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Unit 5
MARKET
SEGMENTATION
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Introduction
One of the important strategic decisions a company
has to make is regarding it target markets.
The firm has to determine which markets it wants to
serve and the specific strategies that can be applied t
market effectively to that target market.
Target market is a group of consumers at whom the
seller specifically aims its marketing efforts.
The selection of the target market is essential for the
development of an effective marketing mix.
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Designing a customer driven marketing
strategy
Market segmentation.
divide the total market into smaller segments
Market targeting.
- Select the best segment (s) to enter by evaluating the
attractiveness
Differentiation
- differentiate the market offering in the minds of target
customers.
Market positioning.
Position the market offering in the minds of target
customers.

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Basis for Consumer Market Segmentation.
Market segmentation is the process of dividing the
market into distinct groups of buyers with different
needs, characteristics, or behavior who might require
separate products or marketing mixes.

Markets consist of buyers and they differ in one or
more ways. They may differ in their wants, resources,
locations, buying attitudes and buying practices.

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Basis for Consumer Market Segmentation.
Since buyers have unique needs and wants, each
buyer is potentially a separate market. Ideally, then
a firm might design a separate marketing program
for each buyer.

There is no single way to segment a market. A
marketer has to try different segmentation
variables, either alone or in combination, to find
the best way to view the market structure.
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Basis for Consumer Market Segmentation..
a. Geographic segmentation.
Market divided into different geographic units, such as
nations, regions, statesetc.
Localizing products, promotion, and sales effort .
Seeking to cultivate untapped market

b. Demographic segmentation.
Age and family life cycle e.g. 40 yrs old just starting a
family and a 40 yrs old sending children to college.
Gender (eg: clothing, cosmetics, magazines, toiletaries)
Income (eg: luxury goods, convenience service)
Generation etc
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Market Segmentation.
c. Psychographics segmentation.
Based on social class, lifestyle, or personality
characteristics.
Lifestyle, e.g. Porsche being targeted at high achievers,
successful and those that have discerning taste.

d. Behavioral segmentation.
Based on consumer knowledge, attitude, uses or responses
to a product.
Occasion, benefit sought, user status (i.e potential user),
loyalty status, usage rate,

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Benefits of Market Segmentation.
Market segmentation is a customer oriented
philosophy and is thus consistent with the
marketing concept. First identify the needs of
the customers within a sub market then satisfy
those needs.
By tailoring marketing programs to individual
market segments, management can do a
better marketing job and make more efficient
use of marketing resources.

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Benefits of Market Segmentation.
By employing the strategy of market
segmentation, a company can design products that
really march customer demands.
By developing a strong position in specialize
market segments, small and medium sized firms
can achieve rapid growth rate in a competitive
market.

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Limitations of Market Segmentation.
Market segmentation can be an expensive
proposition both in production and marketing of
products. It is more cost effective to have one size
fits all than to produce otherwise.
Segmentation leads to higher inventory costs as
stocks of different varieties have to be kept.
Advertising costs go up because different ads may
be required for different segments.
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Market Targeting.
In evaluating market segments, firms look at the
following factors:
a. Segment size and growth.
Firms may target segments with large current sales, a high
growth rate. Smaller firms may find such segments too
competitive.
Small segments may also be attractive if it is new and
there is a potential for high growth rate.
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Market Targeting.
b. Segment attractiveness.
Strong and aggressive competitors : less attractive
The relative power of buyers : attractive factor.
powerful suppliers : less attractive. Why? Control price

c. Company objectives and resources.
Firms must ensure that the chosen segment mesh with its
long term strategies.
Attractive segments may be dismissed when assessed
from the political and social views.

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Selecting Market Segments.
a. Undifferentiated marketing.
Ignore market segment differences and go after the whole
market with one offer. The offer will focus on what is
common rather than what is different.
Designs a product and marketing program that appeals to
the largest number of buyers.
Firm uses mass production, advertising and distribution.
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Selecting Market Segments.
b. Differentiated market.
Target several segments and designs separate offers for
each.
Offering product and marketing variations.
Hoping for higher sales and stronger position
Increase cost.

c. Concentrated marketing (niche)
Use by firms with limited resources, going for a large
share of a small market.
Excellent way for new small businesses to get a foothold
against larger, more resourceful competitors. Eg:
Southwest Airlines.


Selecting Market Segments.
d. Micromarketing
refer to practice of tailoring product s and marketing
programs to the needs and wants of specific individuals and
local customer groups.

Local marketing
- tailoring brands and promotions to the needs and wants of local
customer groups. Eg: cities, neighbors.
- helps company to market more effectively.

individual marketing
- tailoring products and marketing programs to the needs and
preferences of individual customers.
- eg: custom made suit, cabinet maker for furniture.


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Production Positioning.
Product positioning means:
a. Communicating a products image relative to
competitors in the market.
b. In the mind of the customer.

Through marketing research, the position of competitors
brands are established on the basis of important
attributes used by customers in brand choice.
The firm then decides if it wants to compete directly with
another brand or fill a gap in the market where an
unfulfilled want exists.