Market segmentation

Market segmentation involves grouping your various customers into segments that have common
needs or will respond similarly to a marketing action. Each segment will respond to a different
marketing mix strategy, with each offering alternate growth and profit opportunities.
Some different ways you can segment your market include the following;

Demographics which focuses on the characteristics of the customer. For example age, gender,
income bracket, education, job and cultural background.

Psychographics which refers to the customer group's lifestyle. For example, their social class,
lifestyle, personality, opinions, and attitudes.

Behaviour which is based on customer behaviour. For example, online shoppers, shopping
centre customers, brand preference and prior purchases.

Geographical location such as continent, country, state, province, city or rural that the
customer group resides.
Targeting
After segmenting the market based on the different groups and classes, you will need to choose your
targets. No one strategy will suit all consumer groups, so being able to develop specific strategies for
your target markets is very important.
There are three general strategies for selecting your target markets:

Undifferentiated Targeting: This approach views the market as one group with no individual
segments, therefore using a single marketing strategy. This strategy may be useful for a business or
product with little competition where you may not need to tailor strategies for different preferences.

Concentrated Targeting: This approach focuses on selecting a particular market niche on which
marketing efforts are targeted. Your firm is focusing on a single segment so you can concentrate on
understanding the needs and wants of that particular market intimately. Small firms often benefit
from this strategy as focusing on one segment enables them to compete effectively against larger
firms.

Multi-Segment Targeting: This approach is used if you need to focus on two or more well
defined market segments and want to develop different strategies for them. Multi segment targeting
offers many benefits but can be costly as it involves greater input from management, increased
market research and increased promotional strategies.
Prior to selecting a particular targeting strategy, you should perform a cost benefit analysis between
all available strategies and determine which will suit your situation best.
Positioning
Positioning is developing a product and brand image in the minds of consumers. It can also include
improving a customer's perception about the experience they will have if they choose to purchase your
product or service. The business can positively influence the perceptions of its chosen customer base
through strategic promotional activities and by carefully defining your business' marketing mix.
Effective positioning involves a good understanding of competing products and the benefits that are
sought by your target market. It also requires you to identify a differential advantage with which it will
deliver the required benefits to the market effectively against the competition. Business should aim to
define themselves in the eyes of their customers in regards to their competition.

What is STP ?
STP or segmentation targeting positioning is a marketing tool with the help of which
marketeers differentiate, attract, retain and grow customer base for their respective
products.

What is segmentation?

Segmentation is the procedure that an organisation goes through to segregate the market
into different groups according to the different characteristics which might need different
products. The Marketer, groups various people into segments on the basis of
similar characteristics, tastes, perception etc. so that they will have a similar view/response
to a particular product launched specifically for each segment.
The subdividing of a market into homogenous (or similar) subsets of customers, where
any subset may conceivably be selected as a target market to be reached with a distinct
marketing mix

Market segmentation is a two-step process of: naming broad product markets, and
segmenting those markets in order to select target markets. Most segmentation efforts fail
because inexperienced marketers attempt to find one or two demographic characteristics to
segment a mass market. Generally, customer needs and behaviours do not fit nicely into
one or two demographic characteristics. This section of the report will outline Best Practices
related to segmenting our various product markets.
Defining Generic and Product Markets
A market is a group of potential customers who have similar needs and are willing to
purchase goods or services to satisfy those needs. Good marketers focus on the customer
and develop marketing mixes for very specific target markets. On the other hand, poor
marketers focus on their products when defining markets, leading to missed opportunities
and questionable customer satisfaction. The point here is that a market is external to an
organization; it doesnt make sense to segment potential markets based on the features
contained in our products or services.

When narrowing down the mass market, it is helpful to think of two basic types of markets:
generic markets and product markets. A generic market is a market of customers with
generally similar needs, which organizations satisfy in a variety of ways. An example of a
generic market would be the transportation market for a city; buses, trains, cars, bicycles,
and walking, are all methods of getting around town.
Contrastingly, a product market is a market of customers with very similar needs. An
example of a product market would be for laptop computers, where customers have the
choice between products from Fujitsu, Dell, Apple, Lenovo, HP etc.
When evaluating potential market opportunities, we look for a definition that is broader than
our firms current product market, but not so broad that our firm cannot handle the demand
if it were generated. Work to establish a slightly broader definition for our current product
markets.
When defining our product market, there are four important aspects:
1.

What - Product Type

2.

To Meet Customer Needs

3.

Who - Customer Segments

4.

Where - Geographic Region

An example of a product market might be Financial Consulting services in Western parts of

India, where once we have defined our product markets, we are ready to continue the
segmentation process to identify potential target markets.
Understand Common Market Segment Dimensions
There are common market segment dimensions for consumer and B2B markets. Following
are two lists containing sample dimensions that can be used to slice and dice our consumer
or B2B product markets. High importance is to be given to the allocating criteria and the
weight preferences, as these parameters will form the basis for defining our target markets.
* Note: the following lists are meant to provide examples that will stimulate our thinking of
applicable dimension. There are thousands of variables that could be used for this exercise,
so

be

sure

to

carefully

B2C Segmentation Criteria

Demographic:

Age

Income

Marital Status

select

the

right

dimensions

for

our

market.

Education

Family Size

Gender

Geographic Location

Social Status

Occupation

Psychographic:

Brand Preferences

Price Sensitivity

Conservative/Liberal

Enviro-Friendly

Hobbies

Lifestyle

Information Sources

Service Preferences

Buy Based on Trends

Spontaneity

Influenced by Peers

Relationship Importance

Behavioural:

Purchase History

Where They Shop

Type of Store Preferences

Association Memberships

Internet Usage

Impulsiveness

Environmental:

Country of Residence

Political Climate

Currency

Payment Methods

Shipping & Receiving

Languages Spoken

B2B Segmentation Criteria

Demographic:

Annual Revenue

# Employees

Industry

# Locations

Years in Business

Markets Served

Products/Services

Job Title

Level of Experience/Seniority

Psychographic:

Resistance to Change

Diversification Oriented

Open Minded/Rigid

Decision Making Process

Early Adopter/Follower

Growth Oriented/Static

Technology Sophistication

Professionalism

Require Referrals

Awareness of Competitors

Risk Aversion

Loyalty

Market Focused/Product Focused

Behavioral:

Website Visits

Responses to Marketing

Purchasing Methods

Association Memberships

Internet Usage

Social Media Groups

Collateral Views/Downloads

Environmental:

Technology Landscape

Purchasing Power

Management Practices

Purchasing Process

Business Culture
Differences in B2B and B2C markets can be understood from the diagram give below:Group Customers into Homogeneous Micro Segments
In this stage of the segmentation process, our goal is the find customers who have similar
needs that will respond to a marketing mix in a predictable manner.
Following are 4 criteria that strong market segments have in common:
1.

Homogeneous - customers in a market segment should be very similar in both their

segment dimensions and their likely response to a marketing mix.

2.

Heterogeneous - customers in different market segments should be as divergent as

possible with other segments.

3.

Economic Upside - the segment needs to be large enough, or predicted to grow

sufficiently, to be profitable.

4.

Operational - the segment dimensions should be helpful for understanding &

identifying customers and making decisions regarding the marketing mix.

It is essential that market segments are operational. The whole point of segmenting is to
assist with better targeting, positioning, and decision-making; be sure that our segment
dimensions are extremely relevant.
Once we have established distinct market segments based on various dimensions, we are
ready to start targeting our potential customers. The next section of the report provides
advice pertaining the effective target marketing techniques.

TARGETING
Targeting evaluates the attractiveness of each segment of its buying power, size, growth of
the market, competitiveness etc. Defending a target market requires market segmentation,
the process of pulling apart the entire market as a whole and separating it into
manageable, disparate units based on demographics. We then choose or come up with a
particular strategy or a product itself for each targeted segment.
Target marketing makes the promotion, pricing and distribution of the products or services
in a particular segment. Target marketing provides a focus to all marketing activities.
Market targeting means to choose ones target market.

PROCESS OF CHOOSING TARGET MARKET:

-

We
must
make
sure
that
target
market
is
not
synonymous
to
segmentation. Segmentation is just the first step of the target market.Target market follows
different basis of segmentation. We must view each segment as a distinct marketing
opportunity and continuously evaluate the worth of each segment (sales/profit potential).
Estimating whether the segment is:
Distinguishable.
Measurable
Sizable.
Accessible.
Growing.
Profitable
Compatible with the firms resources.
Checking out if the firm has the differential advantage
Distinctive capability for serving the selected segments.

At the end choose those segments which the most appropriate for the company.

DECISIONS INVOLVED IN TARGETING STRATEGY INCLUDE

which segments to targeting.
how many products to offer.
which products to offer in which segments.
After evaluating different segments, the company can consider five patterns of target
market selection. They are:-

Single Segment concentration: We have brands in the market which concentrate only on
one segment. For example, Zodiac brand concentrates on formal wear for executives and
professionals. Farm Equipment Division of M&M concentrates on tractors.
Through concentrated marketing, the firm gains a strong knowledge of the segment
needs and achieves a strong market presence. But, a particular market's growth can
deteriorate or a competitor may invade the segment. For example, when Digital camera
technology took off, Kodak's market share started to fall gradually and they could not regain
their dominance as new competitors like Sony and Nikon had arrived.
1.
Selective Specialization: A firm selects the number of segments, each objectively
attractive and appropriate. There may be little or no synergy among them but each
promises to be a money-maker. For example, Cadbury's advertising targets audience of a
wide range with one select ad for each segment.
2.
Product Specialization: A microscope manufacturer makes different microscopes
for different customer groups such as University, Govt., Hospitals and commercial
laboratories and builds a strong reputation in that product area. The risk is that the product
may be replaced by newer technologies.

3.
Market Specialization: A firm gains strong reputation in serving a customer group
and becomes a channel for additional products the customer group can use. For example,
ITC first concentrated only on tobacco related products, and later they moved into the field
of FMCG and IT services. The downside is that the customer group suffers budget cuts or
shrink in size.
4.
Full Market Coverage: The firm attempts to all customer groups will all the
products that might be needed. Only very less firms like Microsoft(Software), General
Motors(Vehicle), Dell(Electronics) etc. can undertake a full market coverage strategy.
They can cover the whole market via Undifferentiated Marketing, where the firm
ignores segment differences and Differentiated marketing, where the firm offers different
products for different segment.
POSITIONING
Positioning has come to mean the process by which marketers try to create an image or
identity or value in the minds of their target market for its product, brand, or organization.
Positioning involves on affecting the target. The example can be Apple Computer has chosen
itself as user-friendly computers. Thus, Apple advertising itself as a computer for nongigs.
Positioning of a product is a sum of the attributes which are normally described by the
customers. Describe its standing, target market, quality, strengths, weaknesses, prices and
any other values the product represents.

There are three types of positioning concept:

Functional position
Solve problems.
Provide benefits to customers.
Get favourable perception by investors (stock profile) and lenders.
Symbolic positions
Self-image enhancement.
Ego identification.
Belongingness and social meaningfulness.
Affective fulfilment.
Experiential positions
Provide sensory stimulation.
Provide cognitive stimulation
Approaches of positioning- the main approaches to positioning are:

Customer benefit approach- involves putting the brand behind the competitors. It can be a
single product which can solve many problems e.g. Procter & Gambles Head & shoulder
shampoo functions as anti-dandruff and anti-hair fall shampoo.

The price-quality approach- some brands have higher price to cover the cost of the
product and to give the customer message that this product is on a high level and quality
example can be RADO watch 1,323

The use or application approach.- For example: MUSIC EDITION mobile phone.
Samsung scg-r470

The product user approach in here the brand identify the target market for which
product will be position.

The product class approach.

The cultural symbol approach. - It is based on showing the cultural symbol which helps
stand out from other competitors. The example of this can be the MALBORO brand which
shows the cowboy image

The competitor approach.

To effectively understand repositioning, it is important to understand how ones brand
and those of competitors are perceived. This let identify how products are perceived by the
consumers. After that the company can attempt to move the brand in more desirable
directions by promoting other, certain points.
Segmentation, targeting and positioning are closely interrelated with each other.