Unit : 7

Subject Code : MB0046

Segmentation, targeting and positioning

1
 Contents
• Introduction
• Concept of market segmentation
• Benefits of market segmentation
• Requisites of effective segmentation
• The process of market segmentation
• Bases for segmenting consumer markets
• Targeting
• Market positioning

2
 Introduction
• Market segmentation is the first step in applying the
marketing strategy.
• Segmentation means dividing the market into similar sub-
markets by understanding the needs and expectations of
customers.
• Companies follow different marketing programs for different
segments to maintain better relationship with customers.

3
 Learning Objectives
After studying this unit you will be to able to
• Explain the concepts and benefits of market
segmentation
• Mention the requisites' of effective segmentation
• Explain the bases of market segmentation.
• Describe the process of evaluating market segments
• Identify appropriate target market for given segment
• Analyze the positioning strategies of companies’ on
the basis of product differentiation.

4
 Concept of Market Segmentation
Definition
Market segmentation is the process of dividing a potential market into
distinct sub markets of consumers with common needs and
characteristics.
For example, Cadbury India functions in three different markets namely,
malted foods, cocoa powder and drinking chocolates and chocolates and
sugar confectionary.

5
 Benefits of Market Segmentation
The benefits of market segmentation are
1. Understanding the needs of Consumers
2. To adopt better positioning strategies.
3. Proper allocation of marketing budget.
4. Helps in preparing a better competitive strategy.
5. Provides guidelines in preparing media plan of the company.
6. Different offerings in different segments enhance the sales.
7. Customer gets more customized product.
8. Helps Company to identify niches.
9. Provides opportunities to expand market
10. Encourages innovations

6
 Requisites of Effective Segmentation
Segmentation is successful if it has the following
characteristics:
1.Measurable and obtainable – The size, profile and
other characteristics of the segment must be measurable
and should be obtained in the form of data.
2.Substantial – The size of the segment should be such
that it is profitable. For small segments the cost is high
and hence the products are priced very high.
3.Accessible – We should be able to reach the segment
through existing network at affordable cost.

7
4. Differentiable – The segments are different from
each other and hence require different 4Ps and
programs.
5. Actionable – The segments which a company wants
to target must be actionable, i.e., there should be
sufficient finance, personnel, and capability to
target the segment.

8
 Segmentation
The process of market segmentation.

9
1. Identify existing and future wants in the current
market
• Marketers must understand the changing needs of
customers.
• This process helps to know whether the customer is
satisfied with the existing products or not.
• It also helps to test the company’s new and
innovative concepts.

10
2. Examine the attributes that distinguish among
segments.

• In this process, marketers separate different types

of wants into similar categories.
• The separation may be done on the basis of product
features, lifestyle or behavior.

11
3. Evaluate the proposed segment attractiveness on the basis
of measurability, accessibility and size
• Segments selected in second step should be analyzed for measurability,
accessibility, substantial, actionable and differentiability.
• The further plans of the company depend on the result of this process.

12
 Bases for Segmenting Consumer Markets

1. Geographic segmentation:
Dividing the market into different
geographical units such as nations,
states, regions, cities or neighborhoods
2. Demographic Segmentation:
In this segmentation the market is
divided into groups on the basis of
variable such as age, family size, family
life-cycle, gender, income, occupation,
education, religion, race, generation,
nationality and social class.
Some factors used for
demographic segmentation
are:
13
• Age and life cycle stage – The needs and wants of
consumers change with age. On the basis of age, a
market can be divided into four classes, children,
young, adults and old. A good marketing manager
should understand the age group for which the
product is most suitable and then plan his
marketing, pricing and advertising policy
accordingly.
For example, Hindustan Unilever launched
Pepsodent Kids for small children.
• Gender – Segmentation on the basis of gender is
useful in clothing, hair-styling, cosmetics and
magazines.
• Income – Segmentation on the basis of income is
useful for products and services like automobiles,
clothing, cosmetics and travel.

14
3. Psychographic Segmentation: In this segmentation, buyers are
classified into different groups on the basis of life-style or
personality and values.
• People belonging to the same demographic group may show
very different psychographic characteristics.
• Some factors used for psychographic segmentation are
a) Life-style: Different people have different life-styles and the
products they use shows their life-style.
– One of the most common psychographic profiling scheme is the VALS, developed
by SRI International, INC.
– VALS defined adult consumers into eight segments. They are
1. Innovators: They are successful, sophisticated, active, take charge. They are
people with high self-esteem and rich resources. They are business leaders and
interested in growth, innovation and change. They are image conscious.
2. Thinkers: They are mature, satisfied, comfortable, thoughtful people who value
order, knowledge and responsibility.

15
3. Achievers: They are successful career and work oriented people who want a
controlled life. They prefer predictability and stability over risk. They are
committed to work and family.
4. Experiencers: They are young, enthusiastic, impulsive, disloyal, disobedient.
They want variety and excitement. They like variety and enjoy new things.
They like exercise, sports, outdoor recreation and social activities.
5. Believers: They are traditional people with high commitment to family,
community and nation. They have a moral code. They prefer American
products and established brands.
6. Strivers: They look for motivation and approval from others. They are unsure
of themselves and have less economic, social and psychological resources.
7. Makers: They are practical people who have constructive skills and value self-
sufficiency. They are happy with their families and have little interest outside
their family.
8. Survivors: They are poorly educated, low skilled and concerned about their
health. They satisfy urgent needs of the present. They are concerned for
security and safety. They are cautious consumers. They are loyal to favorite
brands.

16
b) Personality: Marketers use
personality variables to segment the
market. They promote their products
with brand personality that resembles
consumer personalities.
c) Social class: It has a strong
influence on preference in cars,
clothing, home furnishings, leisure
activities, reading habits, etc. Many
companies design products and
services for specific social classes.

17
4. In behavioral segmentation, buyers are divided into groups
on the basis of their knowledge or attitude towards the use
of, or response to a product.
• Some factors used for behavioral segmentation are
1. Occasions
2. Benefits
3. User status
4. Usage rate
5. Loyal status
6. Buyer readiness stage

18
1. Occasions: Buyers develop a need, purchase or use a product according to
occasion. For example, Tanishq offer schemes and promotions for purchasing
on Akshaya Truthiya.
2. Benefits: Buyers can be classified according to the benefits they are looking
for.
3. User status: Markets can be segmented into non-users, potential users, first
time users and regular users of a product. Marketing strategy for each
segment is different.
4. Usage rate: Markets can be segmented into light, medium and heavy product
users. Heavy users are less in number but responsible for a large part of total
consumption. Marketers like to attract one heavy user rather than many light
users. For example, textile brand Allan Paine offered 4 cotton trousers for Rs.
999. It wanted to earn profits from sales volume.

19
5. Loyal status: Consumers have different levels of loyalty for different
brands and stores. According to brand loyalty status, buyers can be
divided into four groups:
a) Hard core loyal: Such consumers buy only one brand all the time.
b) Split loyal: Such consumers are loyal to two or three brands.
c) Shifting loyal: Such consumers shift from one brand to another.
d) Switchers: Such consumers show no loyalty to any brand.
6. Buyer readiness stage: A market consists of buyers who are at different
stages of willingness to buy a product. Some are unaware of the product, some
are aware, some are informed, some are interested, some desire the product and
some plan to buy.

20
 Targeting
• Targeting is defined as a group of people or
organizations for which an organization designs,
implements and maintains the marketing mix.
• After segmentation, it is important to identify the
people or organization for which the product is
meant.
• Selecting target market segments
• A company chooses its market segmentation
strategy on the basis of following factors
– Homogeneous preference showing no natural
segments as in case of cold drinks.
– Diffused preference showing clear preferences as in
case of automobiles.
– Clustered preference, market showing natural
segments as in case of occupation having impact on
the types of clothes worn.

21
• Undifferentiated marketing: In this strategy, the whole target market is treated
as one and it is considered that there are no market segments that show
uncommon needs. The company believes on ‘one product-all segments strategy’
and has one marketing mix for the target market. For example, Coca Cola sells
Coke, Limca, Thums-up, etc. and does not differentiate between the target
audience.
• Differentiated marketing: In this marketing strategy the company divides the
market into segments and uses different marketing mix for each segment. This
strategy is used by Hindustan Unilever which sells soaps like Lifebuoy, Lux, Rexona,
Liril, Pears, etc. and each has its own market.
• Concentrated marketing: In this marketing strategy the company follows ‘one
product one segment policy’. For example Ashok Leyland produces large chassis of
machines for buses and trucks.

22
Comparison of Market Coverage Strategies

Focus Undifferentiated Differentiated Concentrated

Marketing Marketing Marketing

Product One/Few Many One/Few

Segment All Many One/Few

Marketing Mix One Many One/Few

23
 Choosing a Market Coverage Strategy

Undifferentiated Differentiated Concentrated

Marketing Marketing Marketing

Constrained Firm More suitable Least suitable Most suitable

Resources

Common Usage Most suitable More suitable Lease suitable

Products

Different need Least suitable Most suitable More suitable

satisfying products

24
 Market Positioning
• Positioning is defined as the process of designing the company’s products and
image to occupy a unique place in the target market’s mind.
• Many marketers favor promoting only one major benefit and Rosser Reeves called
it as “a unique selling proposition”. Some unique selling propositions (USPs)
companies use are best quality, best service, lowest price, best value, safest, more
advanced technology, etc.

25
The four major positioning errors that a company must avoid are

•Under positioning: Some companies find that buyers have only an

unclear idea of the brand.
•Over positioning: Buyers have very narrow image of the brand.
•Confused positioning: Buyers have confused image of the brand
because the company has made too many claims or changed the
brand positioning too frequently.
•Doubtful positioning: Buyers do not easily believe the claims made by
brands about the product’s features, price or manufacturer.

26
Bases of positioning the product
1. Attribute positioning: The company positions itself on the basis of attribute like
size or number of years in existence. Sunfeast positions its snacky brand as bigger,
lighter and cheaper.
2. Benefit positioning: The company positions its product as leader in providing a
certain benefit. For example Santro positioned itself as India’s simplest car to
drive.
3. Use or application positioning: The company positions its products as best for
certain use or application. For example, Kenstar positioned its products as
unexpectedly cold.
4. User positioning: The company positions its product as best for some user group.
For example, Parle-G positions the boy in the advertisement as rock star targeting
the kids and boys.

27
5. Competitor positioning: The company claims its products as better than a
named competitor.
6. Product category positioning: The company positions its product as
leader in certain product category. For example, Bajaj CT 100 was
positioned as leader in the entry segment bikes.
7. Quality or price positioning: The product is positioned as offering the best
value. For example, the vegetable oil brand Dhara positions itself as
‘anokhi shuddata, anokha asar’. This means the company offers unique
purity and unique effect.

28
29