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07/16/14Marketing
1
Unit 5
MARKET
SEGMENTATION
07/16/14Marketing
2
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.
07/16/14Marketing
3
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.
07/16/14Marketing
4
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.
07/16/14Marketing
5
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.
07/16/14Marketing
6
Basis for Consumer Market Segmentation..
a. Geographic segmentation.
 Market divided into different geographic units, such as
nations, regions, states…etc.
 Localizing products, promotion, and sales effort .
 Seeking to cultivate untapped market
a. 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
07/16/14Marketing
7
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,
07/16/14Marketing
8
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.
07/16/14Marketing
9
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.
07/16/14Marketing
10
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.
07/16/14Marketing
11
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.
07/16/14Marketing
12
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.
07/16/14Marketing
13
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.
07/16/14Marketing
14
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.
07/16/14Marketing
15
07/16/14Marketing
16
Production Positioning.
Product positioning means:
a. Communicating a product’s 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.

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Unit 5 segmenting_and_targeting_market(2)

  • 2. 07/16/14Marketing 2 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.
  • 3. 07/16/14Marketing 3 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.
  • 4. 07/16/14Marketing 4 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.
  • 5. 07/16/14Marketing 5 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.
  • 6. 07/16/14Marketing 6 Basis for Consumer Market Segmentation.. a. Geographic segmentation.  Market divided into different geographic units, such as nations, regions, states…etc.  Localizing products, promotion, and sales effort .  Seeking to cultivate untapped market a. 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
  • 7. 07/16/14Marketing 7 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,
  • 8. 07/16/14Marketing 8 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.
  • 9. 07/16/14Marketing 9 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.
  • 10. 07/16/14Marketing 10 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.
  • 11. 07/16/14Marketing 11 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.
  • 12. 07/16/14Marketing 12 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.
  • 13. 07/16/14Marketing 13 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.
  • 14. 07/16/14Marketing 14 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.
  • 15. 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. 07/16/14Marketing 15
  • 16. 07/16/14Marketing 16 Production Positioning. Product positioning means: a. Communicating a product’s 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.