Unit 5: Market Segmentation,
Targeting & Positioning strategies
Market
Market is a grouping of customers.
• Consists all existing and potential customers(individuals,
groups, household or organizations)
Characteristics of market:
• Customers
• Needs/wants
• Purchasing power
• Willingness to spend
• Exchange relationship
• product
The concepts of market can be:
• Place concept(face to face)
• Space concept(online market)
• Customer concept(customer demand)
Types of Market
• Consumer market (consists of individuals and
household, brand, packaging, promotion)
• Industrial market (Business market, business
use, reselling or making other products)
• Institutional market(schools, colleges,
government, NGOs…)
• Global market(International market, cut-throat
competition, generally branded products direct
marketing or authorized dealers)
Market on the basis of product sold:
Product market
• Market for branded manufactured product,
legally registered to have trade mark,
example: Pepsi, coke, hulas, CG…
Generic market
• Market for non-branded products, producers
not identifiable, generally agricultural
products. Example: fruits, vegetables, poultry,
fish…
Segmentation, Targeting & Positioning
Market Segmentation
• “Market segmentation is the act of identifying
and profiling distinct groups of buyers who
differ in their need and preferences.”
- Philip Kotler
Types/ Levels of segmentation
1. Target Marketing
2. Niche Marketing
3. Local Marketing
4. Customized Marketing
1. Target marketing
• Total market viewed as heterogeneous
customer group
• Market is divided into segments having
homogenous customer
• One or more segments are selected as target
market
• Tailored marketing mix for each segment
2. Niche Marketing
• Narrowly defined group of customers
• Identified by dividing segments into sub-
segments
• Fairly small group whose need has not been
well served
• Willing to pay higher price
3. Local Marketing
• Marketing mix tailored to the need and want
of local market
• They can be localities or stores
• Example: New road in Kathmandu
4. Customized Marketing
• Market is viewed as consisting of individual
with distinct need and characteristics.
• Tailored marketing mix
• Example: Designer cloth, individually designed
house, hair stylist
Requirement for effective market
segmentation
Bases for segmenting customer market
Segmentation variables:
A. Geographic variables
– Area(country, zone, district, city)
– Topography(mountain, hill, terai)
– Population density (urban, rural)
– Age(young, teen age, middle age, old age)
B. Demographic variables
–Age(young, teen age, middle age, old age)
–Gender
–Family size
–Family life cycle
–Education
–Occupation
–Income
–Social class
–Ethnicity
–Religion
C. Psychographic variables
– Buying motive
• Rational motive
• Emotional motive
• Ego motive
– Lifestyle
• Reflected in activities, interest and opinion of people
– Personality
D. Behavioural variables(refers to customers response to
product)
– Occasion
• Regular occasion
• Special occasion
– Benefits
• Can be functional and emotional
– User status
• Regular user
• First time user
• Potential user
• Ex user
• Non user
– Loyalty status
• Hardcore, split loyal, shifting loyal, switcher
– Attitude towards product
• Enthusiastic, +ve, -ve, indifferent, hostile
Bases for segmenting organizational market
A. Geographic variables
– Location
• Local, Regional, global
– Topography
• Mountain, hill, terai
B. Demographic variables
– Types of industry(agriculture, forestry, mines,
transport, communication, finance, insurance)
– Size of customer(cottage/small, medium, large,
global)
C. Operating variables
– Technology
• Manual, mechanized, computerized, robotics
– Usage rate
• Heavy user
• Medium user
• light user
• Non-user
– Service need
• Before sale, after sale, warrantee, guarantee,
installation
D. Purchase related variables
– Purchase organization
• Centralized, decentralized
• Who operates them
– Purchase documentation
– Negotiation period
Segment Evaluation
• Segment size and growth potential
– Sales, profitability and growth rates
• Segment structural attractiveness
– Competition, substitute products, buyer and supplier
power, new entrants(Porter’s % forces)
• Company objective and resources
– Market segment needs to be consistent with their
objective
– Core competencies
– “What business do we want to be in?”
– Business that want to maintain environment friendly image
don’t easily enter into business that pollutes environment
Structural Attractiveness
Michael Porter’s Five forces model
Segment Analysis
• It involves a careful and thorough analysis of
the market segments that look attractive from
the point of view of size, growth, profit and
structure.
• Information collection of following aspects are
done:
– Estimate total demand for the product in segment
– The market share of competitors
– Relative strength of competitors
Process of Market Segmentation
Market
Survey
Segment
Identification
Segment
Profiling
Segment
Selection
Product
Positioning
Segment Selection
• Organization now need to decide which and
how many market to enter and serve:
• 5 alternative market coverage patterns:
1. Single segment coverage
2. Multi segment coverage
3. Product specialization
4. Market specialization
5. Full market coverage
Product Positioning
• Product Positioning strategy is an egffective
technique of creating sound product image in
the minds of customers.
• It is concerned with selecting the marketing mix,
which is appropriate to each market segment.
• It refers to all the activities undertaken by
marketer to create and maintain the concept of
value regarding its brand in the minds of
customers as against competitor’s brand
Types of product positioning
Product Positioning Process
A. Identification of differentiation factors(competitive
advantage)
• Product differentiation
• Feature differentiation
• Style differentiation
• Design differentiation
• Performance differentiation(durability, reliability, reparability)
• Service differentiation(aftersales)
• Personnel differentiation(dept. stores, plane…)
• Image differentiation
B. Selecting differentiating
factors(choosing the right competitive
advantage)
– Number of differentiating factors
• Should avoid confusion
• Should not under position, over position,
doubtful position
– Selection of positioning variables
• Consistent with the organization image(for low
profile organization, it is difficult to try to convince its
new product has a high quality)
• Competitor’s position and their strength(avoid
position crowding)
C. Communicating the positioning factors
(signalling the competitive advantage)
• Marketing mix for a product should support
the positioning strategy
