Market Segmentation,

Target Marketing

CHAPTER # 3
 Chapter Outline

1- Market segmentation
 Consumer Market Segmentation
 Business Market Segmentation

2- Target Marketing
3- Positioning
What is Market Segmentation?

Segmentation
 What is Market Segmentation?
 “Dividing a market into distinct groups with distinct
needs, characteristics, or behavior who might require
separate products or marketing mix”.
 Market Segmentation is breaking down heterogeneous
mass market into more homogeneous submarkets.
 Marketer’s assume that consumers within segments
should respond similarly to particular marketing actions.
 Consumer response should be different between
different segments. For Example- Children, Youth and
Elders response differently.
Why segment
the market?
 Why segment the market?
 Customers have diverse needs, wants and buying
behaviors which differ from other customers.
 One firm cannot satisfy everyone’s needs.

 Organizations have different strengths and

competitive advantages in different areas.
 Marketer’s should focus on what they do best.

 It can create better marketing opportunities for

organizations
 It may be more profitable for organizations.
 Types of Market Segmentation

Consumer Market Segmentation

Business Market Segmentation
Consumer Market Segmentation
There is no single way to
segment a market. A
marketer has to try
different segmentation
variables, alone and in
combination to find the
best way to view the
market structure.
Consumer Market Segmentation Variables

 Consumer market can be segmented through the

following variables;

1- Geographic segmentation
2- Demographic segmentation
3- Psychographic segmentation
4- Behavioral segmentation
1- Geographical Segmentation
Dividing a market into
different geographical
units such as nation,
province, regions,
countries, cities and
climate etc.
Geographic Segmentation Variables

Continents or World Regions-Africa, Asia, Europe

Countries-Afghanistan US, Pakistan
Province- kabul, Jalalabad, Herat
City or Metro Size- under 5000 people, 5000-19,999
Climate- Tropical, Temperate, Cold.
2- Demographic Segmentation
Dividing the market
into groups based on
demographic variables
such as age, gender,
etc.
 Demographic Segmentation Variables
 Age
 Gender
 Family size
 Family life cycle
 Income
 Occupation
 Education
 Religion
 Race
 Generation
 Nationality
 Demographic segmentation
 Age- Under 6 years old, 6-12, 13-19, 20-29,30-39,40-49,50+

 Gender- Dividing a market into different groups based on

gender (male/female). For example- NIKE has recently capture
the women sports shoes market.

 Family life cycle- Single, Young married, Married with children

 Income- Dividing a market into different income groups. (high,

medium and low income groups). For example- Honda
presenting Motor cycle for low income and car for high income
groups.
 Demographic segmentation

 Occupation- employed, unemployed, self employed.

 Education- Grade school or less, high school, graduated from

high school, post graduate from university, Doctorate.

 Religion- Muslims, Christens, Jewish, Buddhist.

 Family Size- 1-2 persons, 3-4 persons, more than 4 persons

 Nationality- Afghani, Pakistani, French, British, Canadian,

Japanese.
 3- Psychographic Segmentation
Dividing a market into
different groups based
on social class,
lifestyle and
personality
characteristics etc.
Psychographic Segmentation Variables
 Social class- There are 3 major social classes i.e. Upper,
Middle and lower class on the basis of high middle and
low income.

 Lifestyle- It may be different on the basis of income,

community, religion etc. Different customers adopt
different lifestyles. For Example- People living in
villages has different lifestyle than people living in cities.

 Personality- There may be different personalities of

customers like Calm, Dynamic, Aggressive
4- Behavioral Segmentation
Dividing a market into
groups based on
consumer use,
knowledge, attitude or
response to a product.
Behavioral Segmentation Variables

 Occasions
 Benefits
 Attitude Toward the
Product
 User Rates
 Loyalty Status
 Behavioral Segmentation
 Occasion- When the buyers get the idea to buy. (occasional
buyers). For Example- Sometime we suddenly feel to drink
juice.

 Benefit- Dividing a market into groups according to the different

benefits that consumers seek from the product.
For example- free bag with a laptop. Or discount on software or
free delivery.

 User Loyalty status- A market can also be segmented by

consumer loyalty. For Example- Consumer can be loyal to brand
(Nokia), stores (Imperial Store) and car companies (Toyota).
 Behavioral Segmentation

Usage rate
Markets can also be segmented into light, medium
and heavy usage of products.

 Attitude Toward the Product

For some companies or products customers show favorable
attitude and for some products, they show unfavorable
attitudes.
For Example: Customer show favorable attitude towards
Japanese Electronics and Unfavorable attitude towards
Chinese Electronics.
 Business Market Segmentation

 Business markets can be segmented on the basis of various

consumer market variables and some other variables like
operating variables, purchasing approaches etc.

 For example: Kam Air Airline service focuses on

convincing new merchants, building relationships with old
customers, and offering benefits to corporate such as
insurance plan, travel discounts etc.
Bases for Segmenting Business Markets

Demographics
Demographics Business Marketers
Use Many of the
Same Consumer
Operating
Operating Variables
Variables Variables, Plus:

Purchasing
Purchasing Approaches
Approaches

Situational
Situational Factors
Factors

Personal
Personal Characteristics
Characteristics
Bases for Segmenting Business Markets
1- Demographic segmentation
Business markets can be segmented on the basis of Industry,
company size and location etc.
For Example; Textile, Sugar and FMCG (Fast Moving
Consumer Goods) are different industries, so there raw
material and machinery will be available in different business
markets.
2- Operating variables
Business markets can be segmented on the basis of
Technology, usage status and customer (business) capabilities.
For Example; Computers, mobile phones and electronics are
technology based products as compared to juices and
furniture. So on the basis of technology, business market will
be different.
Bases for Segmenting Business Markets
3- Purchasing approaches
Business markets can be segmented on the basis of Regular
purchases and occasional purchases.
For Example; Some type of raw materials are regularly
purchased by different businesses like stationary, papers, paints
etc but some raw materials like sugarcane, cotton will be
purchased occasionally in the season.
4- Situational factors
Business markets can be segmented on the basis of Urgency,
specific application and size of order.
For Example; Some businesses are very big businesses,
therefore their size of order for raw materials are also very big, so
such markets may be segmented which are selling products in
larger quantity only or in wholesale, not in retail.
Bases for Segmenting Business Markets

5- Personal characteristics
Business markets can be segmented on the basis of Buyer-
seller similarity, attitudes toward risk, loyalty.

For Example; If the buyer (Businessman of sugar mill)

makes a contract with seller (Farmer of sugarcane) that for
next 10 years , he will provide a specific quantity of raw
material to him on a specific price. So in this regard, the buyer
(Business) reduces his risk and he created loyality.
Target Marketing
 Target Marketing

Target market: A set of buyers sharing common

needs or characteristics that the company decides to
serve.

After successfully segmented the market the firm

now must evaluate the various segments and decide
how many and which segment it can serve best.
Steps in the Target Marketing Process

1- Evaluating Market Segments

2- Selecting Target Market Segments

 1- Evaluating Market Segments
 In evaluating different market segments, a firm must look at
three factors:
 Segment size and growth
Analyze sales, growth rate and expected profitability.
 Segment structural attractiveness
Consider effects of Competitors, Availability of Substitute
Products and the Power of Buyers & Suppliers. A segment is less
attractive if it already contain strong and aggressive competitors
or substitute products.
 Company’s objectives and resources
Even if a segment has the right size and growth and is
structurally attractive, the company must consider its own
capability, compatative advantage, objectives and resources.
 2- Selecting Target Market Segments through
Target Marketing Strategies

 After evaluating different segments, the company must

decide which and how many segments it will target.
 A target market consists of a set of buyers who share
common needs or characteristics that the company
decides to serve.
 Buyers have unique needs and wants, a seller could
potentially view each buyer as a separate target market.
Then a seller might design a separate marketing program
for each buyer.
 Companies can target very broadly , very narrowly or
some where in between.
 There are four different types of strategies which the
marketers apply while selecting target market segments.
 Target Marketing Strategies

 Targeting broadly targeting narrowly

 A- Undifferentiated Marketing

A firm might decide to ignore market segments and

target the whole market with one offer. This mass
marketing focuses on what is common in the needs
of consumers rather than on what is different.

For Example; Nestle offers mineral water for the

entire market without any change for different
customers attributes.
 Company
Company
Marketing Market
Market
Marketing Mix
Mix

A. Undifferentiated Marketing Strategy

 B- Differentiated Marketing

 A firm decides to target several market segments and

design separate offers for each.

 For Example; Head & Shoulders design separate

nature of shampoo for different types of customer
needs.
 Company
Company
Marketing
Marketing Mix
Mix 11 Segment
Segment 11
Company
Company
Marketing
Segment
Segment 22
Marketing Mix
Mix 22
Company
Company
Marketing
Marketing Mix
Mix 33
Segment
Segment 33

B. Differentiated Marketing Strategy

 C- Concentrated or Niche Marketing

A third market coverage strategy is specially

appealing when company resources are limited.
Instead of going after a small share of a large market,
the firm goes after a large share of one or few smaller
segments.

For Example; Pepsi offers Diet Pepsi (Pepsi Max)

for Diabetes patients and diet conscious people.
 Company
Company Segment
Segment 11
Marketing
Marketing Segment
Segment 22
Mix
Mix
Segment
Segment 33

C. Concentrated Marketing Strategy

 D- Micromarketing (Local/Individual
Marketing)

 The practice of tailoring products and marketing

program to the needs and wants of specific
individuals.

 Individual marketing has also labeled one to one

marketing.

 For example; Dell is doing individual marketing,

by taking the order of every individual and prepare
the computer accordingly for each customer.
Company
Company Individual
Individual
Marketing
Marketing Customer
Customer
Mix
Mix

D. Micromarketing or
Local/Individual Marketing Strategy