UNIT-2

Market segmentation is the process of dividing a target market into smaller, more defined categories.
It segments customers and audiences into groups that share similar characteristics such as demographics,
interests, needs, or location.

The Four Types of Market Segmentation

The four bases of market segmentation are:

 Demographic segmentation
 Psychographic segmentation
 Behavioral segmentation
 Geographic segmentation

Within each of these types of market segmentation, multiple sub-categories further classify audiences and
customers.

Demographic Segmentation
Demographic segmentation is one of the most popular and commonly used types of market segmentation. It
refers to statistical data about a group of people.

Demographic Market Segmentation Examples 

 Age
 Gender
 Income
 Location
 Family Situation
 Annual Income
 Education
 Ethnicity

Where the above examples are helpful for segmenting B2C audiences, a business might use the following to
classify a B2B audience:
  Company size
 Industry
 Job function

Psychographic Segmentation
Psychographic segmentation  categorizes audiences and customers by factors that relate to their
personalities and characteristics.

Psychographic Market Segmentation Examples 

 Personality traits
 Values
 Attitudes
 Interests
 Lifestyles
 Psychological influences
 Subconscious and conscious beliefs
 Motivations
 Priorities

Psychographic segmentation factors are slightly more difficult to identify than demographics because they
are subjective. They are not data-focused and require research to uncover and understand.

For example, the luxury car brand may choose to focus on customers who value quality and status. While
the B2B enterprise marketing platform may target marketing managers who are motivated to increase
productivity and show value to their executive team.

While demographic and psychographic segmentation focus on who a customer is, behavioral

segmentation  focuses on how the customer acts.
Behavioral Market Segmentation Examples 

 Purchasing habits
 Spending habits
 User status
 Brand interactions

Behavioral segmentation requires you to know about your customer’s actions. These activities may relate to
how a customer interacts with your brand or to other activities that happen away from your brand.

A B2C example in this segment may be the luxury car brand choosing to target customers who have
purchased a high-end vehicle in the past three years. The B2B marketing platform may focus on leads who
have signed up for one of their free webinars.

Geographic Segmentation
Geographic segmentation is the simplest type of market segmentation. It categorizes customers based on
geographic borders.
Geographic Market Segmentation Examples   

 ZIP code
 City
 Country
 Radius around a certain location
 Climate
 Urban or rural

Geographic segmentation can refer to a defined geographic boundary (such as a city or ZIP code) or type of
area (such as the size of city or type of climate).

An example of geographic segmentation may be the luxury car company choosing to target customers who
live in warm climates where vehicles don’t need to be equipped for snowy weather. The marketing platform
might focus their marketing efforts around urban, city centers where their target customer is likely to work.

"Market aggregation" is defined as the marketing of standardized goods and services to a

large population of people that have similar needs, according to Inc. Another name for market
aggregation is "mass marketing," a strategy that treats all customers as a single group that is
handled homogeneously.

Market Targeting

Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more
segments to enter. A company should target those segments in which it can create the greatest customer value
and sustain it over time. A company with limited resources might decide to enter only one or a few special
segments.

Or a company might decide to serve more than one segment, which consists of different kinds of customers having
the same basic wants. Or a large company might decide to approach all market segments with a complete range of
products.

Initially, most companies enter a new market by deciding to operate in a single segment. If it proves rewarding,
they add new segments.

Big companies ultimately go for covering the full market. They want to be the leading companies in their industry.
The leading company offers different products designed to fulfill the special needs of each segment.

Market Positioning

Market positioning refers to the task of arranging for a product to occupy a clear, distinctive, and desirable place
relative to competing products in the minds of target consumers. It also involves formulating competitive
positioning for a product and a detailed marketing mix.

Companies position their products in a way that distinguishes their products from competing brands and gives
them the best strategic advantage in their target markets. For example, Chrysler compares its car to those of
various competitors and concludes, “Advantage: Chrysler.”
At Ford, “quality is job one,” and Mazda “just feels right.” Jaguar is positioned as “a blending of the art machine,”
whereas Saab is “the most intelligent car ever built.”

Mercedes is “engineered like no other car in the world,” the Lincoln Town car is “what a luxury car should be,” and
the luxurious Bentley is “the closest a car can come to having wings.” Such deceptively simple statements form the
backbone of a product’s marketing strategy.
 What is customer segmentation?
Customer segmentation is a way to split customers into groups based on certain
characteristics that those customers share. All customers share the common need of
your product or service, but beyond that, there are distinct demographic differences
(i.e., age, gender) and they tend to have additional socio-economic, lifestyle, or other
behavioral differences that can be useful to the organization.
6 types of customer segmentation models
Common customer segmentation models range from simple to very complex and can
be used for a variety of business reasons. Common segmentations include:
1. Demographic
At a bare minimum, many companies identify gender to create and deliver content
based on that customer segment. Similarly, parental status is another important
segment and can be derived from purchase details, asking more information from
customers, or acquiring the data from a 3rd party.
2. Recency, frequency, monetary (RFM)
RFM is a method used often in the direct mail segmentation space where you identify
customers based on the recency of their last purchase, the total number of purchases
 they have made (frequency) and the amount they have spent (monetary). This is often
used to identify your High-Value Customers (HVCs).
3. High-value customer (HVCs)
Based on an RFM segmentation, any business, regardless of sector or industry, will
want to know more about where HVCs come from and what characteristics they share
so you can acquire more of them.
4. Customer status
At a minimum, most companies will bucket customers into active and lapsed, which
indicates when the last time a customer made a purchase or engaged with you. Typical
non-luxury products consider active customers to be those who have purchased within
the most recent 12 months. Lapsed customers would those who have not made a
purchase in the last 12 months. Customers may be bucketed even further based on the
time period in that status, or other characteristics.
5. Behavioral
Past observed behaviors can be indicative of future actions, such as purchasing for
certain occasions or events, purchasing from certain brands, or significant life events
like moving, getting married, or having a baby. It’s also important to consider
the reasons a customer purchases your product/service and how those reasons could
change throughout the year(s) as their needs change.
Psychographic
Psychographic customer segmentation tends to involve softer measures such as
attitudes, beliefs, or even personality traits. For example, survey questions that probe
how much someone agrees or disagrees with a statement are typically seeking to
classify their attitudes or perspectives towards certain beliefs.

Target Consumers

In the context of intense competition, marketers must be customer-oriented to be successful. This means
customer satisfaction should be the ultimate goal of a company.

For providing satisfaction to customers, a company must first understand their needs and wants, which requires a
careful analysis of consumers. As there are myriad types of consumers with myriad types of needs, a company
can’t satisfy all consumers in a given market.

Therefore, the company must divide up the total market into segments, select the best segments, and design the
strategies for serving chosen segments most efficiently.

This task consists of four steps;

1. demand measurement and forecasting,

2. market segmentation,
3. market targeting, and
4. market positioning.
Branding is the process of creating a strong, positive perception of a company, its products or services in the
customer's mind by combining such elements as logo, design, mission statement, and a consistent theme
throughout all marketing communications.

9 Different Types of Brands

So here are the nine types, labeled by what characterizes or differentiates them the most:

1. Disruptive Brand — Challenges the current ways of doing things and introduces new concepts that
substantively change the market
2. Conscious Brand — Is on a mission to make a positive social or environmental impact or enhance people’s
quality of life
3. Service Brand — Consistently delivers high-quality customer care and service
4. Innovative Brand — Consistently introduces advanced and breakthrough products and technologies
5. Value Brand — Offers lower prices for basic quality
6. Performance Brand — Offers products that deliver superior performance and dependability
7. Luxury Brand — Offers higher quality at higher price
8. Style Brand — Is differentiated through the way its products or services look and feel, as much as or more
than what they do
9. Experience Brand — Is differentiated through the experience it provides, as much as or more than the
product or service
What is Brand Equity? How to Build and Measure It
 Brand equity describes the level of sway a brand name has in the minds of consumers, and the value of
having a brand that is identifiable and well thought of. Organizations establish brand equity by creating
positive experiences that entice consumers to continue purchasing from them over competitors who make
similar products.
Reputation & Less Ad Spend

If your products have a good reputation, people will seek you out as their go-to brand. This results in less
money being spent via advertising and leads to increased sales when you launch a new product due to
established trust.
 Customer Lifetime Value: If your customers are loyal to your brand, they will purchase more from
you. Apple is regularly regarded as one of the organizations with the highest brand equity. Apple
users tend to own other Apple products, while Android users do not generally have a loyalty to a
specific PC technology provider.
 Customer Loyalty:  Customers are 7 times  more likely to forgive brands they are loyal to for
mistakes. Additionally, consumers are 9 times  more likely to try new products from brands they
are loyal to.
  Stock Price: Strong brand equity can increase stock market process for organizations, out of the
expectation that it will continue to perform.
How to Build Brand Equity
There are obvious payoffs to establishing brand equity, but it takes a lot of work and research upfront to
build and maintain this status. It begins with conducting research into the values and needs of a  target
audience , as well as identifying what makes your brand different. Once established, organizations must
continue to spread awareness to earn new business, while fostering loyalty among existing customers.

What is brand positioning?

Defined as the space a company owns in the mind of a customer and how it differentiates itself from competitors,
brand positioning is a marketing strategy that helps business set themselves apart. From cell phone manufacturers
to online retailers to even nonprofits, brand positioning helps customers instantly recognize and connect with a
company. One of the most important factors of success is how well, and how many, people know your brand. It’s
not enough to set up a generic website and hope people flock to it by the millions. In fact, no company is able to
truly thrive in the marketplace without an established brand position.

7-Step Brand Positioning Strategy Process

In order to create a position strategy, you must first identify your brand’s uniqueness and determine what
differentiates you from your competition.

There are 7 key steps to effectively clarify your positioning in the marketplace:

1. Determine how your brand is currently positioning itself

2. Identify your direct competitors

3. Understand how each competitor is positioning their brand

4. Compare your positioning to your competitors to identify your uniqueness

5. Develop a distinct and value-based positioning idea

6. Craft a brand positioning statement

7. Test the efficacy of your brand positioning statement