Chapter 3

Market Segmentation

• Prepared by :
Hiren Kodiyatar (10)
Parfez Virani (34)
 Chapter Outline
• What Is Market Segmentation?
• Bases for Segmentation
• Criteria for Effective Targeting of
Segments
• Implementing Segmentation Strategies
Market Segmentation
The process of dividing a
potential market into
distinct subsets of
consumers and selecting
one or more segments as
a target market to be
reached with a distinct
marketing mix.
 Three Phases of
Marketing Strategy
Phase 3
Product/Brand Positioning

Phase 2
Target Market and Marketing Mix Selection

Phase 1
Market Segmentation
 MARKET SEGMENTATION
=
• Dividing market into segments, each of
which behaves differently vis-à-vis
your product
• Selecting certain segment(s)
• Developing one marketing plan for
each segment
• Thinking small(er)
Market segmentation
aggregating consumers into groups that:

1. Have common needs and

2. Will respond similarly to marketing
action.

The groups that result from the

market segmentation process are
called market segments.
Ryka produces
sports shoes
that meet the
special needs
of women’s
feet.
 Bases for Segmentation
Geography
Geography

Bases
Bases Demographics
Demographics
Used
Used to
to
Segment
Segment Psychographics
Psychographics
Consumer
Consumer
Markets
Markets Benefits
Benefits Sought
Sought

Behavioral
Behavioral
 Geographic
Segmentation
• The division of a total potential market into smaller subgroups
on the basis of geographic variables (e.g., region, state, or city)

• Market size

• Market density : TV Companies

• Climate: woollen clothes

• City
 Demographic
Segmentation
• Age: Cartoon Network; MTV; News Channels
• Gender: Cosmetics & After Shave
• Income: Economical & Luxury goods
• Ethnic background: Food
• Family Life Cycle: Life Insurance Companies
• Generation: old , young
• Education: student , graduate , masters
• Occupation
 Web sites for Singles
Looking for a Match

Match.com targets all The Right Stuff

singles targets only Ivy
League graduates
 Psychological
Segmentation
• Motivations
• Personality
• Perceptions
• Learning
• Attitudes Harley-Davidson Video
Two High-End Watches for Different
Psychological Segments
 Psychographic
Segmentation
• Psychographic segments market in terms of
shared attitudes, interests, and opinions
• Segments include demographic information
such as age and income, but also includes
richer descriptions
• Some organizations develop their own
psychographic segments for their
consumers, but others utilize national
systems (VALS by SRI International)
 Opinions
and Attitudes
ADBUSTERS
Web site is
targeted to
consumers
with a certain
attitude
weblink
toward
advertisers
 Sociocultural
Segmentation
• Family Life Cycle
• Social Class
• Culture, Subculture, and Cross-Culture
 Family Life Cycle
Advertising
Video cameras
are often
purchased by
young couples
with children.
 Target
reaches out to
the Latino
market.
 Use-Related
Segmentation
• Rate of Usage
– Heavy vs. Light
• Awareness Status
– Aware vs. Unaware
• Brand Loyalty
– Brand Loyal vs. Brand Switchers
 Usage-Situation
Segmentation
• Segmenting on the basis of special occasions
or situations
• Example Statements:
– Whenever our daughter gets a raise, we always
take her out to dinner.
– When I’m away on business, I try to stay at a
suites hotel.
– I always buy my wife flowers on Valentine’s Day.
 Benefit Segmentation
• The process of grouping customers
into market segments according to
the benefits they seek
from the product .
• Maruti Esteem, Honda City
 Band-aid
offers “flex”
as a
benefit to
consumers.
 Hybrid Segmentation
Approaches
• Psychographic-Demographic Profiles
• Geodemographic Segmentation
• SRI Consulting’s VALS
 VALS Framework
•PRINCIPLE ORIENTED:
•Fulfilled: Mature, Well Educated, Informed,
Respectful but Open minded
•Believers: Conservative, Conventional, follow
established rules
•STATUS ORIENTED:
•Achievers:Committed to family and Work,
Image is very Important
•Strivers: Unsure of themselves, Money is a
measure of success
•ACTION ORIENTED:
•Experiencers: Young, Vital, Enthusiastic,
rebellions
•Makers: Practical, Suspicious of new ideas,
value working with their hands
 Criteria for Effective
Targeting of Market
Segments
• Identification
• Sufficiency
• Stability
• Accessibility
 Implementing
Segmentation Strategies

• Undifferentiated Segmentation Strategies

• Differentiated Segmentation Strategies
• Concentrated Segmentation Strategies
• Customized Segmentation Strategies
 Undifferentiated
segmentation

• Appeals to a broad spectrum of people

• Efficient due to economies of scale
• Effective when most consumers have
similar needs
• Example: Big Bazaar
 Differentiated
Segmentation
• Develops one or more products for each of
several customer groups with different product
needs
• Appropriate when consumers are choosing
among well-known brands with distinctive
images and it is possible to identify one or
more segments with distinct needs for different
types of products
• Example:Lakme, Ponds, Fair & Lovely
 Concentrated
segmentation
• Entails focusing efforts on offering one
or more products to a single segment
• Useful for smaller firms that do not
have the resources to serve all markets
• Example:HMT Watches
 Customized
segmentation
• Segments are so precisely defined that
products are offered to exactly meet the
needs of each individual
– Example: Xbox360
• Mass customization is a related approach in
which a company modifies a basic good to
meet the needs of an individual
– Example: Dell Computers
 Target Market

Group of people or organizations for which an

organization designs, implements, and
maintains a marketing mix intended to meet
the needs of that group, resulting in mutually
satisfying exchanges.
 Strategies for Selecting
Target Markets

Undifferentiated
Undifferentiated Concentrated
Concentrated Multisegment
Multisegment
Strategy
Strategy Strategy
Strategy Strategy
Strategy
 Undifferentiated
Targeting Strategy
Advantages:
 Potential savings on
production and marketing
costs

Disadvantages:
Disadvantages
 Company more susceptible
to competition
 Concentrated
Targeting Strategy
Advantages:
Advantages
 Concentration of resources
 Meets narrowly defined segment
 Small firms can compete
 Strong positioning

Disadvantages:
Disadvantages
 Segments too small, or changing
 Large competitors may market to
niche segment
 Multisegment
Targeting Strategy
Advantages:
Advantages
 Greater financial success
 Economies of scale

Disadvantages:
Disadvantages
 High costs
 Cannibalization
 Positioning
Developing a specific marketing
mix to influence potential
customers’ overall perception of
a brand, product line, or
organization in general.
 Position
The place a product, brand, or
group of products occupies in
consumers’ minds relative to
competing offerings.
 Toothpaste Example
• Pepsodent Tooth Decay
• Close-Up Freshness Appeal
• Aqua fresh Triple Benefit Teeth
• Colgate CDC Strong Teeth
• Colgate Jr Kids Brand with fluoride
 POSITIONING THE PRODUCT
• Choosing a Positioning Strategy:
– Identifying possible competitive advantages
• Products, services, channels, people or image can be
sources of differentiation.
– Choosing the right competitive advantage
• How many differences to promote?
– Unique selling proposition
– Choose more than one if others share a claim to be best:
• Which differences to promote?
- Some: Important, Distinctive, Superior, Affordable, visible to
buyers.
 POSITIONING THE PRODUCT
• Choosing a Positioning Strategy:
– Developing a positioning statement
• Positioning statements summarize the
company or brand positioning
• EXAMPLE: To (target segment and need) our
(brand) is (concept) that (point-of-
difference).
– Communicating the chosen position
 Steps to Choosing and Implementing
a Positioning Strategy

• Step 1. Identifying a set of possible competitive advantages:

– Competitive Differentiation.
• Step 2. Selecting the right competitive advantage.
• Step 3. Effectively communicating and delivering the chosen position to
the market.
• Step 4: Evaluate market response and reposition if necessary
 1.Attribute Positioning GM: Safety

2.Benefit Positioning Maruti:Economy

3. Use Positioning PVR:Leisure Based Entertainment

4. User Positioning Bungee Jumping: Adventurous

5.Competitor Positioning IIPM:Better Than IIMs

6. Product Category IIMs: Best B School

 Repositioning

Changing consumers’
perceptions of a brand
in relation to competing
brands.