MARKET SEGMENTATION & TARGET MARKET STRATEGIES

UNDERSTANDING SEGMENTATION

What is Market?

PEOPLE
BUT - not just ANY 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

LEVEL OF DIFFERENCES

We need different marketing mix for different group of customers .

PROCTER & GAMBLE (MULTINATIONAL COMPANY) 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

 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 TARGETING The process of evaluating each market segments attractiveness & selecting one or more segments to enter. MARKET POSITIONING Formulating 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
No Segmentation

SEGMENT MARKETING NICHE MARKETING MICRO MARKETING

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 Card HOTELING PACKAGES: Business traveler Family traveler Tourist Packages TV 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 (not match (less than Salary criteria) Rs. 60,000/-)

Gold (greater than 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 customers 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
Psychographic Demographic

GEOGRAPHIC FACTORS BEHAVIORAL FACTORS: OCCASION BENEFIT ETC PSYCHOGRAPHIC FACTORS

Occasion

Consumer Geographic Markets

Behavioral

Benefit

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

BASIS FOR CUSTOMER SEGMENTATION

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 peoples personality, interest, lifestyles E.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 item E.g. Mothers day, Valentine day, Eid days BENEFIT - based on the different benefits that consumers seek from the product E.g. people buy something because it causes a benefit i.e. Diet coke - less sugar, lose weight i.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 dont older adults need calcium, but dont drink milk (they take pills)
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 patterns e.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 cycle e.g. 0-5 young children, 6-19 school children,
20-34 young adults, 35-49 younger middleaged, 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 organisations goals and images. Marketing opportunity presented by the segment must match the companys resources.

MARKET COVERAGE STRATEGIES

Company Marketing Mix Market

A. (Aggregation) Undifferentiated Marketing

Company Mix 1 Company Mix 2 Company Mix 3

Segment 1 Segment 2 Segment 3

B. (Single segment) Differentiated Marketing

Company Marketing Mix

Segment 1 Segment 2

Segment 3
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 MARKETING A 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 consumers 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
Product Class
Product Attributes

Away from Competitors

G H C

Benefits Offered

Against a Competitor

D E B F

Usage Occasions

Users

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
Competitionlook for niche marketing. Customersseek product attributes. The companystatus of current image. Repositioningneeds of target market changed? The marketing mixmust 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 Installation Repair service customer training service
Which hat is unique?

SERVICES DIFFERENTIATION

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?