Key Concepts in Segment Market

for a Product or Service and

Appropriate Target Market
Segment and its Positioning
G5 PRESENTATION
What is Market Segmentation?

Market segmentation is the process of dividing a market of potential customers into

groups, or segments, based on different characteristics. The segments created are
composed of consumers who will respond similarly to marketing strategies and who
share traits such as similar interests, needs, or locations.
Why is Market Segmentation Important
for Marketers?
Market segmentation makes it easier for marketers to personalize
their marketing campaigns.
By arranging their company’s target market into segmented groups, rather
than targeting each potential customer individually, marketers can be more
efficient with their time, money, and other resources than if they were
targeting consumers on an individual level. Grouping similar consumers
together allows marketers to target specific audiences in a cost effective
manner.
You can describe the Market segmentation also reduces the risk of an
unsuccessful or ineffective marketing campaign. When marketers divide a
market based on key characteristics and personalize their strategies based on that
information, there is a much higher chance of success than if they were to create
a generic campaign and try to implement it across all segments.

Marketers can also us segmentation to prioritize their target audiences. If

segmentation shows that some consumers would be more likely to buy a product
than others, marketers can better allocate their attention and resources.
 Consumer Segmentation
Variables

These are four major variables

used in market segmentation:

1.Geographic- pertains to where the population is located. Geographic

segmentation divides the market by regions, cities, urban and rural area,
coastal and central land masses, by density or areas with low, medium or
heavy concentration of population, or by areas of the country with either
relatively temperate or hot temperature, among others.

Some examples of geographic segmentation sub-variables are:

•Region •Density •Climate
 2.Demographic – refers to the general Some examples of common demographic
characteristics of the population. Using segmentation sub-variables are:
demographic segmentation, males may be
grouped together in one segment, and females •Gender
in another. Age can also be an effective •Age
segmentation variable. Teenagers may compose •Income
a segment, young adults another, and mature •Occupation
individuals and senior citizens may form two •Education
more individual segments. Educational •Civil status
attainment can be an effective segmentation •Religion
sub-variable as well, such as those with higher •Nationality
education (holders) of master’s degree, or •Race
doctorate degrees), individuals who have •Family size
completed their college education, graduated
from high school, completed elementary
education, and those with little or no education.
3.Psychographic-these are variables that represent the psychological profile of
consumers. This is one of the most effective segmentation variables in predicting
purchase behavior. However, the psycho-graphic profiles of different segments of
the population are difficult to measure as no government agency undertakes
regular studies and release data to identify and quantify these segments. This is in
contrast with geographic and demographic population data, which is collected
every five years by the Philippine Statistics Authority. Another is through
Expectation Surveys
undertakenbyseveralgovernmentagenciesastheBangkoSentralngPilipinas.

Examples of psycho-graphic segmentation sub-variables are:

• Lifestyle
• Personality
• Social Class
• User status
• Usage rate
• Loyalty status
• Benefits sought
4.Behavior-graphic - is the segmentation variable most indicative of purchase behavior.
Unfortunately, it is not available to all organizations as it depends on the meticulous
maintenance and conversation of internal databases. Retailer databases, for example, can
provide information such as customer listings, their home and email addresses, and contact
numbers. When customer database is organized and synchronized with point-of-sales system,
retailers can pinpoint individual customer purchases, by item, transaction size, time of day, and
frequency. When the database of a particular female customer, for example, indicates a
preference for capri pants, the retailer can send an email to this customer to advise her of the
arrival of new capri pants. Without the database, the email will be sent to all of the retailer’s
customers. Behavior-graphic segmentation not only enhances the likelihood of sales, but
dramatically reduces direct marketing costs.
The organization has to decide which segmentation sub-variables are relevant to the
successful and cost-efficient marketing of its product or service. For example, a fruit juices
company may decide to concentrate the marketing of its products to teenagers from the middle
class income bracket. It may also decide not to segment its potential consumers by education,
as educational attainment may be irrelevant in fruit juices purchase and consumption.
What is target market?
After segmenting the market into various homogeneous parts (or
segments possessing similar characteristics), the marketer decide
which parts/segments he/she wants to actively pursue. The target
market of a product or service is defined as its most probable and
most logical consumers, and may likewise be its heaviest consumers.
A company may, for example, decide its product’s target market to
be:
“Males and females residing in Metro Manila who belong to
income classes A, B and C, single, are between the ages of 21 to 30,
who are sports-minded and are looking for a sports drink that can
provide relief after strenuous physical activities.”
Figure 13. Population Statistic
Elements of an Ideal Target Market

A company may finalize the selection of its market upon consideration of its conformity with
the following elements:
• Substantial - the select target market must be large enough in terms of quantity and/or total
consumption capability. The size of a target market can be determined as follows:
Target market: Males and females residing in Metro Manila who belong to income classes A, B, and
C, single, are between the ages of 21 to 30, who are sports-minded and are looking for a sports drink
that can provide relief after heavy physical activity.
Although psychographic segmentation sub-variables (such as being sports-
minded, or those engaged in heavy physical activity) may be the most indicative
in determining potential consumption, no database on these factors are available
in public database. In most cases, organizations may have to conduct market
research to determine the percentage of the total population processing these
psychographic characteristics.
After the total size of the target market is determined (in this case 431.877),
the organization then decides on the substantiveness of the total market. If the
organization feels the size is sufficient to generate substantial sales revenues to
make a profit, the company can proceed to market its product/service offering.

If, however, the organization feels that the target market is not substantial enough
to generate sufficient revenues, the organization can either:
A.Expand its target market to include other segment brackets previously not targeted

The company may decide to not just target ages 21 to 30 but likewise include ages 31to 40.
This will result in a larger target market, as follows:

11,278,564 (Metro Manila Population)

x 1.00 (decimal equivalent of the percentage of the population

who are male and female)

x 0.625 decimal equivalent of the percentage of the population

who belong to income classes A, B, and C

x 0.311 decimal equivalent of the percentage of the population

who are single

x 0.376 decimal equivalent of the percentage of the population

who are between the ages 21 to 30 and 31 to40

824,294 Target market size

 ICE
BREAKER
B.Expand its target market by reducing the number of sub-variables

● The company may decide to exclude civil status as a segmentation sub-variable by targeting
all men and women regardless of marital status. The resulting target market size is as follows:
 C.Combination of the two options
The company may decide not to use civil status as a segmentation sub-variable.
It may expand its target market to include ages 31 to 40.The resulting target
market size is as follows:
 The target market should ideally be:

•Financially capable-must have the financial means to afford means to afford the
purchase price of the product/service. Since organizations require a selling price for their
product/service, financial capability is an essential element of an ideal target
market. For this reason, most profit-oriented organizations exclude income
class E as part of their target market.
Reachable - must be within physical reach to
•

permit product distribution. It should also reachable by various

marketing activities (advertising, promotions, Internet and digital
marketing, etc.)

•Homogeneous - must react similarly to specific marketing stimuli.

A homogeneous market is an ideal target market. Since companies
employ various marketing stimuli to attract, persuade, or retain
the loyalty of its target market, homogeneous markets will ensure
that the marketing
activities will be efficient and effective.
Target Market vs. Consuming Market
How does a product’s target market differ from its consuming market? A
company’s target market is the group of individuals with specific characteristic
to whom the company has decided to focus its marketing efforts. For example,
a fruit juices brand may have identified its target market to be “males and
females residing in major urban centers nationwide, who are between the ages
of 12 and25, belonging to income classes A, BandCwho are looking for a
carbonated beverage with a high caffeine content that can reinvigorate them
and keep them active enough to perform their daily activities.” Individuals who
fit this description is the brand’s target market.
Positioning
Positioning is the process of communicating the image of a brand into the minds of consumers. The
objective is to make the brand stand out in comparison to its competitors.
Why should a brand have an image or a brand position? The first reason is to recall.
Customers have difficulty remembering brand position? The first reason is to recall. Customers
have difficulty remembering brands that have no distinct image. This can be illustrated using a
typical high school student attending a reunion of his elementary graduating class. Upon seeing his
former schoolmates, he may remember some schoolmates immediately, some even by name. These
schoolmates are memorable because of some distinct image they had when they were together in
primary school: the most intelligent, the neatest, the cutest, the tallest, the darkest, the funniest, etc.
He may struggle to remember the names of the majority of his schoolmates because they were just
“faces in the class,” little known for anything in particular.
Elements of Good Brand Position
What is a good brand position? These are three requirements:
•Unique - A brand must select a position that is not currently
occupied by another brand. For example, it would not be good for
a new bank to position itself as a full service financial institution
that is willing to go out of its way to satisfy customer needs and
adopt other bank’s tagline. The new bank must identify its own
distinctive features and communicate them to its customers using
a different tagline.
Beneficial - The selected position must be perceived by its customers as
beneficial Customers always ask when considering a product or service,
“what in it for me?” They are willing to patronize market offerings that they perceive as
capable of satisfying their needs and/or wants. Hence, if a commercial bank that is slow
in processing transactions.
•Credible - Once a brand position is selected, it must ensure that it performs and
fulfills the promise of its position. If a retailer positions itself as customer-friendly
and communicates this through the tagline “service with a smile,” the organization
must ensure that this positioning is implemented 100% of the time for it to be
credible, perhaps requiring employees to smile all the time when dealing with
customers.

Selecting a Good Brand Position

There are several tools available that can be used in the selection of a good brand
position. One of the most powerful of these tools is perceptual mapping.
Perceptual Mapping
Perceptual mapping involves the identification of a competitive
brand’s position using two variables or axes (for example, price and
quality). Each variable represents a factor relevant and important to
customers. Using perceptual maps, new products launched into the market
can select the position they wish to occupy. This is after a comprehensive
assessment of the number, size, and intensity of competition in each
quadrant of the map.For existing brands, perceptual mapping is useful in
identifying industry participants perceived by customers to be the brand’s
most direct competitor’s
Communicating Brand Position

The brand position of a product/service must be consistent

and communicated effectively to its target market. It is
pointless to adopt a brand position if it is known only to the
company’s executives and employees. The continuous and
consistent communication of the brand’s positioning to its
target market is important to create impact in the market. All
elements of the product must be consistent to the brand’s
selected positioning.
Identifying and Selecting Competitive Advantage

Competitive advantage- is defined as the superiority of an

organization over competitor. It typically answers the question “Why
should the customer purchase from this company instead of its
competitors?”
•Cost advantage - results when firm has the ability to produce a
product or service at a lower cost compared to its competitors.
This cost superiority will result in the company either being able
to sell its products or services at a lower price than its competitors, or
generate a larger margin from its sales.
●
Differential advantage - when a company’s
product or service differs from its competitors
and are perceived by consumers to be better or
of greater value.
● Focus advantage When a company knows
-

its target market very well, and can service its

needs better than any of its competitors.
 Competitive advantage can be achieved through external or internal
means. Companies can take advantage of opportunities that arise from changes in
macro-environmental factors, and being responsive to these changes. Internally, a
company can achieve cost advantage or differentiation through improvements in
the production process, cost efficiency measures, branding, or product
innovation. Focus advantage, on the other hand, can be attained by studying and
predicting the needs and preferences of the target market.
Sources of competitive advantage include the company’s cost structure,
products/service offerings, and distribution networks, among others. In selecting
its competitive advantage, the company must know what operational attributes
(such as products/service offerings, and distribution network, among others. In
selecting its competitive advantage, the company must know what operational
attributes (such as product quality, technology, price, availability, service, etc.)
are important to its target market. Selecting an operational aspect with low
importance to a company’s target market will result to incremental competitive
advantage.
Thanks
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 QUIZ
What are the four major variables
used in Market Segmentation?

ENUMERATION
 5. This must be within physical reach to permit product distribution
6. A brand that must select a position that is not currently
occupied by another brand.
7.When a company’s product or service differs from its
competitors and are perceived by consumers to be better or
of greater value.
8.Once a brand position is selected, it must ensure that it performs
and fulfills the promise of its position.
9. Pertains to where the population is located.
10.This results when a firm has the ability to produce a
product or service at a lower cost compared to its
competitors.
 ANSWERS
1. GEOGRAPHIC
2. DEMOGRAPHIC
3. PSYCHOGRAPHIC
4. BEHAVIOR- GRAPHIC
5. REACHABLE
6. UNIQUE
7. DIFFERENTIAL ADVANTAGE
8. CREDIBLE
9. GEOGRAPHIC
10. COST ADVANTAGE