Identifying Market Segments and Selecting Target Markets

Chapter 10
Companies cannot connect with all customers
in large, broad, or diverse markets.
So how do they reach a market
?
They need to identify the market segments they can serve effectively.
This decision requires a keen understanding of consumer behavior and
careful strategic thinking about what makes each segment unique and
different.
In the world of social media

A company targeted a different

audience than most other social
networks, establishing itself as the
premier professional networking site
with a vision.
Identifying and uniquely satisfying the right market segments are often the
key to marketing success. LinkedIn has built an online powerhouse by
fulfilling the needs of career-minded professionals.

Linkedin is driven by three distinct customer segments:

1. job seekers who buy premium subscriptions with various special services;
2. advertisers large and small who rely on its marketing solutions unit; and,
supporting its largest and fastest-growing business,
3. corporate recruiters who buy special search tools from its talent
solutions unit.
Objectives

1. Learn how companies identify the segments that

make up a market.
2. Understand the criteria companies use to choose
the most attractive market segments.
Target Marketing
• Target marketing requires marketers to take
three major steps:
• Market segmentation: Identifying and profiling distinct
groups of buyers who differ in their needs and
preferences.
• Market targeting: Selecting one or more market
segments to enter.
• Market positioning: Establishing and communicating the
key distinctive benefit(s) of the company’s market
offering to each target.
Using Market Segmentation
• Mass marketing is losing popularity
• Micromarketing can be undertaken at four levels:
• Segment marketing
• Niche marketing
• Local marketing
• Individual marketing
Using Market Segmentation
• Three patterns of preference segments are typically identified:

1. Homogeneous preferences: When the customers have relatively the same kind of
preferences in terms of their needs and wants, the market shows no natural segments.

2. Diffused preferences: It is the extreme of the homogeneous preferences, here the

customer's preferences vary significantly.

3. Clustered preferences: In such scenario, there are several brands in the market that try to
fill the space and show the real differences to match the different customer's preferences.
Segmenting Consumer Markets

Bases for Segmentation • Nation or country

• State or region
• Geographic • City or metro size
• Demographic • Density
• Psychographic • Climate
• Behavioral
PRIZM by Neilsen Clatitus
• Neilsen research company have 1. education and affluence
developed geoclustering 2. Family life cycle
approach called PRIZM
(Potential rating index by Zip 3. Urbanization
Markets) 4. Race
• It has 39 factors in 5 broad 5. Mobility
categories
McDonalds divides the market into geographical units such as nation, states, country,
city, area and tweaks their menu by geographical segmentation
Segmenting Consumer Markets
• Age, race, gender
Bases for Segmentation
• Income, education
• Geographic • Family size
• Family life cycle
• Demographic
• Occupation
• Psychographic • Religion, nationality
• Behavioral • Generation
• Social class
VENUS RAZOR:
Segmentation attribute - Gender
• Gillette’s Venus razor has
become the most successful
women’s shaving line ever
holding more than 50 percent of
the global women’s shaving
market
Insight: Extensive research identified unique shaving needs for women, including shaving a surface
area 9X greater than the male face; in a wet environment and across the unique curves of the body.

Insight leading to product development

And afterwards
Brands can communicate how much to save
in each phase of lifecycle.
For a different segment maybe.
Segmenting Consumer Markets

Bases for Segmentation • Lifestyle

• Activities
• Geographic • Interests
• Demographic • Opinions
• Psychographic • Personality
• Behavioral • Core values
Because Gen Y members are often turned off by overt branding practices and “hard sell,” marketers
have tried many different approaches to reach and persuade them.
Consider these widely used experiential tactics.

1. Student ambassadors: likeminded people communication, consumer to consumer.

2. Street teams: street teams help to promote brands both big and small.
3.Cool events: Salt Art events, Coke fest, EAT fest, purple patch event, MAD school events,
IAM KARACHI,
Touches consumers
activity and interest
Segmenting Consumer Markets

Bases for Segmentation • Occasions

• Benefits
• Geographic • User status
• Demographic • Usage rate
• Psychographic • Loyalty status
• Behavioral • Buyer-readiness
• Attitude
Segmenting Consumer Markets
• Multi-attribute segmentation via geoclustering combines
multiple variables to identify smaller, better-defined target
groups
• PRIZM Geoclustering system uses demographic, geographic,
lifestyle, and behavioral characteristics
Segmenting Business Markets
• Rackman and Vincentis proposed a segmentation scheme
that classifies business buyers into three groups:
• Price-oriented customers: best served via transactional selling
• Solution-oriented customers: best served by means of consultative
selling
• Strategic-value customers: best served by means of enterprise
selling
Crafting brand positioning
Chapter 11
Developing and Communicating a Positioning
Strategy

• Act of designing company’s offerings and image to occupy a

distinctive place in minds of target market
• Result of positioning is successful creation of customer-focusted value
proposition
Point of Difference (POD)
• Attributes and benefits that consumers strongly associate with a
brand, positively evaluate, and believe that they could not find to the
same extent with a competitive brand.
• Apple (design), Nike (Performance), Lexus (quality)
Point of Parity
• Association that are not necessarily unique to the brand but may in
fact be shared with other brands.
• Category point of parity: association which are essential to a credible offering
within certain product category-necessary but not sufficient
• Competitive point of parity: associations that negate competitor’s point of
difference (Dettol vs. Salvon)
Choosing PODs
• Desirable
• Firm has capabilities to deliver that
• Level of point-of-differences.
• Brand attributes
• Brand benefits
• Brand values
Desirability Criteria of PODs
• Relevance
• Target customer must find PODs personally relevant and important
• Distinctiveness
• Must be distinctive and superior
• Believability
• Credible and believable
• Brand must offer a compelling reason for choosing it over other options
Differentiation Strategies
• Personnel Differentiation
• Channel Differentiation
• Image Differentiation
Strategies introduction Growth Maturity Decline
Product Offer a basic Offer product Diversify brand Phase out
product extension, and items weak products
service, warranty models

Price Charge cost- Price to Match with Cut price

plus penetrate competitors
market
Distribution Build selective Build intense More intensive Go selective,
distribution distribution distribution phase out
unprofitable
outlets
Advertising Build product Build awareness Stress brand Reduce to level
awareness and interest in differences and needed to
among early mass market benefits retain hard-
adopters core loyal
Sales Use heavy sales Reduce to take Increase to Reduce to
Promotion promotion to advantage of encourage minimum level
entice trial heavy consumer brand
demand switching
Perceptual mapping
Brand Mantras
THE END