A note on segmentation and targeting

This reading talks about the steps in marketing planning process. It starts with the marketing
strategy followed by forming the marketing mix which taken together becomes the value
proposition offered to the target market and understanding how the plan impacts the firm
financially is the last step in marketing planning process.
Marketing strategy, Figure 1. The marketing planning process.
within the broader
marketing planning
process, involves four
steps:
defining the market (also
referred to as establishing a
frame of reference), (2)
segmenting the market, (3)
choosing the segments to
target, and (4) positioning
for target customers vis-à-
vis competitors within each
chosen segment. The first 3
steps are given and
positioning is mentioned in
another note.

Step 1: Market Definition

Ideally, the market will be defined in terms of customer needs rather than particular products or
services. Market definition has been called the Achilles’ heel of strategy because of the tension that
exists in defining a market either too broadly or too narrowly.

Step 2: Market Segmentation

market segmentation—dividing the market into groups of consumers who share similar
characteristics. It’s rare that a market is homogeneous (i.e., that everyone in the market is the same
and has identical needs, wants, habits, and practices). Segmenting a market into smaller
subsegments enables a marketer to understand the characteristics that differentiate consumers
within a market and to identify the potential segments that may be a good fit for the company,
given its capabilities and goals.

There are three important steps in a segmentation analysis: dividing the market into segments,
profiling the segments, and then determining the attractiveness of each segment.

 Dividing the markets into segments - Segments are meaningful if the variable(s) chosen to
divide the market make a difference in how consumers make choices among products
within the frame of reference. There are many bases for segmenting markets: geography,
demographics, psychographics (e.g., lifestyle, personality, values, and attitudes), benefits
sought, and usage pattern (e.g., heavy users, light users, nonusers, and users’ loyalty
status). The long list of possible segmentation bases can be partitioned into two general
categories:
1. Characteristics that define a consumer or customer independent of their
relationship with the product/service (e.g., demographics, geography,
psychographics—lifestyle, personality, activities, interests, and opinions).
2. Characteristics that describe the consumers or customers with respect to the
 product or service (e.g., usage patterns, loyalty status, benefits desired from using
the product or service, involvement with product and category, stage in the buying
process, and role in the decision-making process).
 The next step in segmentation is to profile the segments in order to better understand the
opportunities in each segment. The objective is to estimate the size of each segment,
understand the nature of competition in each segment, and generate deeper insight into the
nature of consumers in each segment.
 Popular criteria for assessing segment attractiveness include size, growth rate, competitive
intensity, synergy with other aspects of the organization, match with the company’s
competencies, consistency with the firm’s overall strategy and vision, and so forth.

Step 3: Choosing Target Market(s)

Having identified potential segments within the market and assessed the attractiveness of each, it is
time to choose which segments to serve and which not to serve. The segments the firm chooses to
serve become the target markets. There are several approaches to choosing a target markets – mass
marketing , multitarget marketing and niche marketing.
Evaluating Segmentation and Targeting Choices

Measurable, actionable, substantial, accessible, differentiable.