loyalty

Impulsive buying
Price sensitivity
Heavy users
Moderator users
Light users
Usage rate : Markets can be segmented by how often or how
heavily consumers use a specific product
80/20 Principle - 80% of revenue generated by 20% of
customers
Light
Light Users
Users
80%
80%

Heavy
Heavy Users
Users
20%
20%

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Learning Objective

List the steps involved

in segmenting markets.

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Steps in Segmenting a
Market
Select
a
market
for
study

Choose
bases
for
segmentation

Select
descriptors

Profile
and
analyze
segments

Select
target
markets

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Design,
implement,
maintain
mkting
mix

Learning Objective

Discuss alternative strategies

for selecting target markets.

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Target Market
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.

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Factors for selecting target

segment
1 Market Attractiveness: size, accessibility and profitability
2 Companies resources: financial, managerial, technological

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Undifferentiated
Targeting Strategy / Mass
marketing
Marketing approach that views the market as one
big market with no individual segments and thus
requires a single marketing mix.

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Characteristics of undifferentiated targeting strategies

1 Company aim at the entire market as single entity

2 Market need is relatively homogenous
3 Economy of scale is achieved
4 Vulnerable to competitors

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Undifferentiated Targeting
Strategy
Advantages:

Potential savings on production and marketing

costs
Economy of scale

Disadvantages:

Unimaginative product offerings

Company more susceptible to competition

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Differentiated Targeting/
Multi-segment Targeting
Strategy
A strategy that chooses two or more well-defined market
segments and develops a distinct marketing mix for
each.

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Characteristics of multisegment targeting strategies

1 Increases

firms share

2 Widely used In large firms

3 Potential of the segment should be sufficient

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Multi-segment Targeting
Strategy
Advantages:

Greater financial success

Same market coverage
Price differentiation serves different market
Premium pricing possible
Less risk

Disadvantages:

High costs
Cannibalization

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Concentrated Targeting
Strategy
A strategy used to select one segment of a market
for targeting marketing efforts.

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Characteristics of concentrated targeting strategies

1 One segment: highly specialized marketing mix

2 Maximum share in one segment
3 Main advantage is specialization
4 Resources can be focused
5 Effective positioning
6 Strength over competitor

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Niche

One part of the segment in a market.

Narrower form of market concentration

Focus on very unique features

Customer ready to pay high prices

Substantial share is necessary

Market should have growth and market potential but very less
attractiveness for competitors

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Concentrated Targeting
Strategy
Advantages:

Concentration of resources
Meets narrowly defined segment
Strong positioning

Disadvantages:

Segments too small, or changing

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Cannibalization
Situation that occurs when sales of a new product
cut into sales of a firms existing products.

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New Approaches

1 Mass customization Dell

2 Permission marketing Email news letters

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Consumer Profile

Brand Image

Product
People

Physical Evidence: Logo,

color , decor and
literature
Place

Price

Promotion: Television,
Tie ups, Movies, Sales
promotion, caf citizen
card
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Consumer Profile

Brand Image

Product
People

Physical Evidence: Logo,

color, decor and
literature

Place

Price

Promotion: Sponsorship
and collaborations
Barista coffee card.
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CCD
Consumer Profile : 15-
Brand Image: .Urban. cool hangout
Products: Innovative and adopted productsfrappe.cappuccino
Prices: Reasonable pricing range..Rs.17..Rs 54
People: People are hired for what they know but fired for how they behave
Physical Evidence:
Logo: Red and green logogreen stroke caf is noticeable larger
font is SLURRY.
Color: young colors of todaylight green, yellow orange.
Decor: Lots of steel
Literature: Youth and young at heart Caf Beat
Place: Malls ..cinemas.colleges
Promotion: Mass media promotionZee friendsChannel V Get
Gorgeous.
Associations: Hindi movies,
Sales Promotions: Caf citizen card10% discount
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Barista
Consumer Profile : 25-
Brand Image: .For love of Coffee
Products: Traditional products with traditional names
Prices: Medium pricing range
People: Pleasant, polite and Positive
Physical Evidence:
Logo: Barista written in upward curve with coffee underneathsimple
Color: Warm earth glow
Decor: Simplicity..light shades of wood
Literature: Traditional, customers publication,
Place: High street and family entertainment centers
Promotion: traditionalprint
Associations: Leo Mattel toys.scrabble
Sales Promotions: Barista Coffee card

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Make the consumer include the brand in their consideration set

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Learning Objective

Explain how and why firms implement

positioning strategies and how product
Differentiation plays a role.

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Position
The place a product, brand, or group of products
occupies in consumers minds relative to competitors
offerings.

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Positioning
Developing a specific marketing mix to influence
potential customers overall perception of a brand,
product line, or organization in general.

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Effective Positioning

Assess the positions of competing products

Determine the dimensions of these

positions

Choose an effective market position

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Competitive Frame of
Reference

Determine frame of reference by identifying

target market and competitors this is called
Category Membership

Point of Difference
Point of Parity

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Product Differentiation

A positioning strategy that some firms use to

distinguish their products from those of competitors.

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Differentiation based on Tangible attributes:

1 Ingredient

2 Functional

3 Additional feature

4 Packaging

5 Product design

6 Quality

7 Service

Differentiation based on non tangible attributes

1 Lifestyle

2 Emotional

3 Service industry

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Positioning.
1 Provides meaning to the products
2 Placing products in predetermined orbits
3 Connects product to the target market
4 Relate to competitors positioning
5 Value preposition

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Repositioning

Changing consumers perceptions of a brand

in relation to competing brands.

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