CHAPTER FOUR:
MARKET SEGMENTATION, MARKET TARGETING AND MARKET POSITIONIG
4.1. Introduction
A company that decides to operate in a broad market recognizes that it cannot appeal to all
buyers in those markets or at least not to all buyers in the same way. Buyers are too numerous,
too widely scattered and too varied in their needs and buying practices. Simply buyer may differ
in their wants, resources, geographical areas, buying attitudes and buying practices that a
company normally cannot serve all customers in that market with a single product. More over
different companies vary widely in their ability to serve different kinds of customers. Hence,
instead of competing everywhere and in an entire market, sometimes against superior
competitors, it is better for companies to identify the parts of the market that it can best serve (to
identify the market segments that it serves most effectively). To this end today many companies
are moving from mass marketing to target marketing. In target marketing sellers distinguish the
major market segments, target one or more of these segments and develop products and
marketing programs tailored to each segment. Instead of scattering their marketing effort, they
can focus on the buyers whom they have the greatest chance of satisfying.
4.2. MARKET SEGMENTATION
Market segmentation means the process of deviding the whole market for a product into several
smaller, internally homogenous groups. i.e. it is dividing a market into distinct groups of buyers
with different needs, characteristics, or behaivior who might require separate products of
marketing mixes. A company that practices market segmentation recognizes that buyers differ in
thier needs perceptions, and buying behaviors. Hence, the company tries to isolate the broad
segments that make up the market and adapts its offers to more closely match the needs of one or
more segments. The esence of segmentation is that the members of each group are similar with
respect to the factors that influence demand. Hence, sometimes the ability to segment markets
effectively is considered as a major element for company sucess.
4.2.1 Levels of Market Segmentation
Buyers have unique needs and wants; each buyer is potentially a separate market. Ideally, a seller
would design a separate marketing program for each buyer. Market segmentation can be carried
out at many different levels.
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Companies can practice
no segmentation (mass marketing),
complete segmentation (micromarketing), or
Segmenting in between (segment marketing or niche marketing) as seen in the fig. below.
Mass marketing Segment marketing Niche marketing Micro marketing
NoSegmentation Complete Segmentation
Fig. Levels of marketing segmentation
I. Mass Marketing
Companies have not always practiced target marketing. For most of the twentieth century, major
consumer product companies held fast to mass marketing.
Mass marketing is mass producing, mass distributing, and mass promoting about the same
product in the same way to all consumers.
The traditional argument for mass marketing is that it creates the largest potential market, which
leads to the lowest costs which translates into either lower prices or higher margins. However,
many factors now make mass marketing more difficult. Therefore, many companies are
retreating from mass marketing and turning to segment marketing
II. Segment Marketing
A company that practices segment marketing recognizes that buyers differ in their needs,
perceptions and buying behaviors.
Segment marketing is marketing that buyers differ in their needs, perceptions, and buying
behaviors. It offers several benefits over mass marketing.
III. Niche marketing
Market segments are normally large identifiable groups within a market. Niche marketing is
marketing that focuses on subgroups within the large identifiable groups/ segments in market. A
niche is a more narrowly defined group, usually identified by dividing a segment into sub
segments or defining a group with a distinctive set of traits who may seek a special combination
of benefits.
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Segments are fairly large and typically attract several competitors; niches are smaller and usually
attract only one or few competitors. Niche marketing offers smaller companies an opportunity to
compete by focusing their limited resources on serving niches that larger competitors may
consider unimportant or simply overlook. Niches are the norm in markets.
IV. Micromarketing
Segment and niche marketers tailor their offerings and marketing programs to meet the needs of
various market segments. They do not customize their offerings to individual customers. Thus,
they fall between the extremes of mass marketing and micromarketing.
Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of
specific individuals or locations. It includes local marketing and individual marketing.
Local Marketing involves tailoring brands and promotions to the needs and wants of local
customer group’s cities, neighborhoods, and even specific stores. It helps a company to
marketing more effectively in the face of pronounced regional and local differences in
community demographics and lifestyles.
In the extreme, micromarketing becomes individual marketing. Individual Marketing is the
practice of tailoring products and marketing programs to the needs and preferences of individual
customers.
4.2.2 Bases for Segmenting Consumers Markets
There is no a single way to segment a market. A marketer has to try different segmentation
variables, alone and in combination, to find the best way to view the market structure. There are
four commonly used bases for segmenting consumers markets. These are:
A. Geographic Segmentation: Geographic segmentation is dividing of an overall market into
homogeneous groups on the basis of population location. This is the earliest form that served a
base for segmenting markets. It considers current population location and residence (urban or
rural) and future expected shifts. Geographic segmentation is used in order to know regional
variation in customer taste and also determine and supply good appropriate to climate changes.
B. Demographic Segmentation: Demographic segmentation is dividing an overall market into
homogeneous group based upon population characteristics such as age, sex and income level. It
is now the most common approach used for market segmentation. This method uses such
variables as sex, age, income, occupation, education, household size and stage in the family life
cycle.
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C. Psychographics Segmentation: Demographic data are used to segment a market because they
are related to behavior and because they are relatively easy to gather. However, demographics
are not in themselves the causes of behavior. That means demographics are related to behavior
but they do not explain it. But if possible the desirable thing for marketers is to know the
rationale why customers buy a given product. Psychographics segmentation utilizes behavioral
profiles developed from analyses of the activities, opinions, interest and life styles of
consumers. The life-styles of potential consumers may prove important in order to determine
their preferences; life style refers to the mode of lives. Consumer’s life-styles are regarded as a
composite of their individual psychological make-ups their needs, motives perceptions and
attitudes. In addition a marketer may use personality aspects which are usually described in
terms of traits that influence behavior to divide his market or he may use values: reflection of
our needs adjusted for the realities of the world in which we live.
D. Behavioral Segmentation: Behavioral segmentation focuses on product related behavior of
customers. This focuses on such attributes as product usage rates (heavy users, medium users or
light users), the benefits derived from the product(benefit sought), attitude towards the
product(enthusiastic, positive, indifferent, negative, and hostile), buyer readiness stage(unaware,
aware, informed, interested, desirous, and intending to buy), users and non-users etc.
Characteristics of market segments
Measurable: the size, purchasing power and the characteristics of the segment can be
measured.
Substantial: the segment is large and profitable enough to serve.
Accessible: the segment can be effectively reached and served.
Differentiable: the segment is conceptually distinguishable and responds differently to
different marketing mix elements and programs.
Actionable: effective marketing programs should be formulated for attacking and serving
the segment.
4.2.3. Importance or Benefits of Market Segmentation
Market Segmentation offers the following advantages:
(1) Increase in Sales Volume: Segmentation recognizes the existence of multiple demand
curves in a market and tailors a product to each one. It presumes that the sum of the individual
demand curves is greater than a single demand curve generalized to the entire market, since the
more a product is tailored to the tastes of a particular buyer or buyer class, the higher is the
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probability of sales. If the market is properly segmented, if the buyer’s respective preference
systems are accurately defined, and if all segment are properly served, the sales volume should
be large than if the same product were offered to all buyers.
(2) Specialized Marketing: Another advantage of Market segmentation is that marketing can be
more specialized, and promotion better suited to the characteristics of the buyers. More
specialized, hence, presumably more efficient media can be used, advertising can be less general,
and personal selling can be focused on a small buyer population. This specialization may
increase marketing efficiency provided it does not bring about large diseconomies of scale.
(3) Sound Marketing Program: On the basis of market segmentation, the manufacturer can
prepare and follow a sound marketing program. It also leads to efficiency and more success in
selling.
(4)Increase in market opportunities: Through segmentation a manufacturer comes closer to a
particular group of customers; hence it becomes more responsive to the changes in the market.
A manufacturer can modify or develop a new product according to market demand very soon.
(5) Better utilization of market resources: Market segmentation provides opportunities of
better utilization of various marketing resources. It leads the firm in the long-run towards better
profitability and more profits.
(6) Other advantages: Market segmentation provides various, types of information which are
useful in marketing research, product development, evaluation of marketing activities, evaluation
of facilities of marketing and distribution etc.
4.3 MARKET TARGETING
After a market is segmented, the company must decide which and how many segments to serve.
This is what we call market selection (target marketing). A target market consists of a set of buyers
who share common needs or characteristics that the company decides to serve. In selecting
markets, it is advisable for companies to take into consideration the followings:
First, target markets should be compatible with the organization’s goals and image.
Second, the segment’s opportunity should commensurate with the company’s resource.
The segment must be profitable.
Fourth, a company ordinarily should seek a market where there are the least and
smallest competitors.
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There are five targeting strategies
1. Single Segment Concentration
Also known as concentrated marketing, single segment concentration is a strategy to direct
resources toward serving a single, big and large market segment. Volkswagen concentrates on
the small-car market. It is usually used by small (with limited resources) and new companies or
companies entering a new geographic area. The firm gains a strong knowledge of the segment’s
need. However, there is a risk that a competitor might invade the segment. For this reason, many
companies prefer to operate in more than one segment.
2. Selective specialization
It is concerned with selecting limited number of segments and developing separate marketing
programs for each market segment. It has the advantage of diversifying the firm’s risk.
3. Product specialization
It refers to designing and selling a single product to many numbers of market segments. For
example, a microscope manufacturer makes different microscopes and sells to university,
government and commercial laboratories.
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4. Market specialization
The firm sells an assortment of products to a particular segment.
5. Full market coverage
The firm attempts to serve all customer groups with all the products they might need. Only few
large firms such as General Motors (vehicle market) and Coca Cola (non-alcoholic beverage
market) can undertake a full market coverage strategy.
1.3. MARKET POSITIONING
After a company discovered different segments in the market place and targeted those segments
that it can satisfy in superior way, it should identify different means of differentiating its
offerings from competitors. Product positioning is the process of creating an image, reputation or
perception in the minds of buyers about the organization or its products relative to its
competitors (communicating a set of meaningful differences). Positioning is not what you do to a
product; it is what you do to the mind of the prospect.
Dimensions of differentiation
A. Human resource (personnel) differentiation: Through recruiting, selecting and training of
competent people, a firm can exalt its advantage in the sights of consumers. A smiling
receptionist and waiter at the door of Hotel and welcoming and communicable salesperson in
auto display room can attract customers.
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B. Product differentiation: Some products are highly standardized and others are highly
differentiated. Companies stress on consistency of a brand features, performance, durability,
reliability, style and design and reparability. Quality image is also affected by packaging,
distribution, advertising and promotion.
C. Service differentiation: Brands can be differentiated on the basis of different service
dimensions like order ease, delivery, installation, customer training, customer consulting and
maintenance and repair.
D. Image differentiation: Image is the way the public perceives the company or its products. By
using unique names or symbols, the company can differentiate its products from the competitor’s
products.
E. Channel differentiation: Companies can achieve competitive through the way they design
their distribution channels’ coverage, expertise and performance.
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