MARKET SEGMENTATI

ON & TARGET MARKET

STRATEGIES

UNDERSTANDING SEGMENTATION

What is Market?

PEOPLE

BUT - not just ANYANY people, they have to have

• Willingness to buy

• Purchasing power (money)

• Authority to buy

CUSTOMER / CONSUMER: Different people with different characteristics

• Brand Preferences• Product – use behavior• Attitude & Perception

We need different marketing mix for different group of customers .

LEVEL OF DIFFERENCES

– 11 brands of Laundry Detergent– 8 brands of Hand Soap– 6 brands of Shampoos– 4 brands of liquid washing detergents,

toothpaste & coffee– 3 brands of floor cleaner & toilet tissue– 2 brands of disposable diapers &

cooking oil

PROCTER & GAMBLE (MULTINATIONAL COMPANY)

• TARGET MARKET - When the seller/marketer design particular marketing mix & market segment for specific group of people

• Two (2) ALTERNATIVE TARGET MARKET STRATEGIES:– Shotgun Approach (one program, broad

target – treat the total market as a single unit)

– Rifle Approach (Separate programs, pinpointed targets)

STEPS IN TARGET MARKET

• Market Segmentation• Market Targeting• Market Positioning

MARKET SEGMENTATION

Dividing a market in to distinct groups of buyers with different needs, characteristics, or behavior who might require separate product or marketing mixes.

MARKET SEGMENTATION

• With a large country• Many different types of people- it is too difficult to create a product that

will satisfy everybody, that is why we focus on a segment of the total market

- Success of the company depends upon the ability of the firm to segment its market effectively

• MARKET TARGETINGThe process of evaluating each market segment’s attractiveness & selecting one or more segments to enter.

• MARKET POSITIONINGFormulating competitive positioning for a product & detailed marketing mix.

BENEFITS OF MARKET SEGMENTATION

– Build strong position in specialized market segments.

– Allows firm to focus on specific needs.– Improves marketing mix for each

segment.– Allows small firm to exist & compete the

giants in the industry– Recognize the diversity of customers

E.g: Nokia: 7320, N70, 3210 Sony Erickson: K500i, T610

MARKET SEGMENTATION

LIMITATION OF MARKET SEGMENTATION

• Segmentation can be expensive in terms of production and marketing of products to only those specific groups of the market.

• Mass production offers economies of scale.• Standardisation of service offers:

increased delivery speed and efficiency.• Increase in promotion, administrative and

inventory Costs.

LEVELS OF MARKET SEGMENTATION

MASS MARKETING

SEGMENT MARKETING

NICHE MARKETING

MICRO MARKETING

No Segmentation

Complete Segmentation

MASS MARKETING

• Mass producing, Mass distributing, Mass promoting.

• Very difficult to create single product/program that appeal to diverse group of customers.

• Mass Marketing is dying.• “one size fits all”

SEGMENT MARKETING

• It recognizes that buyers differ in their needs, perceptions & buying behavior

• It helps the company to serve the market more effectively.

• Company face fewer competitors in the market if few competitors are focusing in this market.

FOR EXAMPLE:

PLASTIC MONEY: • Debit card• Credit CardHOTELING PACKAGES:• Business traveler• Family traveler• Tourist PackagesTV CHANNELS:• Geo Entertainment• Geo News

NICHE MARKETING

• It focuses on sub segments with distinctive traits that may seek a special combination of benefits.

• Niches are smaller & normally attract only one or a few competitors.

• Niching offer smaller companies an opportunity to compete with larger competitors by focusing on small markets.

• FOR EXAMPLE:

Bank Al-falah Credit Card

Blue Silver Gold(not match (less than (greater

thanSalary criteria) Rs. 60,000/-) Rs. 60,000/-)

House Wife Children Chauffer Butler

MICRO MARKETING

• Local Marketing• Individual Marketing (one-to-one

marketing, Customized Marketing)• MASS CUSTOMIZATION

It is the ability to prepare on a mass scale individually designed products to meet each customer’s requirements.E.g.: Personalized BMW“A broadcast medium to a Dialog

medium”

MARKET SEGMENTATION PROCESS

• Identify the needs & wants of customers. (Objective is to identify needs not currently being satisfied)

• Identify the different characteristics between market segments. (Identifying the characteristics that distinguish particular segments from others)

• Estimate the market potential. (Marketers need to know if a market is viable before segmentation occurs)

CONDITIONS FOR EFFECTIVE SEGMENTATION

• The characteristics used to categorise customers must be measurable and the data obtainable & actionable.

• The segment itself must be accessible with a minimum cost and waste.

• A segment must be large enough to be profitable.

A USEFUL SEGMENTATION PROCESS MUST MEET ABOVE

CONDITIONS:

BASES FOR CUSTOMER SEGMENTATION

BASIS FOR CUSTOMER SEGMENTATION:

DEMOGRAPHIC FACTORS

GEOGRAPHIC FACTORS

PSYCHOGRAPHIC FACTORS

BEHAVIORAL FACTORS:

• OCCASION

• BENEFIT ETC

ConsumerMarkets

Demographic

Geographic

Behavioral• Benefit

• Occasion

Psychographic

BASIS FOR CUSTOMER SEGMENTATION

1 Demographic factors (age, income, Gender etc.)

2 Geographic factors (cultural, regional, and national differences, Climate)

3 Psychographic factors (lifestyle, personality, Social class)

4 Behavioral factors:

• benefit segmentation

• Occasion segmentation

• Usage rate etc

BASES FOR CUSTOMER SEGMENTATION

CONT.• GEOGRAPHIC LOCATION - based upon

where people live (historically a popular way of dividing markets)

• DEMOGRAPHIC - based upon age, gender and income level (very often used)

• PSYCHOGRAPHIC / LIFESTYLES - based on people’s personality, interest, lifestylesE.g. people who like hard rock & pop music probably prefer soft drinks rather than juices

BEHAVIORAL SEGMENTATION• OCCASION – Based on different occasion

when buyers get the idea to buy, actually make their purchase, or use the purchased itemE.g. Mother’s day, Valentine day, Eid days

• BENEFIT - based on the different benefits that consumers seek from the productE.g. people buy something because it causes a benefiti.e. Diet coke - less sugar, lose weighti.e. Extra white toothpaste - whiter teeth, better smile

GEOGRAHPIC SEGMENTATION

• The reason why we study geographic segmentation is because WHERE people live has a big effect on their consumption patterns.

• Additionally, WHERE people live in a city is also a reflection of their income level and we can make certain assumptions about their ABILITY TO SPEND based upon their address.

• This helps marketer plan store locations and the location of other services.

• CLIMATE:

winter equipment and recreation are effected by geographic location

you can sell more Air Conditioner in Hot climate areas than Northern areas of Pakistan

clothing purchases are also effected by climate/geography

DEMOGRAPHIC SEGMENTATION

• Demographic Segmentation is the most common approach to Market Segmentation

Variables are:• age• gender (male/female)• income• occupation• education• household (family - style) size

• AGE

Age is another obvious way to divide the market into segments since so many products are based upon “time of life”

• diapers for babies• toys for children• entertainment for “over 19”

• Also, people have different consumption patterns at different ages

e.g. Milk products• children and teens drink a lot of milk• adults don’t• older adults need calcium, but don’t

drink milk (they take pills)

• GENDER (MALE/FEMALE)GENDER (MALE/FEMALE)• gender is an obvious way to divide

the market into segments since so many products are gender-specific.

• clothing• medical products• sports products/services• entertainment• INCOME• Segmenting markets on the basis of

income and expenditure patternse.g. High Income class ….. Afford Lexus, BMW, 5 star hotels, Bungalow in some Posh area

• HOUSEHOLD (FAMILY - STYLE) SIZE

• Segmenting by the “stages in the family life cycle”

• There are different buying characteristics of people in each stage of the family life cyclee.g. 0-5 young children, 6-19 school children, 20-34 young adults, 35-49 younger middle-aged, 50-64 older middle-aged, 65+ seniors, 80+ SUPER seniors

MARKET COVERAGE STRATEGIES

• TARGET MARKET

A set of buyers sharing common needs or characteristics that the company decides to serve

• Target market should be compatible with organisation’s goals and images.

• Marketing opportunity presented by the segment must match the company’s resources.

MARKET COVERAGE STRATEGIES

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

Company Mix 1Company Mix 1

Company Mix 2Company Mix 2

Company Mix 3Company Mix 3

MarketMarket

A. (Aggregation) Undifferentiated Marketing

B. (Single segment) Differentiated Marketing

C. (Multiple segments) Concentrated Marketing

• UNDIFFERENTIATED MARKETING

A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.

• DIFFERENTIATED MARKETINGA market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each.

• CONCENTRATED MARKETING A market-coverage strategy in which a firm goes after a large share of one or a a few submarkets.

POSITIONING• Definition: the perception of a product or

organisation in the consumer’s mind relative to their perception of other offerings in the same category about attributes, benefits & image of brand.E.g. Mehran – economy

Honda City – Comfort Mercedes – Luxury BMW – Performance Volvo – safety

POSITIONING STRATEGIES

Against aCompetitor

Against aCompetitor

UsageOccasions

UsageOccasions

Away fromCompetitors

Away fromCompetitors

ProductAttributes

ProductAttributes

ProductClass

ProductClass

BenefitsOffered

BenefitsOffered

UsersUsers

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AA

EEDD

CCHHGG

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SELECTING A POSITION

• Positioning is the final step in the segmentation/targeting process.

• Marketers must consider various factors in deciding what position they should seek.

FACTORS OF CONSIDERATION

• Competition—look for niche marketing.

• Customers—seek product attributes.

• The company—status of current image.

• Repositioning—needs of target market changed?

• The marketing mix—must support the selected position.

COMPETITIVE ADVANTAGE

• An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices– Not copyable– Give value to the company– Find in any part of the company– Buyers perceive as valuable

• Company can differentiate its offering in following ways:

• PRODUCT DIFFERENTIATION– Features– Performance– Style and design

• SERVICES DIFFERENTIATION– Installation– Repair service– customer training service

Which hat is

unique?

•IMAGE DIFFERENTIATION– Nokia means Reliability– Motorola means quality– Sony Erickson means style & design

Image differentiation can be done by strong symbols.•PEOPLE DIFFERNETIATION

– PIA – Graceful attendants– TCS – Courteous staff– GEO – competent & knowledgeable team – Mcdonald – Professional & friendly

FEEL FREE TO ASK QUESTIONS?