MARKETING MANAGEMENT

Chapter-3
Market Segmentation,
Targeting and Positioning

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 Introduction
 A company cannot serve everyone in broad
markets, because customers are too
numerous and diverse in their buying
requirements.
 Thus, marketers look for specific market
segments that they can serve more
effectively.

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 Market and market segmentation
 Market: people or institutions with
sufficient purchasing power, authority,
and willingness to buy.

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 Basis for Segmenting Consumer Markets
 In segmenting consumer markets,
marketers can apply
 geographic,
 demographic, and
 psychographic variables related to consumer
characteristics as well as
 behavioral variables related to consumer
responses .
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 Contd.

 Geographic segmentation
 divides the market into different geographical units
such as nations, regions, states, counties, cities, or
even neighborhoods.
 The company can operate in one or a few geographic
areas or operate in all but pay attention to local
variations.
 Localizing products, advertising, promotion, and
sales efforts to fit the needs of individual regions,
cities etc.

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Contd.

 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.
 (1) It is the most popular consumer segmentation
method because consumer needs, wants, and usage
rates often vary closely with demographic variables;
 (2) Demographic variables are also easier to measure
than other variables;
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Contd.
 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.
 Gender segmentation divides the market based on sex (male
or female).
 Generation. Each generation is profoundly influenced by the
times in which it grows up—the music, movies, politics, and
events of that period.
 Income segmentation divides the market into affluent or low-
income consumers. Income does not always predict the best
customers for a given product.

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 Contd.
The traditional family life-cycle stages
Young singles
Married couples with children.

The non-traditional family life-cycle stages

Unmarried couples

Singles marrying later in life

Childless couples

Single parents

Extended parents (those with young children

returning home)
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 Age & Life Cycle
Segmentation – families
with young children

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 Contd.
 Psychographic segmentation divides
buyers into different groups based on
social class, lifestyle, or personality traits.

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 Contd.
 Behavioral segmentation divides buyers into
groups based on their knowledge, attitudes,
uses, or responses to a product.
• Occasion
• Benefits sought
• User status
• Usage rate
• Loyalty status

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Contd.

 Occasion segmentation
 divides buyers into groups according to
occasions when they get the idea to buy, actually make
purchases, or respond to a product. – help build up
product usage
 Benefit segmentation
 requires finding the major benefits people look for in
the product class, the kinds of people who look for each
benefit, and the major brands that deliver each benefit .

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Occasion Segmentation – consumers buy
special items for occasions like birthdays

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Contd.
 User status
 divides buyers into ex-users, potential
users, first-time users, and regular users of
a product.
 Usage rate
 divides buyers into light, medium, and
heavy product users.

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 Contd.

 Loyalty status
 divides buyers into groups according to their degree
of loyalty.

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Multiple Segmentation

 Multiple segmentation is used to identify

smaller, better-defined target groups. It is
about using several variables for
segmenting market.
 Geodemographic segmentation is an
example of multivariable segmentation that
divides groups into consumer lifestyle
patterns.
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Basis for Segmenting Business Markets
 Business buyers can be segmented using:
 Geographically- city, nation.
 Demographically (company size, number of employees)
 Organizational Type- Manufacturing, service,
institutional, government
 Behaviorally (benefits sought, user status, usage rate, and
loyalty status)
 Purchasing approaches- centralized or decentralized?
Quality oriented or price oriented? Etc.

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 Basis for Segmenting International Markets
• Geographic location – regions
• Economic factors – population income levels or
overall level of economic development
• Political and legal factors – the type and stability
of government, receptivity to foreign firms,
monetary regulations, and the amount of
bureaucracy
• Cultural factors – common language, religions,
values and attitudes, customs, and behavioral
patterns
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 Requirements for Effective Segmentation
 To be useful, a market segment must be:
• Measurable
• Accessible
• Substantial
• Differentiable
• Actionable

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 Requirements for Effective Segmentation
 Measurable: Examples include the size,
purchasing power, and profiles of the
segments.
 Accessible: the market can be effectively
reached and served.
 Substantial: the markets are large and
profitable enough to serve.

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Contd.
 Differentiable: the markets are
conceptually distinguishable and respond
differently to marketing mix elements and
programs
 Actionable: effective programs can be
designed for attracting and serving the
segments.

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 MARKET TARGETING STRATEGIES

 Once the firm has identified its market-

segment opportunities, it is ready to initiate
market targeting.
 Marketers evaluate each segment to
determine how many and which ones to
target and enter.

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 Evaluating Market Segments

In evaluating different market segments, the

firm must look at:
 Segment size and growth
 Segment structural attractiveness
 Company objectives and resources

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 Segment size and growth

• Analyze sales, growth rates and expected

profitability for various segments.

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 Segment structural attractiveness

• Competition
• Substitute products
• Power of buyers
• Power of suppliers
• Attractive if there is least &
smallest competitors.

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 Company objectives and resources

• Select segment in harmony with skills,

knowledge, objectives and resources
possessed by company.

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 Target Market coverage strategy

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 Contd.

 Undifferentiated marketing targets the whole

market with one offer.
• Mass marketing
• Focuses on common needs rather than
what’s different.
• For example, grapefruit and steel

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 Contd.

 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, extra marketing research and
promotion.
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 Differentiated strategy

Organization

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 Differentiated marketing – Colgate targets different
market segments with different types of toothpaste.

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 Contd.

 Concentrated marketing targets a small

share of a large market;
• Appealing when
 Limited resources
 Greater knowledge of consumer needs in the
niches
 Special reputation

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 Contd.

 Micromarketing is the practice of tailoring

products and marketing programs to suit the
tastes of specific individuals and locations.
• Local marketing
• Individual marketing

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Contd.
 Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups (cities, neighborhoods and
stores).
 Benefits of local marketing
• Increased marketing effectiveness in competitive markets
• More customer-specific offerings
 Challenges of local marketing
• Increased manufacturing and marketing costs
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 contd.

 Individual marketing involves tailoring

products and marketing programs to the needs
and preferences of individual customers.
 Also known as:
• One-to-one marketing
• Mass customization
• Markets-of-one marketing

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 Contd.

 Mass customization is the process through

which firms interact one-to-one with masses
of customers to design products and services
tailor-made to meet individual needs.
• Provides a way to distinguish the company
against competitors

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 Basis for Choosing a market coverage
Strategy

 Company resources
 Product variability
 Product life-cycle stage
 Market variability
 Competitor’s marketing strategies

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 Cont’d
 Product variability:
 Undifferentiated marketing for uniform
products (e.g., commodity, steel).
 Differentiation or concentration marketing 
for products that can vary in design (e.g.,
cameras and cars).
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Contd.

 Product's stage in the life cycle:

 When a firm introduces a new product
undifferentiated marketing or concentrated
marketing
 In the mature stage of the PLC 
differentiated marketing .
 Company resources:
 Concentrated marketing for a firm with limited
resources.

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Contd.

 Market variability:
 Undifferentiated marketing  when buyers
have same tastes, buy same amounts and react
in same way to marketing efforts
 Competitors‘ marketing strategies:
 When competitors use undifferentiated
marketing a firm gain advantage using
differentiated or concentrated marketing.

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 Developing Competitive Differentiation

• Differentiation is the act of designing a

set of meaningful differences to
distinguish the company’s offer from the
competitor’s offers.
• THE OBJECTIVE IS TO CREATE A
SUSTAINABLE COMPETITIVE ADVANTAGE
through bases for differentiation.

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 Developing Competitive Differentiation
 A company can differentiate its market offering
along five dimensions:
 Product differentiation on features, performance,
style or design, form,
 Service differentiation through speedy, convenient,
or careful delivery, ordering ease, installation,
customer training & maintenance and repair
 Channels differentiation - coverage, expertise, and
performance

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Cont’d

 People differentiation –hiring and training

better people than their competitors do.
 Image differentiation–Image is the way
the public perceives the company or its
products. An effective image establishes
the product’s character and value
proposition.

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 Developing & Communicating a
Positioning Strategy
 All products can be differentiated to some extent.
Criteria for determining which difference to promote:
 Important: The difference delivers a highly valued
benefit to target buyers.
 Distinctive: Competitors do not offer the difference,
or the company can offer it in a more distinctive way.
 Superior: The difference is superior to other ways
that customers might obtain the same benefit.

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Cont’d
 Communicable: The difference is communicable
and visible to buyers.
 Preemptive: Competitors cannot easily copy the
difference.
 Affordable: Buyers can afford to pay for the
difference.
 Profitable: The company can introduce the
difference profitably.

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 Methods to position products

 In general, various positioning methods can be

distinguished.
 1.Attribute Positioning / Customer Benefits
 The enterprise positions itself in terms of one or

more outstanding attributes or benefits.

 2. Product Benefit Positioning
 This positioning method emphasizes the unique

benefits that the enterprise or product offers.

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 Cont’d
 3. Quality / Price Positioning
 The enterprise may claim that its product is of
exceptional quality, or has the lowest price.
 4. Use / Application Positioning
 An enterprise can position itself on its market

offering in terms of the product use or

application possibility. Nike describes one of its
shoes as the best for running.

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Cont’d

 5. User Positioning
 The enterprise may position its products with users in

mind, using models or personalities. Influences image

of product by association.
 6.Competitor Positioning
 Some market offerings can best be positioned against

competitive offerings.
 7. Origin Positioning
 E.g., France perfume

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 The End

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