Module 2:

Segmentation, targeting and positioning

Market: is a set of all actual and potential buyers who have interest in, income
for and accessto the product.

Segmentation: segmentation refers to a process of bifurcating or dividing a large

unit into various small units which have more or less similar or related
characteristics.

Market Segmentation: Is a marketing concept that divides the target market into
distinct groups of homogenous consumers with similar needs and consumer
behaviour. One market segment is totally distinct from the other market segment.
The individuals from the same segment respond in a similar way to the
fluctuations in the market.

Variables / Bases for Segmenting Consumer Markets

The following variables are commonly used to segment consumer markets.
1) Geographic segmentation -This calls for dividing the market into different
geographicalunits such as Nations, States, Regions – West, North, Central, South,
e.t.c.
- Countries, Cities or Neighbourhoods
Attention should be paid to variations in geographical needs and preferences.
Geographical segmentation assists the seller to position retail outlets in most
appropriate locations as well as simply identifying the needs on the basis of the
consumers own location.

2) Demographic segmentation -This consists of dividing the market into groups on

the basis of demographic variables such as:- Age, sex, family size, family life
cycle, income, education, occupation, religion, race and nationality.
These variables are the most popular for distinguishing customer groups because,
- Consumers’ wants and preferences are closely related to them.
- They are easier to measure than most other types of variables.
a) Age -Consumer needs and wants change with age. Hence the market should
be segmentedas young, old, e.t.c.
 b) Gender -This can be employed to segment such markets for clothes
deodorants, lotions, magazines, e.t.c. Thus the markets can be for either men or
women, male or female
c) Family life cycle (FLC) -The product needs for a household vary
according to maritalstatus and the present ages of children. Thus family life cycle
can be divided into:-
- Single,
- Young, married with no children,
- Young, married with young children,
- Older married with children, e.t.c.
d) Income -Marketers can segment the market according to the distribution
of income e.g. higher income group, middle income group and lower income
group.
e) Occupation -Variables include; bankers, teachers, farmers, clerks, students,
housewives, secretaries, e.t.c. A marketer can choose to specialize in the needs of
one occupation group.
g) Religion - e.g. Muslims, Christians e.t.c.
j) Generation - Consumer is profoundly influenced by the generation in which
it grows [Link] influences one’s inclination to Music, politics, e.t.c.

3) Psychographic segmentation -
In psychographic segmentation, buyers are divided into different groups on the
basis of their:-Motives, Lifestyle and/or Personality characteristics.
People within the same demographic group can exhibit very different
psychographic profiles.

Consumers can thus be sub-divided on the basis of the following psychographic

variables.
i. Lifestyle -Consumers’ lifestyles are derived from their activities,
interests and opinions. Each life style group is influenced by different marketing
mixes. it can be culture oriented, sports oriented and outdoor oriented.
ii. Personality -Personality traits determine an individual’s resources. Different
levels of resources enhance or constrain a person’s expression of his or her
primary [Link] of personality groups may include;
 - Authoritarian
- Ambitious
- Assertive
- Self-confident
- Prestige conscious
- Extrovert/Introvert
4) Behavioural segmentation -Buyers are divided into groups in the basis of their,
Knowledge, Attitude, Use or Response to a product. In this respect, behavioral
variables that are used to segment consumer markets include:-
i) Occasions -Buyers can be distinguished according to occasions when they
- Purchase a product or
- Use a product
E.g. Occasions when public transport is used mostly. Occasion segmentation can
help firmsexpand product usage. Festivals, events, normal occasions etc.
ii) Benefits -Buyers are classified according to different benefits they seek from the
product. Variables here include:-
- Economy (Low price)
- Medical (Decay prevention)
- Bright teeth
- Good taste, e.t.c. for toothpaste.
Benefit segmentation requires determination of:-
- The major benefits that people seek from the product
- The kind of people who look for such benefit
- The major brands that deliver each benefit.
iii) User status -Many markets can be segmented into
- Non-users.
- Ex-users,
- Potential users,
- First time users and
- Regular users of a product
All these people require different marketing approaches.
iv) Usage rate -Markets can be segmented into
- Light,
- Frequent users
v) Decision Roles – it’s easy to identify the buyer for many products, but even here
marketers must be careful in making targeting decisions, because buying roles
change.
TARGETING

After dividing the market into different segments next step is to choose one or
more segment to enter in the market. For this purpose marketer analyze the
segment weather it is beneficial for long run or not, this evaluation and selecting
of segment is called targeting. Simple definition of segmenting is “process of
evaluating each market segment’s attractiveness and selecting on or more
segments to enter”. We can also say that targeting is actually cutting up the market
pie into different parts. Segmentation means that, instead of sending your message
to a crowded hall, a company should pitch their product to a group of attentive
listeners in a quiet room.

Evaluating The Market Segments

In evaluating different market segments, the firm must look at the following factors
1) Segment size and growth
Marketing segment has to be ‘right size’. Size can be measured in terms of sales
volume. Companies should not only concentrate on sales volume but also on the
growth potential of the segment.
2) Segments structural attractiveness – Using Porter’s Five Forces Analysis.
A segment might have desirable size and growth characteristics and still not be
profitable.
The company should evaluate the long-run profitability of the market segment.
Michael Porter has identified five forces that determine the intensive long-run
attractiveness of the whole market or any other segment within it. These five
forces are:-
 Threat of intense segment rivalry -A segment is unattractive if it already contains
strongor aggressive competitors.
 Threat of new entrants -A segment is unattractive if it is likely to attract new
competitors who will bring in new capacity, substantial resources and a drive for
market share growth.
  Threats of substitute products -A segment is unattractive if there exists actual or
potential substitutes for the product.
 A threat of growing bargaining powers of buyers -A segment is unattractive if the
buyer’sposses strong or increasing bargaining power. Interested in low prices but
high quality.
 Threat of growing bargaining power and suppliers -A segment is unattractive if the
suppliers posses a strong or increasing bargaining power. They can raise prices or
reduce the quality and quantity of products and services offered.
- Even if the segment has positive size and growth and it is attractive, the company
has toconsider its own objectives and resources.
- The segment can be dismissed because it does not fit in the company’s long-run
objectives.
- Even if segments fit the company’s objectives, it must consider whether it has the
requiredskills and resources to succeed in that segment.
3) Segment interrelationships
Segments selected should be inter-related in terms of costs, performance and
technology foreffectiveness.

TARGET MARKETING
Target Market Strategies
There are several different target-market strategies that may be followed.
Targeting strategiesusually can be categorized as one of the following:
 Single-segment strategy – With single segment concentration, the firm markets
to only one particular segment. This is also known as concentrated strategy.
Through concentrated marketing, the firm gains deep knowledge of the segments
need and achieves a strong market presence. If it captures segment leadership,
the firm can earn a high return onits investment.

a niche is a more narrowly defined customer group seeking a distinctive

mix of benefits within a segment. Marketers usually identify niches by dividing
segments into sub segments. Niche marketers aim to understand their customer’s
need so well that customers willingly pay a premium.
 Multiple segment strategy- in this the firm selects a subset of all the possible
segments, each objectively attractive and appropriate. The multiple segment
strategy also has the advantage of diversifying the firm’s risk. The firm can also
 attempt to achieve product and market specialization.
With product specialization the firm sells a certain product to several
different market segments. In market specialisation the firm concentrates on
serving many needs of a particular customer group.
 Full market coverage - the firm attempts to serve the entire market. This
coverage can be achieved by means of either a mass market strategy in which a
single undifferentiated marketing mix is offered to the entire market, or by a
differentiated strategy in which a separate marketing mix is offered to each
segment.
Undifferentiated marketing strategy: in undifferentiated marketing the firm
ignores segments differences and goes after the whole market with one offer. It
designs a marketing program for a product with a superior image that can be
sold to the broadest number of buyers via mass distribution and mass
communication
Differentiated marketing strategy: The firm sells different products to all
the different segments of the market. Differentiated marketing typically creates
more total sales than undifferentiated marketing. However it also increases the
costs of doing business. Because differentiated marketing leads to both higher
sales and higher costs, no generalisations about its profitability are valid.

 Individual Marketing: the ultimate level of segmentation leads to “segments of

one”, “ customized marketing”, “one to one marketing”.
POSITIONING

Positioning is the act of designing a company’s offering and image to occupy a

distinctive place in the minds of the target market. The goal is to locate the brands
in the minds of consumers to maximise the potential benefit to the firm. A good
brand positioning helps guide marketing strategy by clarifying the brand’s
essence, identifying the goals it helps the consumer achieve and showing how it
does so in a unique way.

Steps involved:
 Determining a competitive frame of reference

 Identifying competitors: a good start point in defining a competitive frame of

reference for brand positioning is to determine category membership- the products
or sets of products with which a brand competes and which functions as a close
substitutes.
 Analysing Competitors: The Company has to identify its main competitors and
their strategies. Based on the analysis the marketer must formally define
competitive frame of reference to guide positioning
 Identifying optimal points of difference and points of parity:
Points of difference- are attributes or benefits that consumers strongly associate
with abrand, positively evaluate, and believe they could not find to the same extent
with a competitive brand. Difference can be established as follows
1. Important
2. Superior
3. Pre emptive
4. Affordable
5. Profitable
Eg apple (design, ease of use), Nike( performance, innovative technology) ,
toothpaste( added salt)
Points of parity: on the other hand are attributes or benefit association that are not
necessarily unique to the brand but may in fact be shared with other brands. It can
either be category wise or can be on the basis of competition.