Chapter:

Market
segmentation,
Targeting and #
Positioning
An overview of market segments
and Target Markets
Within the same general market there are groups of
costumers-market segments- with different wants,
buying preferences or product-use behavior.
The firm must decide which segment or segments to
pursue, a strategy called target marketing .
However, potential market target markets must be
identified and described. This process is called
market segmentation.
Market segmentation
The variation in costumers’ responses to a marketing
mix can be traced to differences in buying habits, in
ways in which the good or service is used, or in
motives of buying. This involves market
segmentation, a process of dividing the total market
for a good or service into several smaller, internally
homogeneous groups.
Benefits of Market segmentation
• Any Company can do a better marketing job .
• Small firms may compete more efficiently.
• Massive companies can engage in advertising.
The process of market segmentation
1. Identify the current and potential wants that exist
within a market.
2. Identify characteristics that distinguish among
the segments.
3. Determine the potential of the segments and how
well they are being satisfied.
However, to be useful for marketers, results of a
segmentation effort must also meet some conditions:
• The bases for segmenting must be measurable.
• The market segment should be accesible through
existing marketing institutions.
• Each segment should be large enough to be
profitable. This situation is called micromarketing.
Ultimate consumers and business
users- the first cut
A Company can segment its market in may different
ways, and the bases for segmentation vary from one
market to another . Often the first step is to divide a
potential market into two broad categories: ultimate
consumers and business users.
Segmenting a market into these two groups is
extremely significant from a marketing point of view
because the two segments buy differently.
Segmenting Consumer Markets
Dividing a total market into ultimate consumers and
business users results in segments that are still too
broad and varied for most products.
Geographic Segmentation
Subdividing markets into segments based in
location is geographic segmentation.
Regional Population Distribution
The regional distribution of population is important
to marketers because people within a given region
generally tend to share similar values, attitudes and
style preferences.
Demographic segmentation
The most popular characteristics, used alone or in
combination, for demographic segmentation are
age, gender, occupation income, and education.
Psychographic Segmentation
Marketers often go beyond demographic attributes
in an effort to better understand why consumers
behave as they do. They engage in what is calles
psychographic segmentation, which involves
examining attributes related to how a person thinks,
feels and behaves.
Personality caracteristics
An individual’s personality is usually described in
terms of traits that influence behavior. They seem to
be a good basis for segmenting markets.
Lifestyle
A person’s activities, interests, and opinions (AIO)
reflects their lifestyle.
Values are a reflection of our needs adjusted for the
realities of the world in which we live:
• Self-respect
• Security
• Excitement
• Fun and enjoyment in life
• Relationships
• Self- fulfillment
• Sense of belonging
• Sense of accomplishment
• Being well respected.
Behavioral Segmentation
Some marketers regulary attempt to segment their
markets on the basis of product-related behavior-
they utilize behavioral segmentation: the benefits
desired from a product and the rate at which the
consumer uses the product.
Benefits desired | The ideal method for segmenting
a market is on the basis of costumers’ desired
benefits. This is a multistep process:
1. The benefits must be identified
2. Research
3. Largescale surveys
Usage Rate | Another basis for market segmentation
is the rate at which people consume a product. This
may be categorized as:
• Nonusers
• Light users
• Medium Users
• Heavy Users
Segmenting Business Markets
Costumer location
Business markets are frequently segmented on a
geographic basis. Some industries are geographically
concentrated.
Costumer tye
Industry | Any firm that sells to business costumers in
a variety of industries may want to segment its market
on the basis of industry.
Size | Business costumer size can be estimated using
such factors as sales volumen, number of employees,
number of production facilities, and number of sales
offices.
Organization Structure | A firm may rely heavily on
their purchasing departments to control the inflow of
information, reduce the number of potential
alternatives and conduct negotations.
Others opt for greater involvement in the purchase
process by the people who will be directly affected by
the purchase.
Purchase criteria | All muyers want good quality, low
prices, and on-time delivery. However, within a market
there are groups for which one of these or other
purchase criterion is particulary significant.

Transaction conditions
The circumstances of the transaction can also be a
basis for segmenting a market.
• Buying Situation
• Usage Rate
• Purchase procedure
Target Market Strategies
A specific market segment (people or organizations)
on which a seller focuses its efforts its called a target
market.
Aggregation Strategy
By adopting a market-aggregation strategy a seller
treats its total market as a single segment. Generally
an aggregation strategy is selected after the firm has
examined a market for segments anc concluded that
their costumers react in a very similar fashion.
Product differentiation occurs when one firm
distinguishes its product from competitive brands
offered to the same aggregate market.
Single-Segment Strategy
A single-segment strategy, also called as
concentration strategy, involves selecting one
segment fron within the total market as the target
market.
Firms that pursue single segments are often referred
to as niche marketers and their targeted segments as
niche markets.
Multiple-Segment Strategy
Under a multiple-segment strategy, two or more
different groups of potential customers are identified
as target markets.
Guidelines in selecting a Target Market
• A target market should be compatible with the
organization’s goals and image.
• To match the market opportunity represented by the
target market with the Company’s resources.
• An organization should should seek markets that will
generate sufficient sales volume at a low enough
cost to result in a profit that justifies the required
investment.
• A Company ordinarily should seek a market where
competitors are few and/or weak.
Positioning
A position is the way a firm’s product, brand or
organization is viewed relative to the competition by
current and prospective costumers. Positioning is a firm’s
use of all the elements at its disposal to create and
maintain in the minds of a target market a particular image
relative to competing products.
There are three steps in a positioning strategy:
1. Select the positioning concept.
2. Design the dimension or feature that most effectively
conveys the position.
3. Coordinate the marketing mix components to convey a
consistent position.
When its position has eroded, and a firm attempts to
reestablish its atractiveness, it is engaging in
repositioning.
Forecasting Market Demand
Demand forecasting estimates sales of a prodyct
during some defined future period.
Basic Forecasting Terms
• Market share is the proportion of total sales of a
product during a stated period in a specific market
that is captured by a single firm.
• A market factor is something that 1)exists in a
market, 2) is measurable and 3) is related to the
demand for a product in a known way.
• Market potential is the total sales volume that all
organizations selling a product during a stated
period of time in a specific market could expect to
archieve under ideal conditions.
• Sales potential is the portion of market potential that
a specific Company could expect to archieve under
ideal conditions.
• A sales forecast is an estimate of probable sales for
one Company’s Brand of a product during a stated
period in a specific market, assuming a defined
marketing plan is used.
Methods of forecasting sales
• Market factor analysis entails determining what the
related factors are and then measuring their
relationship to sales activity.
• A survey of buying intentions involves asking a
simple of current or potential costumers how much
of a particular product they would buy at a given
Price during a specified future period.
• In test marketing to forecast demand, a firm markets
a new product in a limited geographic area,
measures sales, and then -from this sample-
projects the products’ sales over a larger area.
• In past sales analysis, the demand forecast is simply
a flat percentage change applied to the volume
archived last year or to the average volumen of the
past few years.
• Trend analysis examines past sales data to calculate
the rate of change in sales volumen and uses it to
forecast future sales.
• A sales-force composite consists of collecting from
all sales people estimates of sales for their territories
during the future period of interest.
• Excecutive judgement involves obtaining opinions
from one or more executives regarding future sales.