Marketing Management

Segmentation Targeting & Positioning

Market segmentation
Market segmentation is the method for achieving maximum market response from initial
marketing resources by recognizing differences in the response characteristics of various parts
of the market. In this sense market segmentation is the strategy of divide and conquer, i.e.,
dividing market in order to conquer them.
Market segmentation enables the marketers to give better attention to the selection of
customers and offer an appropriate marketing mix for each chosen segment or a group of
buyers having homogenous demand. Each subdivision or segment can be selected as a market
target to be reached with a distinct marketing mix.

Need for Market Segmentation (Why Market Segmentation?)

Market Segmentation helps the marketers to bring together individuals with similar choices and
interests on a common platform.

 Market Segmentation helps the marketers to devise appropriate marketing strategies

and promotional schemes according to the tastes of the individuals of a particular
market segment. A male model would look out of place in an advertisement promoting
female products. The marketers must be able to relate their products to the target
segments.
 Market segmentation helps the marketers to understand the needs of the target
audience and adopt specific marketing plans accordingly. Organizations can adopt a
more focussed approach as a result of market segmentation.
 Market segmentation also gives the customers a clear view of what to buy and what not
to buy. A Rado or Omega watch would have no takers amongst the lower income group
as they cater to the premium segment. College students seldom go to a Zodiac or Van
Heusen store as the merchandise offered by these stores are meant mostly for the
professionals. Individuals from the lower income group never use a Blackberry. In
simpler words, the segmentation process goes a long way in influencing the buying
decision of the consumers.An individual with low income would obviously prefer a Nano
or Alto instead of Mercedes or BMW.
 Market segmentation helps the organizations to target the right product to the right
customers at the right time. Geographical segmentation classifies consumers according
to their locations. A grocery store in colder states of the country would stock coffee all
through the year as compared to places which have defined winter and summer
seasons.

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  Segmentation helps the organizations to know and understand their customers better.
Organizations can now reach a wider audience and promote their products more
effectively. It helps the organizations to concentrate their hard work on the target
audience and get suitable results.

Steps in Market Segmentation

Segmentation refers to the process of creating small segments within a broad market to
select the right target market for various brands. Market segmentation helps the marketers to
devise and implement relevant strategies to promote their products amongst the target
market.

A market segment consists of individuals who have similar choices, interests and preferences.
They generally think on the same lines and are inclined towards similar products. Once the
organizations decide on their target market, they can easily formulate strategies and plans to
make their brands popular amongst the consumers.

Steps in Market Segmentation

1. Identify the target market

The first and foremost step is to identify the target market. The marketers must be very
clear about who all should be included in a common segment. Make sure the individuals
have something in common. A male and a female can’t be included in one segment as
they have different needs and expectations.

1. Burberry stocks separate merchandise for both men and women. The management is
very clear on the target market and has separate strategies for product promotion
amongst both the segments.

A Garnier men’s deodorant would obviously not sell if the company uses a female model
to create awareness.

Segmentation helps the organizations decide on the marketing strategies and

promotional schemes.

2. Identify expectations of Target Audience

Once the target market is decided, it is essential to find out the needs of the target
audience. The product must meet the expectations of the individuals. The marketer
must interact with the target audience to know more about their interests and
demands.

Kellogg’s K special was launched specifically for the individuals who wanted to cut down
on their calorie intake.

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 Marketing professionals or individuals exposed to sun rays for a long duration need
something which would protect their skin from the harmful effects of sun rays. Keeping
this in mind, many organizations came with the concept of sunscreen lotions and
creams with a sun protection factor especially for men.

3. Create Subgroups

The organizations should ensure their target market is well defined. Create subgroups
within groups for effective results.

Cosmetics for females now come in various categories.

 Creams and Lotions for girls between 20-25 years would focus more on fairness.
 Creams and lotions for girls between 25 to 35 years promise to reduce the signs
of ageing.
4. Review the needs of the target audience

It is essential for the marketer to review the needs and preferences of individuals
belonging to each segment and sub-segment. The consumers of a particular segment
must respond to similar fluctuations in the market and similar marketing strategies.

5. Name your market Segment

Give an appropriate name to each segment. It makes implementation of strategies

easier.

A kids section can have various segments namely new born, infants, toddlers and so on.

6. Marketing Strategies

Devise relevant strategies to promote brands amongst each segment. Remember you
can’t afford to have same strategies for all the segments. Make sure there is a connect
between the product and the target audience. Advertisements promoting female
toiletries can’t afford to have a male model, else the purpose gets nullified.

A model promoting a sunscreen lotion has to be shown roaming or working in sun for
the desired impact.

7. Review the behavior

Review the behavior of the target audience frequently. It is not necessary individuals
would have the same requirement (demand) all through the year. Demands vary,
perceptions change and interests differ. A detailed study of the target audience is
essential.

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 8. Size of the Target Market

It is essential to know the target market size. Collect necessary data for the same. It
helps in sales planning and forecasting.

Market Segmentation Bases

Most organizations cannot target the total market for a specific product. For each separate part
of the market that an organization wants to target, a marketing mix (a set of 5Ps) must be
created. It would be very expensive to try to create a marketing mix for every part of the target
market. Instead, companies cut up those targets into specific “segments” of the market that the
organization is more strategically positioned to be successful in targeting. Segmentation also
varies based on the target market being a consumer market or a business market.

The study of buyer behavior helps marketing managers better understand why people make
purchases. To identify the target markets that may be most profitable for the firm, marketers
use market segmentation, which is the process of separating, identifying, and evaluating the
layers of a market to identify a target market. For instance, a target market might be
segmented into two groups: families with children and families without children. Families with
young children are likely to buy hot cereals and presweetened cereals. Families with no children
are more likely to buy health-oriented cereals. Cereal companies plan their marketing mixes
with this difference in mind. A business market may be segmented by large customers and
small customers or by geographic area.

Demographic Segmentation

Demographic segmentation uses categories such as age, education, gender, income, and
household size to differentiate among markets. This form of market segmentation is the most
common because demographic information is easy to obtain. The U.S. Census Bureau provides
a great deal of demographic data, especially about metropolitan areas. For example, marketing
researchers can use census data to find areas within cities that contain high concentrations of
high-income consumers, singles, blue-collar workers, and so forth. However, even though
demographic information is easier to obtain than other types of information, it may not always
be the best approach to segmentation because it is limited on what it can reveal about
consumers.
Forms of Consumer Market Segmentation

Form General Characteristics

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Forms of Consumer Market Segmentation

Form General Characteristics

Demographic
Age, education, gender, income, race, social class, household size
segmentation

Regional location (e.g., New England, Mid-Atlantic, Southeast, Great Lakes,

Geographic
Plains States, Northwest, Central, Southwest, Rocky Mountains, Far West),
segmentation
population density (urban, suburban, rural), city or county size, climate

Psychographic
Lifestyle, personality, interests, values, attitudes
segmentation

Benefit
Benefits provided by the good or service
segmentation

Volume
Amount of use (light versus heavy)
segmentation

Geographic Segmentation

Geographic segmentation means segmenting markets by region of the country, city or county
size, market density, or climate. Market density is the number of people or businesses within a
certain area. Many companies segment their markets geographically to meet regional
preferences and buying habits. Pizza Hut, for instance, gives easterners extra cheese,
westerners more ingredients, and mid-westerners both. Both Ford and Chevrolet sell more
pickup trucks and truck parts in the middle of the country than on either coast. The well-
defined “pickup truck belt” runs from the upper Midwest south through Texas and the Gulf
states. Ford “owns” the northern half of this truck belt and Chevrolet the southern half.

Psychographic Segmentation

Race, income, occupation, and other demographic variables help in developing strategies but
often do not paint the entire picture of consumer needs. Demographics provide basic data that
can be observed about individuals, but psychographics provide vital information that is often
much more useful in crafting the marketing message. Demographics provide the skeleton, but
psychographics add meat to the bones. Psychographic segmentation is market segmentation by
personality or lifestyle. People with common activities, interests, and opinions are grouped
together and given a “lifestyle name.” For example, Harley-Davidson divides its customers into
seven lifestyle segments, from “cocky misfits” who are most likely to be arrogant

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troublemakers, to “laid-back camper types” committed to cycling and nature, to “classy
capitalists” who have wealth and privilege. Two different managers could be described by
demographics as male, managers, 35 years old, with $80,000 per year income. A marketer who
just saw the demographics might create one advertisement to reach both of them. However, if
the marketer knew that one of the managers was president of his homeowner’s association and
captain of a rugby league team and the other manager was a holder of opera season tickets and
president of the Friends of the Public Library, the messages might be designed very differently
in order to be more successful.

Benefit Segmentation

Benefit segmentation is based on what a product will do rather than on consumer

characteristics. For years Crest toothpaste was targeted toward consumers concerned with
preventing cavities. Recently, Crest subdivided its market. It now offers regular Crest, Crest
Tartar Control for people who want to prevent cavities and tartar buildup, Crest for kids with
sparkles that taste like bubble gum, and another Crest that prevents gum disease. Another
toothpaste, Topol, targets people who want whiter teeth—teeth without coffee, tea, or
tobacco stains. Sensodyne toothpaste is aimed at people with highly sensitive teeth.

Volume Segmentation

The fifth main type of segmentation is volume segmentation, which is based on the amount of
the product purchased. Just about every product has heavy, moderate, and light users, as well
as nonusers. Heavy users often account for a very large portion of a product’s sales. Thus, a firm
might want to target its marketing mix to the heavy-user segment. For example, in the fast-
food industry, the heavy user (a young, single male) accounts for only one in five fast-food
patrons. Yet this heavy user makes over 60 percent of all visits to fast-food restaurants.

Retailers are aware that heavy shoppers not only spend more, but also visit each outlet more
frequently than other shoppers. Heavy shoppers visit the grocery store 122 times per year,
compared with 93 annual visits for the medium shopper. They visit discount stores more than
twice as often as medium shoppers, and they visit convenience/gas stores more than five times
as often. On each trip, they consistently spend more than their medium-shopping counterparts.

Business Market Segmentation

Business markets are segmented differently than consumer markets. Business markets may
segment based on geography, volume, and benefits, just as consumer markets are. However,
organizations might also segment based on use of the product (such as a petrochemical
company having one market segment for purchasers who use polyethylene for instrumentation
panels and one for purchasers who use polyethylene for car seats), characteristics of purchasing

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function (such as purchasing committees, purchasing managers, or purchasing departments),
size of the client (one segment for large customers who have different needs than smaller
customers), or industry (such as segmenting food systems into restaurants or government
agencies such as schools or military bases), as well as other considerations related to
characteristics of business customers.

Describe how does a firm choose market-coverage strategy

Market Segmentation – Meaning

Market segmentation is the method for achieving maximum market response from initial
marketing resources by recognizing differences in the response characteristics of various parts
of the market. In this sense market segmentation is the strategy of divide and conquer, i.e.,
dividing market in order to conquer them.
Market segmentation enables the marketers to give better attention to the selection of
customers and offer an appropriate marketing mix for each chosen segment or a group of
buyers having homogenous demand. Each subdivision or segment can be selected as a market
target to be reached with a distinct marketing mix.
Market segmentation is defined as the segmentation or division of markets into various
homogenous coups of customers, each of them reacting differently to promotion,
communication, pricing and other variables of the marketing mix. Market segments should be
formed in such a way that difference between buyers within each segment is as small as
possible.
Thus, every segment can be addressed with an individually targeted marketing mix. Market
segmentation and the identification of target markets are an important element of each
marketing strategy. The importance of market segmentation results from the fact that the
buyers of a product or a service are no homogenous group.
Actually, every buyer has individual needs, preferences, resources and behaviours. Since it is
virtually impossible to cater for every customer’s individual characteristics, the marketing
people group customers into various market segments by variables they have in common.
These common characteristics allow developing a standardised marketing mix for all customers
in this segment. They are the basis for determining any particular marketing mix.
Very often, companies shape their market segmentation using the results of market research
and analysis. Market segmentation research is not designed to shape the market. Rather, it
reveals underlying divisions in the market and characteristics of the market segments that can
be used for effective and profitable marketing.

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At the very least, segmentation research places the steps companies take on a firm factual
foundation. Often, it also uncovers characteristics of the market that are not obvious and
identifies ways of dividing and approaching the market that will be particularly effective. If
these ways are not evident to competitors, the marketing impact of segmentation research can
be even more beneficial.
At a more tactical level, market segmentation can make the choices a company faces in
developing products, services, and marketing messages easier. Often, market segmentation
shows that many conceivable combinations of interest in product features, combinations of
service needs, or combinations of attitudes are actually very rare in the marketplace.
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. The concept of market segment is
based on the fact that the market of commodities are not homogeneous but they are
heterogeneous. Market represents a group of customer having common characteristics but two
customer are never similar in their nature, habits, hobbies, income and purchasing techniques.
Market segmentation is a marketing strategy that involves dividing a broad target market into
subsets of consumers who have common needs, and then designing and implementing
strategies to target their needs and desires using media channels and other touch-points that
best allow to reach them.
Market segments allow companies to create product differentiation strategies to target them.
So it can be concluded here that companies cannot connect with all customers in large, broad,
complex or diverse markets. But division of such markets is possible into groups of consumers
or segments with distinct needs and wants. After that organization can select any segment in
which it can perform well and which is best suited for the overall interest of the organization.
This decision requires a keen understanding of the customer behavior. To develop the best
marketing mix, marketer need to understand what makes each segment unique and different.
Identification and satisfaction of the right market segment is often the key to marketing
success.

Importance of Market Segmentation

1. Co-Ordination of Product and Marketing Appeals – As market segmentation presents an
opportunity to understand the nature of the market, the seller can adjust his thrust to attract
the maximum number of customers by various publicity media and appeals.

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2. Better Position to Spot Marketing Opportunities – As the producer can make a fair estimate
of the volume of his sale and the possibilities of furthering his sales in the regions where
response of the customers is poor.
3. Allocation of Marketing Budget – It is on the basis of market segmentation that marketing
budget is adjusted for a particular region or locality. Specific budget can be allocated according
to different market segments.
4. Meeting the Competition Effectively – It helps the producer to face the competition of his
rivals effectively. The producer can adopt different strategies for different markets taking into
account the rival’s strategies.
5. Effective Marketing Programme – It helps the producer to adopt an effective marketing
programme and serve the consumer better at comparatively lower cost. Diverse marketing
programmes can be attached for various segments.
6. Evaluation of Marketing Activities – Market segmentation helps the manufacturer to find out
and compare the marketing potentialities of the products. It helps to adjust production and
using his resources in the most profitable manner. As soon as the product becomes obsolete,
the product line could be diversified or discontinued.

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