MARKETING SEGMENTATION, TARGETING AND POSITIONING

MARKET SEGMENTATION

INTRODUCTION

Markets consist of buyers who differ in one or more respects.

They may differ in their:-

- Wants
- Resources
- Geographical locations
- Attitudes and
- Buying practices
It is therefore necessary for a marketer to segment his/her market.

MEANING OF MARKET SEGMENTATION

Marketing segmentation is

“The act of dividing a market into distinct groups of buyers who might require
separate products, and /or marketing mixes. Or it is the sub-division of a market into
smaller homogenous sub-markers which the organization might successfully satisfy”.

BENEFITS OF MARKET SEGMENTATION

The following benefits may be derived by a company as a result of market segmentation.

 It may enable a company to select potentially profitable segment.

 It enables a company to concentrate resources on the chosen segments
 The analysis gives a company the opportunity to review developments and anticipate
changes in its chosen segment from competitive activity, legal / political changes, etc.
 Sales opportunities are more likely to be effectively and fully exploited by staff when
target audience is properly defined.
 Better services tailored to the needs of particular markets segments are offered.
 Prices are tailored to customers’ situations and circumstances.
 It may lead to improved level of services both in terms of sophistication and general
standards.

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  Assists in identifying gaps. Market segmentation involves marketing research. During
this process, the marketer can also be engaged in “Gap Analysis.” Gap Analysis is a
process which aims to seek out differences between what markets need and want and
what is actually being supplied – the gap.
Hence gap analysis will uncover:-

o Market needs for existing services not fulfilled

o Other needs where no services currently exist.
A marketer should ask himself the following questions if market segmentation is to work
effectively. The answer to each must be ‘yes’.

Characteristics of a good market segment

a) Can the market be identified?

The marketer should be able to identify which consumers are members of a particular
market segment. There must be some common characteristics that the consumers
have.

b) Can the market identified be measured?

The characteristics that are common to a group of consumers should be measured in
terms of size, purchasing power and other characteristics.

c) Is the market substantial?

The market should be large enough to generate sales volumes that ensure profitability,
otherwise it will not be economical to design a unique marketing mix for it. i.e., is the
market worth the effort?

d) Is the market accessible?

That is, can the market be reached effectively using promotion as well as distribution?

e) Is the market responsive?

Market segments must be defined in their willingness to purchase a product in
response to variations in the marketing mix.

f) Compatibility with corporate image

The market must be compatible with the firm’s objectives and corporate image.

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If the six criteria for effective segmentation are met, marketers should then choose some
means (bases or variables) for segmenting the market.

VARIABLES FOR SEGMENTING CONSUMERS MARKETS

The following variables are commonly used to segment consumer markets.

 Geographic,
 Demographic,
 Psychographic and
 Behavioural variables
Geographic segmentation

This calls for dividing the market into different geographical units such as.

- Nations
- States
- Regions – West, north, Central , South etc
- Countries,
- Cities or
- Neighborhoods
Attention should be paid to variations in geographical needs and preferences.

Geographical segmentation assists the seller to position retail outlets in most appropriate
locations as well as simply in identifying the needs on the basis of the consumers’ own
location.

Demographic segmentation

This consists of dividing the market into groups on the basis of demographic variables such
as: Age, sex, family size, family life, cycle, income, education, occupation, religion, race and
nationality.

These variables are the most popular for distinguishing customer groups because,

- Consumers wants and preferences are closely related to them.

- They are easier to measure than most other variables.
a) Age

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 Consumers needs and wants change with age. Hence the market should be segmented
as young, old etc.

b) Sex
This can be employed to segment such market for clothes deodorants, lotions, magazines,
etc. thus the markets can be for men or women, males or female.

c) Family life cycle (FLC)

The product needs for a household very according to marital status and the present
ages of children. Thus family life cycle can be divided into:-

- Single
- Young, married with no children
- Young, married with youth children
- Older married with children, etc
d) Income
e) Occupation
Variables include; bankers, teachers, farmers, clerks, students, housewives,
secretaries, etc. A marketer can choose to specialize in the needs of one occupation
group or more.

f) Education
E.g.

- Some primary education

- Some high school education

- College education

- University education etc.

g) Religion – e.g. Muslims, Christians etc.

h) Race – e.g. white, black etc
i) Nationality – e.g. Asians, Africans etc.
j) Ethnicity groups
k) Generation

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 Each consumer is profoundly influenced by the generation in which he/she grows up.
This influences one’s inclination to Music, politics etc.

Psychographic segmentation

Psychographics are psychological profiles of different consumers developed from research,

sometimes referred to as AIO (Attitudes Interests and Opinion profiles)

In psychographic segmentation, buyers are divided into different groups on the basis of their:-

- Social class
- Lifestyle and /or
- Personality characteristics
People within the same demographic group can exhibit very different psychographic profiles.

Consumers can thus be sub-divided on the basis of the following psychographic variables.

i. Social class
Social class has a strong influence on people’s preferences. Marketers designing
products and or/ services for specific social classes build in those features that appeal
to the target social class.

ii. Lifestyle
Consumers’ lifestyles are derived from their activities, interests and opinions. Each
life-style group is influenced by different marketing mixes.

iii. Personality
Types of personality groups may include;

- Comparative authoritarian
- Ambitious
- Alerts to change
- Self-confidence
- Prestige conscious
- Self image
- Self concept
Behavioural segmentation

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Buyers are divided into groups on the basis of their

- Knowledge
- Attitude
- Behaviour
- Use or
- Response to a products
- Potential users
- First time users and
- Regular users of a product.
TARGETING

 Market segmentation reveals the market segment opportunities open to the firm
 It has now to evaluate the various segments and decide on how many and which ones
to serve.
 In evaluating the segments, the firm should look at:
i. The segment size and growth
ii. Segment’s structural attractiveness, this is determined by:
- Threat of intense segments rivalry
- Threat of new entrants.
- Threat of substitute products
- Threat of growing bargaining power of buyers
- Threat of growing bargaining power of suppliers
iii. Company objectives and resources.

When selecting their target markets, companies have to make a choice of whether they are

going to be focused on one or few segments or they are going to cater to the mass market.

The choice that companies make at this stage will determine their marketing mix and

positioning strategy

 There are four generic target marketing strategies.

1. Undifferentiated marketing:

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There may be no strong differences in customer characteristics. Alternatively, the cost of

developing a separate marketing mix for separate segments may outweigh the potential gains

of meeting customer needs more exactly. Under these circumstances a company will decide

to develop a single marketing mix for the whole market. A company using an

undifferentiated targeting strategy essentially adopts a mass market philosophy. It views the

market as one big market with no individual segments. The company uses one marketing mix

for the entire market and assumes that the market has similar needs that can be met using one

marketing mix.

There is no competition as this stage and hence no need to customise market offering.

Companies offering undifferentiated targeting strategies save on production and marketing

costs since only one product is produce and hence the company enjoys economies of mass

production. Marketing costs are also low because only one product has to be promoted and

one channel of distribution used for all products.

However, companies that adopt this strategy choose to ignore any differences in the market

which often results into some level of dissatisfaction in the market. Such firms may also face

stiff competition from players with a more focused offering.

1. Differentiated market coverage(multi segment targeting)

A differentiated market coverage strategy reveals several potential target segment that the

company can serve profitably, develops specific marketing; mixes to appeal to all or some of

the segments.

The differentiated strategy is popular because it has potential to generate sales volume, higher

profits, a larger market share and economies of scale in manufacturing and marketing.

The strategy involves greater product design, production, and promotion, inventory

marketing research and management costs.

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 2. Focused or concentrated targeting

Several segments may be identified but a company may not serve all of theme probably

because of their unattractiveness, shortage of resources and capabilities, etc. Such firms

may concentrate their resources, and capabilities on serving one large segment that is

narrowly defined (niche marketing) It is a good strategy for companies with limited

resources, those that are new in the market. The strategy results in great market

satisfaction and customer loyalty but faces the danger of attracting competition from large

organisations or even pulling out o he market when segments become unprofitable for

one reason or the other.

3. customized marketing

In some markets, the requirements of individual customers are unique and their

purchasing power is sufficient to make designing a separate marketing mix for each

customer a viable option. The needs and wants, tastes and preference s of a customer are

tailor-made to suit the customer, a close working relationship with the customer is

developed and the customer is normally willing to pay a premium price for the product(s)

Positioning is the act of designing the product and service offering of a company in the
minds of the customer’s so that:
(i) the consumer can relate the product and service offering to a need or want;
(ii) the marketer can create a distinctive image of himself.
(iii) the consumer can perceive a brand’s characteristics relative to those of competitive
offerings.
It is process of creating an image of the product and service offering in the minds of the
consumer.

As a strategy, positioning can be based on:

i) on perceived benefits, characteristics or image.
ii) on competition
iii) on a combination of both (i) and (ii).

The product positioning may be done on various bases: [Strategies]

i) Product Attributes: quality, features
ii) Benefits, Problem Solutions & Basic Needs: Pepsodent (decay prevention), Close-Up

(Fresh breath)

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iii) Quality: Sony
iv) Product User: Parker - Executive/ Lifestyle
v) Product Usage:
vi) Specific use: Greeting cards for every occasion
vii) Services:
viii) Price:
ix) Distribution: Dell (direct selling: customization)
x) Against Other Products (Competitors): Savlon vs Dettol