CHAPTER-4

MARKET-SEGEMENTATION
TARGETING
POSITIONING
Market segmentation is the process of dividing
a market of potential customers into groups, or
segments, based on different characteristics.
 Market segmentation :is a process of splitting
or dividing potential customers into certain
groups or segments sharing similar levels of
needs.
 It is creating sub-sets of a market based on
similar characteristics of consumers with similar
demands and providing them with a product to
satisfy their need in a much better way than it
could have been otherwise
Bases for Market Segmentation
• Markets may be divided into several sub-markets
on several bases.
1. Geographic Segmentation
• A market segmented into sub-markets on the
basis of geographic location is known as
Geographic Segmentation.
• Examples of such division are nations, states,
regions, provinces, districts, counties, cities or
even neighborhoods. An international firm may
divide its market on the basis of nations and
then move further down to the level of cities
and neighborhoods
• Geographic segmentation helps companies to pay
attention to geographical differences in needs and
wants and to localize the company’s products,
advertising, promotion and sales efforts to fit the
needs of individuals in the region.
• Geographic segmentation is important as there are
many factors contributing to the varying needs of
consumers across different regions of the world. What
is considered as a need in the US may be a luxury in
Singapore. What is a luxury in India may be
something redundant or useless in the UK. The
customer needs and wants, the ways and means to
satisfy them may be entirely different in one country
from those who in another.
2. Demographic Segmentation
• A market split into sub-segments on the basis of
variables such as age, gender, sex, family, income,
education, religion, culture, occupation, profession,
ethnicity etc is known as demographic segmentation.
• To make it simpler, it is the division of market on the
basis of demographics.
• This is one of the most common segmentation
practice among the marketers. Demographic
segmentation is seen almost in every industry like
automobiles, beauty products, mobile phones,
apparels, etc and is set on a premise that the
customers’ buying behavior is hugely influenced by
their demographics.
 Gender
• Gender is one of the most simple yet important bases of market segmentation. The interests,
needs and wants of males and females differ at many levels. Thus, marketers focus on different
marketing and communication strategies for both. This type of segmentation is usually seen in the
case of cosmetics, clothing, and jewellery industry, etc.
• Gender segmentation is another powerful and successful segmentation and can be seen in areas
like clothing, cosmetics, beauty products, hair styles, careers, cars, insurance and now even
education. Perfume companies target men and women separately with their various model and
brands.
 Age group
• Segmenting market according to the age group of the audience is a great strategy for personalized
marketing. Most of the products in the market are not universal to be used by all the age groups.
Hence, by segmenting the market according to the target age group, marketers create better
marketing and communication strategies and get better conversion rates.
 Income
• Income decides the purchasing power of the target audience. It is also one of the key factors to
decide whether to market the product as a need, want or a luxury. Marketers usually segment the
market into three different groups considering their income. These are
 High Income Group
 Mid Income Group
 Low Income Group
• This division also varies according to the product, its use, and the area the business is operating
in.
 Place
• The place where the target audience lives affect the buying decision the most. A person living in
mountains will have less or no demand for ice cream than the person living in a desert.
3. Behavioral Segmentation
• Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses
to a product.
 Occasion
 Benefits sought
 User status
 Usage rate
 Loyalty status
• The market is also segmented based on audience’s behavior, usage, preference, choices and
decision making. The segments are usually divided based on their knowledge of the product
and usage of the product. It is believed that the knowledge of the product and its use affects
the buying decision of an individual. The audience can be segmented into –
 Those who know about the product,
 Those who don’t know about the product,
 Ex-users,
 Potential users,
 Current Users,
 First time users, etc.
• Behavioural segmentation is based on the variables of the actual behavior of the consumer.
• For instance, some users may be classed as heavy users while others as light users. Some
may be just first time user while other are occasional users only
Occupation
• Occupation, just like income, influences the
purchase decision of the audience. A need for
an entrepreneur might be a luxury for a
government sector employee. There are even
many products which cater to an audience engaged
in a specific occupation.
• Occasion Segmentation – consumers buy
special items for occasions like birthdays
Usage
• User status divides buyers into ex-users,
potential users, first-time users, and regular
users of a product.
• Usage rate divides buyers into light,
medium, and heavy product users.
Lifestyle
• Lifestyle includes subsets like marital status,
interests, hobbies, religion, values, and other
psychographic factors which affect the decision
making of an individual.
• Loyalty status divides buyers into groups
according to their degree of loyalty.
4. Psychographic Segmentation
• Life style, social class and personality may the basis for psychographic
segmenting of markets.
• People in the same demographic group can have very different
psychographic make-ups such as:
(a) Social Class – Many companies design products or services for specific
social classes, building in features that appeal to these classes.
Wristwatches, clothing, etc. are good examples of this.
(b) Lifestyle – People’s interest in various goods is affected by their
• lifestyles and the goods they buy express those lifestyles.
• Examples of this are films, books, magazines, etc.
©Personality – Marketers also use personality variables to segment markets,
giving their products personalities that correspond to consumer
personalities.
Examples of social class segments are holdiays, hotels and air travel tickets
targeting people of a particular class.
The consumer in psychographic segmentation may have the same income
level and gender but they may have different inclinations and a unique
style of living. They may have different personalities determining their
likes and dislikes for a particular class of products.
 Requirements for Effective Segmentation
To be useful market segments must be:
 Measurable:- The size, purchasing power and profits
of the segment can be measured.
 Accessible:- The market segment can be effectively
reached and served.
 Substantial:- The market segments are large or
profitable enough to serve.
 Differentiable:- The segments are conceptually
distinguishable and respond differently to different
marketing mix elements and programs.
 Actionable:- effective programs can be designed for
attracting and serving the segments.
 Advantages and Benefits of Market Segmentation
Market segmentation also reduces the risk of an unsuccessful or ineffective marketing campaign
1. Customer needs
It is easier to understand the exact needs of the customer and target the marketing strategy at a particular
group. It is much easier and more successful to create and promote specific and customized products and
services.
2. Profit Potential
Mass marketing is a strategy of the past. Target marketing and positioning creates new potential customers
and new ideas for new products and services. Companies can create better products and hence maximize
their potential profit.
3. Growth
segmenting the markets creates further opportunities for business growth. Specific groups require specific
products.
4. Retaining Customer
It is a great way to retain customers. Firms can establish a life-long relationship with their consumers via
formulating an effective market segmenting strategy.
5. Right Target Market
The Company’s resources are utilized for producing the right product for the right customer.
6. Market Share
segmenting business and consumer markets is important to maintain existing market share and expand it. A
successful company needs to gain competitive advantage by looking closely at the specific needs of customers
and devising strategies to provide maximum benefit and value.
Market Targeting
 Is target customers that we want to serve
 Parts/groups that the company wants to serve
 Is the process of selecting the target market from the entire market
 Consists of groups of buyers to whom the company wants to satisfy
or for whom products are manufacture, price is set, promotion
efforts are made and distribution network is prepared
Market targeting involves two processes/actions. these are:
a) Evaluation of segments
b) Selection of the appropriate market groups
Evaluation of segments
 Refers measuring suitability of segments or attractiveness of the
segment its size,profitability,accessibility
 Considers its resource capacity to achieve the objectives
 Selection of the appropriate market groups
• Is the step in which the company must decide which and how
many segments to serve
• The company must decide which segments to target
The company can consider 5 patterns of target market selection .These
are:
1. Single segmented strategy
2. Selective Specialization strategy
3. Product Specialization strategy
4. Market Specialization strategy
5. Full Market Coverage strategy
Alternative Strategies/Methods of Market Targeting
1. Single Segmented Strategy
 Also called Concentrated marketing
 Is the simplest method
 The company select only a single segment as target market and offer a single
product
 Product is one ,segment is one
 A company may select only higher income segment to serve
Example: selling auto parts only to auto manufacturers
Advantage: company can gain strong knowledge of segment’s need and can achieve a
strong market position in the segment
Company can specialize its production,distribution and promotion
Demerit: competitors may invade the segment and can shake company’s position
Company has to pay high costs for change in fashion design ,habit, attitude
2. Selective Specialization
• Also called multi-segment marketing
• Is a practice of targeting more than one market segment
• Is selling the same product to different segments differently
• The company selects a number of segments
• Has the advantage of diversifying the firm’s risk
• Firms can earn more money from other segments if one/two
segments seem unattractive
• A company may concentrate on all the income groups to serve(High,
medium, low)
Example: selling auto parts to auto manufacturer and other finished
products to the end users
3.Product Specialization
 A company markets a specific product which can be sold to
several segments
 Product is one, but segments are many
 Company offers different models and varieties to meet needs
of different segments
 The major benefit is that the company can build a strong
reputation/character in the specific product area
 The risk is that product may be replaced by a new technology
Example: Many ready- made garments companies prefer this
strategy
 A microscope manufactures that sells microscopes to
university laboratories,gov’t laboratories, commercial
laboratories.
 The firm makes different microscope[es for these customers
group but does not manufacture other instruments that
laboratories use
4. Market Specialization
Is a strategy consists of serving many needs of
particular segment
Products are many but segment is one
Company provides all new products that the group
can feasibly use.
The customer group may have its budget cut
But reduced size of market
Reduce purchase capacity of the segment
Example: a firm that sells various products for a
university laboratories like, Microscope ,
blood burner , X-ray machine etc…
5. Full Market Coverage Strategy
Is the strategy, company attempts to serve all the
customer groups with all the products they need.
All the needs of all the segments are served.
Only very large company can undertake this
strategy
Large firms can cover a whole market into two
ways/methods. These are:
a) Undifferentiated Marketing
b) Differentiated Marketing
Many large companies adopted differentiated
marketing strategy
a) Undifferentiated Marketing
 Company sells the same products to all the customer groups
 Does not consider differences among buyers
 Product and marketing programme remain common for all the segments
 The firm relies on mass production, distribution, advertising
 Considerably reduce production, distribution, advertising costs.Similarly,reduce
costs result into low price and the price sensitive customers can be attracted.
 It is wrong to believe that all the segments have similar needs
Example: Pharmaceuticals companies
b)Differentiated Marketing
 Company operates in several segments and design different marketing
programmes for each of the segment
 Various groups of customers are targeted by several types of products and
marketing strategy
 Based on the notion that each group needs different products
 Mostly used by automobile companies
 Costs of doing business increase like, administrative cost, manufacturing cost,
inventory cost, promotion cost, product modification cost