Module 2 (STP)

Market segmentation
Market segmentation offers several key benefits, primarily by enabling
businesses to understand their target audience better, personalise marketing
efforts, and optimise resource allocation for increased efficiency and
profitability. It also facilitates product development aligned with specific
customer needs, improves customer retention, and builds stronger brand
loyalty.
 Target Market
Target market segmentation involves dividing a broad target audience into
smaller, more defined groups based on shared characteristics. These groups are
then targeted with specific marketing strategies to resonate with their unique
needs and preferences. Common segmentation bases include demographics,
psychographics, behaviours, and geographic locations.
 Target Market
Understanding Segmentation: Definition:
Target market segmentation is the process of dividing a large, diverse market into
smaller, more manageable groups with similar characteristics.
Purpose:
Enhanced Relevance and Personalisation:
Allows businesses to create highly personalised marketing messages, offers, and
experiences that resonate directly with the specific needs and preferences of each
customer group.
 Benefits of Market segmentation
Customers feel understood and valued when they receive content and offers
that are relevant to them, leading to higher engagement.
Improved Conversion Rates:
By delivering the right message to the right audience at the right time,
businesses increase the relevance and effectiveness of their campaigns, which
directly leads to higher conversion rates (e.g., sales, sign-ups, leads).
 Benefits of Market segmentation
Efficient Resource Allocation:
Instead of a "one-size-fits-all" approach, businesses can focus their marketing budget
and resources on the most profitable and receptive segments. This optimises ad
spend, reduces waste, and maximises the return on investment (ROI).
Customer Personas:
Segmentation helps create more accurate customer personas, allowing businesses to
understand the demographics, psychographics, and behaviours of their target
audiences.
 Benefits of Market segmentation
Increased Customer Retention and Loyalty:
Understanding different customer segments allows businesses to create tailored
experiences that foster stronger customer relationships and loyalty. When
customers feel their unique needs are met, they are more likely to stay engaged
with the brand over time.
 Benefits of Market segmentation
Better Product Development:
Segmentation provides valuable insights into the unmet needs, pain points, and
preferences of different customer groups. This information can then be used to guide
product development, ensuring that new or improved products and services are truly
aligned with customer demands.
Stronger Brand Image and Positioning:
By focusing on specific segments, businesses can craft a more distinct and memorable
brand image that appeals directly to their target audience. This helps in differentiating
the brand from competitors.
 Benefits of Market segmentation
Competitive Advantage:
A deep understanding of customer segments allows businesses to identify niche
markets and opportunities that competitors might overlook. This can provide a
significant competitive edge by allowing a company to serve specific customer
needs better than anyone else.
 Steps of segmentation
Steps in the Segmentation Process:
Define the Overall Market (or Business Objective)
Before one can segment, one needs to understand the big picture. What is the
total addressable market for your product or service? What are the overall
business goals (e.g., increase sales, gain market share, launch a new product)?
This step sets the scope for the segmentation efforts. Consider the strengths,
weaknesses, opportunities, and threats (SWOT analysis) in relation to the
market.
 Steps of segmentation
Choose Segmentation Bases/Variables:
This is where one decides how one’ll divide the market. Common segmentation
bases include:
Demographic: Age, gender, income, education, occupation, family size, marital
status, ethnicity, religion, and nationality. (Easiest to obtain data for)
Geographic: Region, city size, population density (urban, suburban, rural), cli
 Steps of segmentation
Psychographics: Lifestyle, personality traits, values, attitudes, interests,
and opinions. (Requires more in-depth research).
Behavioural: Purchase history, usage rate (heavy, light, non-user), benefits
sought (quality, convenience, price), loyalty status, readiness to buy, occasion.
(Highly actionable).
 Steps of segmentation
Conduct Market Research and Collect Data:
Gathering data is crucial to effectively create and validate the segments. This
can involve:
Primary Research: Surveys, focus groups, interviews, observational studies.
Secondary Research: Existing market reports, government data (e.g., census
data), industry publications, competitive analysis, internal sales data, website
analytics.
 Steps of segmentation
Analyse Data and Form Segments:
Once one has the data, analyse it to identify natural groupings or clusters of
consumers. Look for patterns, similarities, and significant differences.
The segments one form should meet certain criteria to be effective:
Measurable: One can quantify the size and purchasing power of the segment.
Accessible: One can effectively reach the segment with the marketing efforts.
 Steps of segmentation
Substantial: The segment is large enough and profitable enough to serve.
Differentiable: The segments are distinct from each other in terms of their
responses to marketing mix elements.
Actionable: One can design effective marketing programs to attract and serve
the segments.
 Steps of segmentation
Develop Segment Profiles/Personas:
For each identified segment, create a detailed profile or "buyer persona." This
goes beyond raw data to paint a vivid picture of the typical customer in that
segment.
Include:
Demographic details
Psychographic insights (e.g., motivations, values, challenges)
 Steps of segmentation
Behavioural patterns (e.g., how they use your product, their buying habits)
Preferred communication channels
Evaluate Segment Attractiveness (Targeting):
Assess the attractiveness of each segment based on factors like:
Segment Size and Growth Potential: Is the segment large enough, and is it
growing?
Competitive Intensity: How many competitors are already serving this segment?
How intense is the competition?
 Steps of segmentation
Alignment with Company Objectives and Resources: Does serving this
segment fit with the company's mission, capabilities, and resources?
Select Target Markets:
Based on the evaluation, choose the segment(s) on which one will focus the
marketing efforts. One might choose:
Undifferentiated (Mass) Marketing: If there's no significant difference in
segments (rarely applicable today).
 Steps of segmentation
Differentiated (Segmented) Marketing: Target multiple segments with different
marketing mixes.
Concentrated (Niche) Marketing: Focus on a single, often smaller, highly specific
segment.
Develop Positioning Strategy:
Once one has selected the target segment(s), one needs to decide how one wants
one’s product or brand to be perceived in the minds of those customers, relative to
competitors. This is the "positioning" part of STP (Segmentation, Targeting,
Positioning).
 Steps of segmentation
Develop and Implement Marketing Mix (4Ps):
Finally, design and implement your marketing mix (Product, Price,
Place/Distribution, Promotion) specifically tailored to one’s target segments
and their desired positioning.
For example, if one segment values convenience, one might focus on wider
distribution (Place) and emphasise ease of use in your messaging (Promotion).
If another values luxury, pricing and product features would reflect that.
 Steps of segmentation
Monitor, Evaluate, and Refine:
Market segmentation is not a one-time process. Continuously monitor the
performance of the marketing campaigns within each segment.
Collect feedback, track sales data, and analyse market trends.
Be prepared to adjust the segmentation, targeting, and positioning strategies as
customer needs, market conditions, and competitive landscapes evolve.
 Basis for Segmenting Consumer Market
Major bases for segmenting the consumer market include geographic,
demographic, psychographic, and behavioural variables.
1. Geographic Segmentation
2. Demographic Segmentation
3. Psychographic Segmentation
4. Behavioural Segmentation
 Types Market segmentation
Geographic segmentation is a market segmentation technique that divides a market
into smaller groups based on geographic criteria, such as region, city, climate, or
population density. This type of customer segmentation allows marketers to tailor
their products, communication, and distribution strategies to the specific needs and
preferences of customers in different geographic locations. Geographic segmentation
can support enhanced resource allocation by helping companies allocate their
resources more effectively by focusing on the areas where they can achieve the
greatest impact. By focusing marketing efforts on the most profitable geographic
segments, companies can maximise their return on investment (ROI) and improve
their overall financial performance
 Geographic Segmentation
Location: This is the most straightforward and common variable. It can be
broken down into various levels of granularity:
Continents/Countries: For global companies, this is the broadest level. (e.g.,
McDonald's adapting its menu in India to be beef-free).
Regions within a Country: (e.g., North vs. South, East vs. West, specific states
or provinces). Preferences for certain foods, sports, or even accents can vary
greatly within a single country.
 Geographic Segmentation
Cities/Towns: Urban, suburban, and rural areas often have different lifestyles
and needs. (e.g., a car manufacturer might target smaller, electric vehicles in
dense cities and larger SUVs in rural areas).
Neighbourhoods/Postal Codes: This provides highly localised targeting,
useful for local businesses or direct mail campaigns.
Specific Radius: For brick-and-mortar stores, targeting customers within a
certain driving distance.
 Geographic Segmentation
Examples of Geographic Segmentation in Action:
Fast Food Chains: McDonald's and KFC adapt their menus significantly in
different countries (e.g., no beef in Indian McDonald's, rice-based meals in
Asian KFCs).
Apparel Retailers: A clothing brand will stock and promote heavy winter wear
in New England but lightweight summer clothing in Florida.
Home Services: A lawn care company targets suburban and rural areas, while
a window cleaning service might focus on urban apartment complexes.
 Types Market segmentation
Demographic segmentation is the process of dividing a market into distinct groups
based on shared characteristics such as age, gender, income, education, and family
size. By using demographic information to understand their customers better,
companies can create marketing campaigns that are specifically designed to reach and
engage the desired demographic groups. Demographic segmentation provides
companies with a deeper understanding of their existing customers and prospects and
the unique challenges they face. This deeper understanding can support marketing and
product development by offering products and services that are relevant to the
specific needs and preferences of different customer groups.
 Demographic segmentation
Age:
Concept: Different age groups often have distinct needs, interests, purchasing power,
and media consumption habits.
Examples:
Infants/Toddlers: Products like diapers, baby food, toys
Children: Toys, educational games, specific clothing brands.
Teenagers (Gen Z): Fashion, social media apps, gaming, fast food, often influenced
by trends.
 Demographic segmentation
Gender:
Concept: Men and women (and non-binary individuals) often have different
needs, preferences, and consumption patterns, particularly for certain product
categories.
Examples:
• Personal Care: Skincare, cosmetics, fragrances, shaving products.
• Apparel: Clothing lines, shoes, accessories.
 Types Market segmentation
Behavioural segmentation uses rich first-party information (i.e. information from the own internal
systems) to show how one’s customers interact with the business and to help one engage with them more
effectively. Typically, behavioural segmentation projects take into account a range of factors, including
your customers’ purchasing and spending habits. This kind of customer segmentation considers how
much, how often, and when customers make their purchases, and through which channels. In doing so, it
allows you to gain a far greater understanding of customers’ wants and needs, and to target them with the
right products, promotions and communications at the right time – via their preferred communications
channel as part of an omnichannel communications strategy. As well as supporting more effective,
personalised marketing and unlocking new cross- and up-selling opportunities, behavioural segmentation
projects can help you to recognise long-time and repeat customers, and to reward them for their loyalty.
One can also identify customers who are behind with their payments, or those who could benefit from
changing to a different product or service based on their usage patterns, helping an individual fine-tune
their customer relations, communications, and business strategies.
 Types Market segmentation
Purchase Behaviour: This is one of the most common and valuable types. It
segments customers based on their buying habits.
Frequency of Purchase: How often do they buy? (e.g., daily coffee drinkers
vs. occasional luxury shoppers).
Purchase Value/Spending Habits: How much do they spend? (e.g.,
high-value customers vs. bargain hunters).
Product Categories Purchased: What types of products do they buy? (e.g.,
someone who buys pet supplies vs. someone who buys electronics).
 Types Market segmentation
Occasion-Based Segmentation: This groups customers based on specific
events or times when they make a purchase or use a product.
Universal Occasions: Holidays (Diwali, Christmas, Eid), seasonal events
(summer, winter).
Recurring Personal Occasions: Birthdays, anniversaries, monthly
subscriptions, daily routines (e.g., morning coffee).
Rare Personal Occasions: Weddings, graduation, moving to a new home.
 Types Market segmentation
Benefits Sought: This segment customers based on the specific benefits,
values, or features they are looking for in a product or service.
Examples:
Someone buying toothpaste might seek: whitening, cavity protection, fresh
breath, sensitive teeth relief, and natural ingredients.
Someone buying a car might seek: fuel efficiency, safety, luxury, performance,
and off-road capability.
 Types Market segmentation
Psychographic segmentation is a technique that divides a market into groups based on
consumers’ attitudes, beliefs, and opinions towards a product, brand, or service. This type of
market segmentation is based on the principle that consumers with similar attitudes towards a
product are more likely to exhibit similar purchasing behaviours. Attitudinal
segmentation (also known as psychographic segmentation) places an emphasis on
characteristics of lifestyle, values and principles, opinions, and the types of benefits people
seek. Needs-based segmentation is a similar technique that focuses on the principle that
consumers with similar needs are more likely to have similar purchasing behaviours.
Companies use needs-based segmentation to understand the motivations and drivers behind
consumer purchasing decisions and to develop marketing strategies that meet the specific
needs of different segments of their target audience.
 Types Market segmentation
Psychographic segmentation is a powerful market segmentation strategy that divides a market
into groups based on psychological characteristics that influence consumer behaviour. Unlike
demographic or geographic segmentation, which focuses on observable traits like age or
location, psychographic segmentation delves deeper into the mindset of consumers.
Lifestyle: This refers to how people live their lives, how they spend their time, what activities
they engage in, and their daily routines.
Examples:
Active/Outdoorsy: People who enjoy hiking, camping, sports, and value health and fitness.
They might be targeted by brands selling outdoor gear, athletic wear, or healthy food options.
 Types Market segmentation
Personality Traits: These are the inherent characteristics that define a person’s
behaviour, attitudes, and emotional responses.
Examples:
Adventurous/Risk-Takers: Drawn to extreme sports, travel to exotic
locations, or innovative tech gadgets.
 Types Market segmentation
Values: These are the core beliefs and principles that guide a person's life and
decision-making. They often determine what a person considers important,
right, or desirable.
Examples:
Family-Oriented: Value products and services that enhance family life,
education, and security.
 Types Market segmentation
Status-Conscious: Motivated by prestige, luxury, and products that signal success.
Community-Minded: Prioritise giving back, supporting local businesses, or brands
with a strong social mission.
Interests and Hobbies (AIO - Activities, Interests, Opinions): What consumers
enjoy doing in their free time, their passions, and what they care about.
Examples:
Gaming enthusiasts: Targeted by gaming consoles, new game releases, and gaming
accessories.
Book lovers: Targeted by bookstores, e-readers, and literary events.
 Market Positioning
Market positioning is a marketing strategy that focuses on creating a unique and
distinct image of a brand or product in the minds of consumers, differentiating
it from competitors. It involves identifying a target audience, understanding
their needs and preferences, and then crafting a message that highlights the
product's unique value proposition. The goal is to establish a clear and positive
perception of the brand, leading to increased brand recognition, customer
loyalty, and ultimately, higher sales.
 Market Positioning
Key Concepts:
Unique Value Proposition (UVP):
This is the core of market positioning. It's the specific benefit or advantage that the product or brand
offers to customers that sets it apart from the competition.
Target Audience:
Understanding the target audience is crucial for crafting a positioning strategy that resonates with them
and their needs.
Competitive Analysis:
Analysing the competitors helps to identify opportunities to differentiate the brand and find a unique
niche.
 Market Positioning
Marketing Mix:
The 4Ps of marketing (Product, Price, Place, and Promotion) are used to communicate the
positioning message and create the desired brand image.
Benefits of Market Positioning:
Differentiation:
Positioning helps businesses stand out from the competition and create a unique identity.
Brand Awareness:
A well-defined position can lead to increased brand recognition and recall.
 Market Positioning
Customer Loyalty:
When customers see value in your brand, they are more likely to become loyal customers.
Targeted Marketing:
Positioning allows businesses to tailor their marketing efforts to specific customer segments.
Competitive Advantage:
A strong positioning strategy can give a business a significant advantage in the market.
Higher Prices:
A well-positioned brand can sometimes command higher prices for its products or services.