Market Segmentation

Identifying Market Segments

&
Selecting target markets

by

Dr. Raja Mazhar Hameed

 Importance of Segmentation

 Market is broad
 Customers/Consumers are numerous
 Buyers are not a homogeneous group
 Therefore they differ in needs, preferences, resources and
behaviors.
 Hence understanding of the common characteristics allow
marketers to develop a standardized marketing mix for all
customers/Consumers in this segment.
 Benefits of Segmentation

 Facilitates right choice of target market

 Facilitates effective tapping of the chosen market
 Makes marketing efforts more efficient

 Helps to identify less satisfiedsegments and

concentrate on them
 Benefits the consumers (end user) as well
 Target Marketing
(Segmentation, Targeting, and Positioning)

Identification of target
Market Segmentation markets
1. Identification of customers’ 1. Evaluation & selection
needs & market segments of the
market segments
2. Develop profile of resulting
market segment

Positioning
• Identification of differential
advantage in each of segment
• Establish & communicate the
distinctive benefit
 Meaning

A market segment consists of a group of

customers/consumers who share a similar set of needs
and wants.

Market segmentation is the segmentation/ division of

markets into homogenous groups of
customers/consumers, each of them reacting differently
to product, pricing, promotion, place (distribution
network) and other variables of the marketing mix (the
remaining three P’s (people, processes and physical
evidence) for service industry.
 Bases of Segmenting
Consumer Markets

Segmentation
variables

Geographic Demographic Psychographic

 Geographic Variables

• Region
• Countries
• Cities
• Population
(size)
• Climate etc
 Demographic Variables

• Age & life-cycle stage

• Family size
• Gender
• Income
• Occupation
• Education
• Social class etc
 Psychographic Variables

• Lifestyle
• Personality
• Values
• VALS (VALS ("Values and Lifestyles") is a proprietary
research methodology used for
psychographic market segmentation. Market segmentation
is designed to guide companies in tailoring their products
and services in order to appeal to the people most likely to
purchase them).
 Benefits of Market Segmentation

 Better understanding & serving customers’ needs & wants

 Helps to design most effective marketing programs for the
homogenous groups
 Improves allocation of marketing resources
 Stimulates innovation
 Identifies opportunities for growth
 New product development

 New market exploitation

 Higher market share, higher profitability

 Sustainable customer relationships in all phases of
customer/consumer life cycle
Different stages of the customer lifecycle
are:
Awareness.
Engagement.
Evaluation.
Purchase.
Product and Support Experience.
Bonding/Advocacy. They represent the journey a
customer takes to move from first learning about
a brand to being the one telling others about it.
TARGETING
 Evaluating & Selecting
Market Segments

1. The segment’s overall attractiveness

 Size, growth, and profitability
2. The company’s objectives & resources
 Long run objectives, necessary competencies etc
Targeting Strategies
 Full market coverage
 Differentiated / undifferentiated
 Selective specialization
 Product Specialization
 Market specialization
 Single segment concentration
 Full Market Coverage
 Serves all customer/consumer groups with all
products(product-line or product-range they
might need
 2 ways to classify
 Undifferentiated
 Ignores market
differences
 Designs product
& marketing
program for
broadest
number of
buyers
 Single Market Concentration

 Strong knowledge of the segment’s needs

 Niche marketing – narrowing defined
customer/consumer group
 Strong market presence
 Selective Specialization

 Multiple segments
 May or may not have synergy in the segments
 Helps to diversify risk
 Product Specialization
 Market specialization
 Summary
 Segmentation is the process of dividing
customers/consumers into homogeneous groups
 Targeting is the selection of the segments