A write up about

Market Segmentation, Targeting and

Positioning for Market Advantage

In partial fulfilment
Of the requirements
In Principles of Marketing

Submitted by Group 3:

Market Segmentation

Market segmentation is a crucial marketing strategy. Its aim is to identify and

delineate market segments or "sets of buyers" which would then become targets for the
company's marketing plans. The advantage to marketing management is that this
technique divides total demand into relatively homogeneous segments which are
identified by some common characteristics. These characteristics are relevant in
explaining and in predicting the response of consumers, in a given segment, to
marketing stimuli.

Market Segmentation can be defined as the process of breaking down all consumers
into groups of potential buyers with similar characteristics or grouping consumers by
some criteria, such that those within a group will respond similarly to a marketing action
and those in a different group will respond differently.

Levels of Market Segmentation

Market segmentation represents an effort to increase a companys targeting
precision. It can be carried out at four levels: mass, segment, niche and micromarketing.

In mass marketing, the seller engages in the mass production, mass distribution,
and mass promotion of one product for all buyers. Henry Ford epitomized this marketing
strategy when he offered the Model-T Ford to all buyers; they could have the car in any
color as long as it is black. Coca-Cola also practiced mass marketing for many years
when it sold only one size Coke in a 6.5-ounce bottle.

A market segment consists of a large identifiable group within a market. A company

that practices segment marketing recognizes that buyers differ in their wants, purchasing
power, geographical locations, buying attitudes, and buying habits. At the same time,
though, the company is not willing to customize its offer/communication bundle to each

individual customer. The company instead tries to isolate some broad segments that
make up a market. For example, an auto company may identify four broad segments: car
buyers seeking basic transportation, those seeking high performance, those seeking
luxury, and those seeking safety.

Segment marketing offers several benefits over mass marketing. The company can
create a more fine-tuned product/service offer and price it appropriately for the target
audience. The choice of distribution channels and communications channels becomes
much easier. And the company may face fewer competitors if fewer competitors are
focusing on this market segment.

Market segments are normally large identifiable groups within a marketfor

example, nonsmokers, occasional smokers, regular smokers, and heavy smokers. A
niche is a more narrowly defined group, typically a small market whose needs are not
being well served. Marketers usually identify niches by dividing a segment into
subsegments or by defining a group with a distinctive set of traits who may seek a
special combination of benefits. For example, the sema, and heavy smokers with
emphysema who are overweight.

Micromarketing consists of Local marketing and Individual marketing. In local

marketing, target marketing is increasingly taking on the character of regional and local
marketing, with marketing programs being tailored to the needs and wants of local
customer groups (trading areas, neighborhoods, even individual stores). Thus Citibank
provides different mixes of banking services in its branches depending on the banks
neighborhood demographics. And Kraft helps supermarket chains identify the cheese
assortment and shelf positioning that will optimize cheese sales in low-income, middleincome, and high-income stores, and in different ethnic communities. In comparison,
Individual marketing, the ultimate level of segmentation leads to segments of one,
customized marketing, or one-to-one marketing. The prevalence of mass marketing

has obscured the fact that for centuries consumers were served as individuals: The
clothier tailor-made the suit, the cobbler designed shoes for the individual, and so on.
And much business-to-business marketing today is customized, in that a manufacturer
will customize the offer, logistics, and financial terms for each major account. It is the
new technologiesspecifically computers, databases, robotic production, and instant
communication media such as e-mail and faxthat are permitting companies to consider
a return to customized marketing, or what is called mass customization. Mass
customization is the ability to prepare on a mass basis individually designed products
and communications to meet each customers requirements.

Bases for segmenting consumer markets

There are 5 bases in segmenting consumer markets namely Geography, Demographics,

Psychographics

Geography

Where are our customers located, and how can we reach them? What products do
they buy based on their locations?

Commonly Characterized by: Region, Market size, Market density andClimate

Ikea discovered that its Japanese customers live in small spaces. In response, its
store displays suggest ways for customers to fit IKEA products into the cramped spaces
of typical Japanese homes

Demographic

How do the ages, races, and ethnic backgrounds of our customers affect what they
buy?

Family life cycle

Race/Ethnicity

Kraft foods and Procter & Gamble are showing interest in Asian Americans due to
the growth of Asian supermarket chains

Income

Lexus has travelled the US asking wealthy customers what they want, and is
developing several new cars costing over $70,000 to appeal to this group

Gender

In the new car market, women are increasingly making buying decision, and car
makers are starting to cater for them. Ford offers eye shadow and nail polish
complementing the color of its cars

Age

(newborns, infants, young children, tweens, teens, Generation X, Generation Y, Baby

boomers, Golden Generation or Depression Generation)

Tweens (9-12) desire to be kids but also want the fun of being teenager
Baby boomers refuse to believe that theyre aging, so marketers should avoid
suggesting it

Psychographics

What do our customers think about and value? How do they live their lives?

Considers Personality, Motives, Lifestyle and Geodemographics

Benefits

Is the process of grouping customers into market segments according to the benefits
they seek from the product.

For example PowerBar is designed for athletes and consumers looking for longlasting fuel.

Usage Rate

Divides a market by the amount of product bought or consumed

The 80/20 principle holds that 20 percent of all customers generate 80 percent of the
demand.

Bases for segmenting Business Markets

Demographic - Segmeneting markets by the type of industry, Company size, and Location.
Operating variables Segmenting markets by considering Technology, Status, and
Customer capabilities
Purchasing process segmenting markets by the way customers purchase

New buy first time buying

Straight rebuy rebuying with the same terms of last purchase

Modified rebuy rebuying with changes in the terms of purchase

Situational factors market segmentation by Urgency, Specific application, and Size of

order.

Bases for Segmenting International Markets

Geographic segmentation segmenting by Location or region

Economic factors segmenting by Population income

Political/Legal Factors segmenting Type/stability of government, Monetary regulation and

Amount of bureaucracy

Requirement for Effective Segmentation

Measurable - Size, purchasing power and profile of segment

Accessible - Can be reached and served

Substantial - Large and profitable enough to serve

Differentiable respond differently

Actionable effective programs can be developed

A good market segmentation will result in segment members that are internally
homogenous and externally heterogeneous; that is, as similar as possible within the
segment, and as different as possible between segments.

Determining Attractive market segment

Level of competition an attractive market segment in the point of view of a seller
faces a low rate of competition in a sense that only them can sell particular products and
thus can control pricing.

Substitute products markets segments can be attractive when there is only few
substitute products that can replace their products. The reason is that only them can
supply for that particular good
Power of buyer an attractive market segment has the buyer who have the ability to
purchase a product financially and physically
Power of supplier the supplier can readily and conveniently supply deficiencies on
a good

Market Targeting

Choosing one market segment for the intention of meeting the needs of that group.

Recognizes the diversity of customers and does not try to please all of them with the
same offering.

Strategies:
Undifferentiated applies to mass marketing
Differentiated applies to segment marketing
Concentrated applies to niche marketing

Market positioning
Developing a specific marketing mix to influence potential customers overall
perception of a brand , product line, or organization in general.

Position Mapping

Creating a visual description about consumer perceptions of a product on two

or more dimensions in relation to competitors.

Check-list for determining a positioning strategy

i. What position do we own? ~in the mind of the prospect.

ii. What position do we want to own?

iii. Whom must we outgun?

iv. Do we have enough money?

v. Can we stick it out? Consistency is essential

vi. Does our advertising match our position?