7 market segmentation & market targeting

Market Segmentation & Market Targeting

4 step approach to marketing

• Segmentation

• Market Targeting

• Product Differentiation

• Product Positioning

Why do we need to segment?

• Customers are :• too numerous• too dispersed• too varied in terms of their buying habits• have varied requirements

• Market is therefore heterogeneous

• Segmentation attempts to disaggregate the total market into homogenous units

• Characteristics of the groups vary among the various groups but be uniform within individual groups.

• Also referred to as Target Marketing

• It helps the seller to:• Develop the right offer• Adjust prices• Select distribution channels• Direct the right communication for each

SEGMENTATION & TARGET MARKETING

• Segmentation symbolises a movement from mass marketing to more focused marketing….segmenting the market and targeting.

• Market Segmentation…dividing the heterogeneous market into homogenous groups, whose needs/wants could be satisfied by specific products

• Market Targeting…evaluating & deciding from amongst the various alternatives, which segment can be satisfied best by the company.

SEGMENTATION VARIABLES: Consumer markets

• Geographic…Country, City, District, climate

• Demographic…Age, gender, family size, family life cycle, Income, occupation, education level etc.

• Psychographic…Social class, life style, personality, achiever, striver, strugglers, ambitious

• Behavioral…Regular/occasional; quality/economy; convenience/speed; user/non-user/light user; loyalty status; readiness stage of buying

SEGMENTATION VARIABLES: Business markets

• Demographics…Industry types, size of company, location of company

• Operating variables…technology used, type of user (heavy/medium or light)

• Purchase approach…centralized vs decentralized, nature & type of relationship, type of purchase policies (sealed bids vs specific negotiations), service/quality or price seekers

• Situational…urgency of need, type of applications, size of order

• Personal…value systems of buyer, risk appettite, level of loyalty

ESSENTIALS FOR EFFECTIVE SEGMENTATION

• Measurable…size, purchasing power & profiles can be measured.

• Accessible…Segments can be effectively reached & served.

• Substantial…segments are large enough &/or profitable to serve.

• Differentiable…segments should have different characteristics

• Actionable…capable of developing specific programs for the segment

BENEFITS OF SEGMENTATION

• Enables marketer to understand the market characteristics better

• Company can develop a more focused strategy to satisfy customer needs/wants more efficiently

• Leads to better utilization of scarce resources

• Enables company to develop customized products

• Distinguishes between potential & profitable segments

• Assessment of response enables firm to develop suitable marketing mix

“Dividing markets to conquer them”

MARKET TARGETING

• Market segmentation reveals the firms market segment opportunities. The firm now has to decide /evaluate the various segments and decide how many and which ones to target.

• Parameters for evaluation– Segment size & growth potential– Segment structural attractiveness– Company objectives & resources

• The company may enter only segments in which it can offer superior value and gain advantages over competitors

Target Marketing strategies

Undifferentiated(mass marketing)

Differentiated(segmented)

Concentrated(niche)

Micromarketing(individual)

Targeting broadly Targeting narrowly