Objectives of the Chapter
• Identify the essential components of a market.
• Outline the role of market segmentation in developing a
• Describe the criteria necessary for effective segmentation.
• Explain each of the four bases for segmenting consumer
• Identify the steps in the market segmentation process.
• Discuss four basic strategies for reaching target markets.
• Summarize the types of positioning strategies.
• Explain the reasons for positioning and repositioning
• Identify and profile distinct groups of buyers who
differ in their needs and preferences.
• Select one or more markets to enter.
• For each target segment, establish and communicate the
key distinctive benefit(s) of the company’s market
offering. (Market Positioning)
Market Segmentation cannot be used in all cases. To be effective,
segmentation must meet the following basic requirements.
• Measurable: Size, purchasing power, and profiles can be
• Accessible: Can be effectively reached and served (move in
• Substantial: Must be large or profitable enough (people taller
than 10 feet not good)
• Differentiable: Two segments that react the same way are not
actually separate segments
• Actionable: Effective programs can be designed for the segment,
i.e. matches company capabilities
Market Segmentation refers to the process of
creation of small groups (segments) within a large
market to bring together consumers who have
similar requirements, needs and interests.
Dividing an overall market into homogeneous groups on
The basis of their locations
• Does not ensure that
all consumers in a location
will make the same buying
• Help in identifying some
Dividing consumer groups according to
characteristics such as gender, age, income,
occupation, education, household size, and stage in
the family life cycle.
• Social class, lifestyle, or personality characteristics
• People in same demographic segment may have
different psychographic characteristics and vice versa
Product Related Segmentation
Can group consumers in terms of:
• Benefits Sought
• Usage Rate: 80 : 20 Principle
• Brand Loyalty
involves breaking a market into segments and then
concentrating your marketing efforts on one or a
few key segments.
Strategies for reaching Target Markets are:
• Undifferentiated Marketing
• Differentiated Marketing
• Concentrated Marketing
• Focus on what is common in all buyers, appeal to
• Mass distribution, mass marketing, etc
• Often difficult to compete with focused
• Much More common in the past
• Target several segments and design separate offers
• Claim – developing a stronger position within
several segments creates more.
• total sales than undifferentiated marketing across all
• Firm goes after a large share of one or a few
segments / niches
• Attractive when resources are limited
Competitive Edge/Advantage or
Unique Selling Proposition
– Features, performance, Price, style, design
– Consistency, durability, reliability, repairability
– Speedy, convenient, or careful delivery
– Installation, repair, customer training or consultation
– Channel's coverage, expertise, and performance
– Hiring and training better people than competitors do
– May affect decision e.g. when products / services otherwise
– Requires creativity and hard work
– Image must be supported by everything the company does
Which differences to promote?
– highly valued benefit to customers
– competitors do not offer, or company can offer it in a more
– difference is superior compared to customer alternatives
to get the same benefit
– can be communicated, visible to buyers
– competitors cannot easily copy
– buyers can afford to pay the difference
– difference can be introduced profitably