Lesson 23 market segmentation

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  • 1. Marketing Management Unit 2 Scanning Marketing Opportunities Chapter 8 - Market Segmentation Lesson 23 - Market Segmentation Process Learning Outcomes: Define the three steps of target marketing: market segmentation, target marketing, and market positioning List and discuss the major bases for segmenting consumer and business markets Explain how companies identify attractive market segments and choose a target marketing strategy Discuss how companies position their products for maximum competitive advantage in the marketplace Determine how a firm chooses and communicates an effective position in the market Determine the major differentiating attributes available to firms Describe the marketing strategies that are applied at each stage of the product life cycle Describe the marketing strategies that are applied at each stage of the market’s evolutionIntroduction:Each parent of yours would like the teachers to give personal attention to their wards. This is prac-tically not possible. If all the children are asked to sit in the same class with various subjects. Tofacilitate this the class is further divided in according to the subjects. On the same philosophy , as thebusiness or the organization cannot meet the needs of each and every individual in the market themarket is divided in to meaningful, relatively similar and identifiable groups, the purpose of which is toenable the marketer to tailor marketing mixes to meet the needs of one or more specific groups.In this lesson you would be introduced to the concept of segmentation and its process in detail.The total market for a good or service consists of all the people and/or organizations that desire it,have resources to make purchases, and are willing and able to buy.Firms often use market segmen-tation—dividing the market into subsets of customers that behave similarly. The development of atarget market strategy consists of three general phases: analyzing consumer demand, targeting themarket, and developing the marketing strategy.1. The firm determines demand patterns, establishes bases of segmentation, and identifies potential market segments.2. The firm targets the market through undifferentiated marketing (mass marketing), concentrated marketing, or differentiated marketing (multiple segmentation).3. The firm then positions it’s offering relative to competitors and outlines the appropriate marketing mix. Meaningful product differentiation is essential.Market segmentation processThere are several important reasons why businesses should attempt to segment their markets care-fully. These are summarized below.Better matching of customer needs - Customer needs differ. Creating separate offers for each16.101G © Copy Right : Rai University 199
  • 2. Marketing Managementsegment makes sense and provides customers with a better solutionEnhanced profits for business - Customers have different disposable income. They are, there-fore, different in how sensitive they are to price. By segmenting markets, businesses can raiseaverage prices and subsequently enhance profitsBetter opportunities for growth - Market segmentation can build sales. For example, customerscan be encouraged to “trade-up” after being introduced to a particular product with an introductory,lower-priced productRetain more customers - Customer circumstances change, for example they grow older, formfamilies, change jobs or get promoted, change their buying patterns. By marketing products thatappeal to customers at different stages of their life (“life-cycle”), a business can retain customerswho might otherwise switch to competing products and brandsTarget marketing communications - Businesses need to deliver their marketing message to arelevant customer audience. If the target market is too broad, there is a strong risk that (1) the keycustomers are missed and (2) the cost of communicating to customers becomes too high / unprofit-able. By segmenting markets, the target customer can be reached more often and at lower costGain share of the market segment - Unless a business has a strong or leading share of a market,it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies inproduction and marketing, pressures from distributors and limited space on the shelves. Throughcareful segmentation and targeting, businesses can often achieve competitive production and mar-keting costs and become the preferred choice of customers and distributors. In other words, segmen-tation offers the opportunity for smaller firms to compete with bigger ones.200 © Copy Right : Rai University 16.101G
  • 3. Marketing Management Points to remember:16.101G © Copy Right : Rai University 201
  • 4. Marketing Management202 © Copy Right : Rai University 16.101G