Chapter 3: Segmentation

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Customer driven marketing strategy starts with:
Market segmentation
Market targeting
Differentiation and positioning

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 Market Segmentation
Market segmentation is the process that
companies use to divide large heterogeneous
markets into small markets with common
needs or characteristics and that can be
reached more efficiently and effectively with
products and services that match their unique
needs

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• The strategy of segmentation allows
producers to enable facing competition in the
marketplace by differentiating their offerings,
not only on the basis of price but also through
styling, packaging, promotional appeal,
method of distribution and superior service.

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Market Segmentation
 Market Segmentation

❑ Segmenting consumer markets

❑ Requirements for effective segmentation

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Market Segmentation: Segmenting
Consumer Markets

Geographic Demographic
segmentation segmentation

Psychographic Behavioral
segmentation segmentation
Bases of Segmentation:
❑Geographic Segmentation
❑Demographic Segmentation
❑Psychographic segmentation: divides buyers
into different groups based on social class,
lifestyle or personality characteristics. People in
the same demographic group can have very
different psychographic makeup
❑Behavioral segmentation: which divides
buyers into groups based on their knowledge,
attitudes, uses, or responses to a product.
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 Market Segmentation:
Segmenting Consumer Markets
❑Geographic segmentation divides the market into
different geographical units such as nations, regions,
states, counties, or cities
e.g: P&G introduced Curry Pringles in England and
Funky Soy Sauce Pringles in Asia.
e.g:Mc Arabia in Arab Countries & Mc Mahraja in India
❑Demographic segmentation
divides the market into
groups based on variables
such as age, gender, family
size, family life cycle,
income, occupation,
education, religion, race,
generation, and nationality
.
Age and life-cycle stage segmentation is the process of offering different
products or using different marketing approaches for different age and
life-cycle groups

e.g: P&G sells Crest featuring children’s characters while for adults it sells
more serious models” a dentist- clean feeling twice a day”.
e.g: Olay segments it’s products based on age. Olay Provital features 50 years
aged women in their ads
e.g: C&CO promotional age campaign
Gender segmentation divides the market based on sex (male or female)
e.g: Nikewomen stores
e.g: L’Oreal offers men’s experts skin care products.
Income segmentation divides the market
into affluent or low-income
consumers
e.g:–Emaar. e.g: Metro vs. Khair Zaman ,
Juhayna vs. Bekhairo , credit cards ,
cars.
❑ Psychographic segmentation divides buyers into
different groups based on social class, lifestyle, or
personality traits. e.g: On the Run & Cilantro.
Lifestyle Achievers, strivers, survivors and techno-road
warriors who are business people spending a high
percentage of their working week travelling equipped
with laptop computers and mobile phones with
broadband network and electronic organizers
Social class: used by banks and financial institutions . It
could be indicated by level of education, income,
occupation
• What products/brands reflects your lifestyle and
personality ? How?
Behavioral segmentation divides buyers into groups
based on their knowledge, attitudes, uses, or
responses to a product
• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status
 Behavioral Segmentation
• Occasions: buyers are grouped according to occasions when they get the
idea to buy, actually make their purchase, or use the purchased item.
e.g: Enjoy Kamar el din at Ramadan, Valentine day gifts , mothers day

• Benefits Sought: group buyers according to the different benefits that

they seek from the product.
e.g: While purchasing a car , people look for safety , other for image or best gas
mileage.

• User Status: markets can be segmented into nonusers, ex-users, potential

users, first-time users, and regular users of a product.
e.g: light cigarettes , Pampers segment newlyweds and mom to be as
potential users

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 Use–related segmentation
• User status: Nonuser, ex-user, potential user,
first-time user, regular user
• User rates: Light user, medium user, heavy
user
• Loyalty status None, medium, strong, absolute
• Readiness stage Unaware, aware, informed,
interested, desirous, intending to buy
• Attitude toward product Enthusiastic, positive,
indifferent, negative, hostile
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 Behavioral Segmentation
Usage Rate: markets can be segmented into light, medium , and heavy •
product users.
e.g: Juhayna 2 kilo yoghurt, Pampers Jumbo , Burger King ad campaign in
U.S.A
Loyalty Status: Buyers can be divided into groups according to their •
degree of loyalty to brands (Tide) , Stores ( mango) , companies
(Toyota, CIB).
- There are loyal , some what loyal and not loyal customers.

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 Market Segmentation: Using
Multiple Segmentation Bases

Multiple segmentation is used to identify smaller, better-defined

target groups
e.g: Bank may not only identify a group of wealthy retired
adults but also , within that group, distinguish several
segments based on their current income, assets, savings , risk
preferences, housing and lifestyles.
 Market Targeting: Selecting Target
Market Segments
• Target market consists of a set of buyers who
share common needs or characteristics that
the company decides to serve
 Market Targeting: Evaluating Market
Segments
• Segment size and growth
e.g: current segment sales, growth rates and expected profitability for
various segments.
• Segment structural attractiveness
e.g: competitors, substitute products, power of buyers and powerful
suppliers.
• Company objectives and resources
e.g: long and short term objectives, budget , sales force capabilities
Market Segmentation: Requirements
for effective Segmentation
To be useful, market segments must be: •

Measurable Accessible Substantial

Differentiable Actionable
 • Measurable: The size , purchasing power , and profiles of the segments can
be measured. e.g: we cant measure left handed population in Egypt and
many parts of the world. U.S.A has 32.5 million left handed.
• Accessible: The market segment can be effectively reached and served. Kito
targets Upper Egypt segment “ rural areas where by their distribution cars
can’t enter ,so they dropped this segment. Also fragrance company finds that
heavy users are single men and women who stay out late and socialize a lot.

• Substantial: The market segments are large or profitable enough to serve.

e.g: It would not pay for an automobile manufacturer to develop cars
especially for people whose height is greater than 3 meters.

• Differentiable: The segments are conceptually distinguishable and response

differently to different marketing mix elements and programs. e.g: if married
and unmarried women respond similarly to perfume , they do not constitute
separate segments.

• Actionable: Effective programs can be designed for attracting and serving the
segments. e.g: although one small airline identified seven market segments ,
its staff was too small to develop separate marketing programs for each
segment.

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 Michael Porter

• Michael Porter has identified five

forces that determine the intrinsic long-

run attractiveness of a market or market

segment: industry competitors, potential

entrants, substitutes, buyers, and

suppliers.

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 In assessing potential threats from competitors,
three high-level variables are useful:

1. Share of market—The competitor’s share of the target market

2. Share of mind—The percentage of customers who named the competitor in

responding to the statement “Name the first company that comes to mind in this

industry.”

3. Share of heart—The percentage of customers who named the competitor in

responding to the statement “Name the company from which you would prefer to buy

the product

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Market Targeting Strategies
 Market Targeting Strategies

Undifferentiated marketing targets the whole market with one offer

– Mass marketing
– Focuses on common needs rather than what’s different
e.g: matches , Egypt telecom for land line , gas and electricity companies

Differentiated marketing targets several different market segments and

designs separate offers for each
• Goal is to achieve higher sales and stronger position
• More expensive than undifferentiated marketing
e.g: Mercedes , A , B, C, E and S class
e.g: P&G markets six different brands of laundry
detergents
• Concentrated marketing targets a small share of a
large market. Used when:
• Limited company resources
• Knowledge of the market
• More effective and efficient
e.g: Jaguar , Ferrari , Isis Organic milk

Micromarketing is the practice of tailoring products and

marketing programs to suit the tastes of specific
individuals and local customers group.
Local Marketing:
Local marketing involves tailoring brands and promotions to
the needs and wants of local customer groups—cities,
neighborhoods, and even specific stores. For example,
Walmart customizes its merchandise store by store to meet
the needs of local shoppers. The retailer’s store designers
create each new store’s format according to neighborhood
characteristics—stores near office parks, for instance,
contain prominent islands featuring ready-made meals for
busy workers.

• In the extreme, micromarketing becomes individual marketing—

tailoring products and marketing programs to the needs and
preferences of individual customers. Individual marketing has also
been labeled one-to-one marketing, mass customization, and
markets-of-one marketing. e.g: LEGO , Dell , Channel ( Oscar awards )

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 Business model

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 Market Targeting: Choosing a Target
Marketing strategy
Depends on:
• Company resources
concentrated marketing works well with limited company resources.

• Product variability
e.g.: undifferentiated marketing is more suited for uniform products as grapefruit or steel. While
products that can vary in design , such as cameras and automobiles are more suited to
differentiation or concentration.
• Product life-cycle stage
e.g.: In the introductory stage , it is practical to launch only one version and use undifferentiated or
concentration while in the mature stage , differentiated marketing begins to make more sense.

• Market variability
e.g.: If most buyers have the same tastes , buy the same amounts, and react the same way to
marketing efforts , undifferentiated marketing is appropriate.

• Competitor’s marketing strategies

e.g.: When competitors use differentiated or concentrated marketing, undifferentiated marketing
can be suicidal. Conversely, when competitors use undifferentiated marketing , a firm can gain an
advantage by using differentiated or concentrated marketing
 Differentiation and Positioning: Choosing
a Differentiation and Positioning Strategy

• Positioning is the act of designing a company’s offering and image to

occupy a distinctive place in the minds of the target market. The goal is to
locate the brand in the minds of consumers to maximize the potential
benefit to the firm. A good brand positioning helps guide marketing
strategy by clarifying the brand’s essence, identifying the goals it helps the
consumer achieve, and showing how it does so in a unique way

• deciding on a positioning requires: (1) choosing a frame of reference by

identifying the target market and relevant competition, (2) identifying the
optimal points-of-parity and points of-difference brand associations given
that frame of reference, and (3) creating a brand mantra summarizing the
positioning and essence of the brand.

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 The competitive frame of reference
• defines which other brands a brand competes with and which
should thus be the focus of competitive analysis. Decisions about
the competitive frame of reference are closely linked to target
market decisions.
• Deciding to target a certain type of consumer can define the nature
of competition because certain firms have decided to target that
segment in the past (or plan to do so in the future) or because
consumers in that segment may already look to certain products or
brands in their purchase decisions.
• Identifying Competitors: A good starting point in defining a
competitive frame of reference for brand positioning is category
membership—the products or sets of products with which a brand
competes and that function as close substitutes
 There are three main ways to convey a brand’s category membership

• 1. Announcing category benefits—To reassure consumers that a brand will deliver on the fundamental

reason for using a category, marketers frequently use benefits to announce category membership. Thus,

industrial tools might claim to have durability, and antacids might announce their efficacy. A brownie mix might

attain membership in the baked desserts category by claiming the benefit of great taste and support this claim by

including high-quality ingredients (performance) or by showing users delighting in its consumption (imagery).

• 2. Comparing to exemplars—Well-known, noteworthy brands in a category can also help a brand specify its

category membership.

• 3. Relying on the product descriptor—The product descriptor that follows the brand name is often a concise

means of conveying category origin.

 Identifying Potential Points-of-Difference (POD) and Points-of-Parity

• Once marketers have fixed the competitive frame of reference for

positioning by defining the customer target market and the nature of the
competition, they can define the appropriate points-of-difference and
points-of-parity associations.
• (PODs) are attributes or benefits that consumers strongly associate with a
brand, positively evaluate, and believe they could not find to the same
extent with a competitive brand.
• Three criteria determine whether a brand association can truly function as
a point-of-difference: desirability, deliverability, and differentiability.
• Points-of-parity (POPs), on the other hand, are attribute or benefit
associations that are not necessarily unique to the brand but may in fact
be shared with other brands. These types of associations come in three
basic forms: category, correlational, and competitive. Category points-of-
parity are attributes or benefits that consumer view as essential to a
legitimate and credible offering within a certain product or service
category. In other words, they represent necessary—but not sufficient—
conditions for brand choice.
 Differentiation and Positioning
• Beyond deciding which segments of the market it
will target, the company must decide on. POD
answers what is your value proposition.
• a value proposition—how it will create
differentiated value for targeted segments and
what positions it wants to occupy in those
segments. It answers why customers should buy
my brand rather than other brands. what is the
value added of your brand that will be delivered
to your customers.
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Developing a positioning statement
company and brand positioning should be summed up in a
positioning statement or sometimes known as mission
statement:
It should take the following form:
To (target segment and need) our (brand) is (concept) that
(point of difference) .
For example: The positioning statement of weight watchers
online:
We know you have a busy life, and Weight Watchers Online
makes it easy to stay connected anywhere, anytime. It’s built
on the proven approach to weight loss developed by the
experts at Weight Watchers—it’s practical, liveable and
sustainable.

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 Differentiation and Positioning

•Product position is the way the product is

defined by consumers on important attributes—
the place the product occupies in consumers’
minds relative to competing products.
• Perceptions
• Impressions
• Feelings

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 Differentiation and Positioning: Choosing
a Differentiation and Positioning Strategy

•Competitive advantage is an advantage over

competitors gained by offering consumers
greater value, either through lower prices or by
providing more benefits that justify higher
prices.

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 (PODs) Differentiation and
Positioning
•Identifying a set of possible competitive
advantages to build a position by providing
superior value from:
Product differentiation
Service differentiation
Channel differentiation
People differentiation
Image differentiation

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 Strategies of differentiation and
positioning
• To find points of differentiation, marketers must
think through the customer’s entire experience
with the company’s product or service.
• The company can find ways to differentiate itself
at every customer contact point. In what specific
ways can a company differentiate itself or its
market offer? It can differentiate along the lines
of product, services, channels, people, or image

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• Through product differentiation, brands can be differentiated on
features, performance, or style and design.
• Some companies gain services differentiation through speedy,
convenient, or careful deliver.
• Firms that practice channel differentiation gain competitive
advantage through the way they design their channel’s coverage,
expertise, and performance.
• Companies can also gain a strong competitive advantage through
people differentiation—hiring and training better people than their
competitors do. Disney World people are known to be friendly and
upbeat. People differentiation requires that a company select its
customer-contact people carefully and train them well.
• Even when competing offers look the same, buyers may perceive a
difference based on company or brand image differentiation. A
company or brand image should convey a product’s distinctive
benefits and positioning. Developing a strong and distinctive image
calls for creativity and hard work.

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 Alternative Approaches to
Positioning
• Rather than outlining specific attributes or benefits, some marketing experts describe positioning a

brand as telling a narrative or story. Companies like the richness and imagination they can derive from

thinking of the story behind a product or service. Five elements of narrative branding:

• (1) the brand story in terms of words and metaphors, (2) the consumer journey or the way consumers

engage with the brand over time and touch points where they come into contact with it, (3) the visual

language or expression for the brand, (4) the manner in which the narrative is expressed experientially or

the brand engages the senses, and (5) the role the brand plays in the lives of consumers. Also, Cultural

Branding usually done in products that are related to culture such as Ramadan festival in Egypt.

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 The End

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