Chapter 4Marketing Segmentation

Targeting, and positioning for competitive advantage

Prepared by:Nor Izzuddin bin Norrahman

Lecturer of management, banking & Islamic FinanceAstin College

Introduction

• Companies that sell goods and services cannot appeal to all buyers in those markets, or at least to all buyers in the same way.

• Buyers too numerous, too widely scattered, and too varied in their needs and buying practices.

Market segmentation

• It involves aggregating prospective buyers into groups that:

– Have common needs

– Respond similarly to a marketing action

• The groups that result from this procedure are known as Market Segments.

• When market segments happens, companies are being more choosy about the customers with whom they wish to build relationships.

• Companies moved away from mass marketing, and towards market segmentation and targeting.

• Instead using shotgun approach, firms are focusing on the buyers who have greater interest in the values (Rifle approach)

• Due to the increasing fragmentation from mass markets into hundreds of micromarkets, target marketing is increasingly taking form of micromarketing.

• Micromarketing is where the companies tailor their marketing programs towards the needs and wants of narrowly defined characteristics such as:– Geographic

– Demographic

– Psychographic

– Behavior segments

Steps in market segmentation, targeting an positioning

Market Segmentation

• Market consist of buyers, and buyers differ in one or more ways.

• Differ in what they wants, needs, resources, locations, and others.

• Because of that, it will create a separate market.

•So how would we identify the separate market?

Segmenting Consumer Markets

• There is NO 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.

• The major variables are:– Geographic– Demographic– Psychographic– Behavioral– Others

Geographic Segmentation

• Dividing the market into different geographical units as:– Nations

– Regions

– States

– Districts

– Towns

• It also follow the density of the population live in the place– KL vs Dungun

Demographic Segmentation

• Demography involves the statistical study of human populations. As a very general science, it can analyze any kind of dynamic living population, i.e., one that changes over time or space.

• Dividing the market into groups based on variables such as:– Age– Gender– Family size– Race– Nationality

Demographic Segmentation (Cont.)

• Multivariate Demographic Segmentation –Combining two or more demographic variables.

• Example: Age + Gender

Psychographic Segmentation

• Psychographics is the study of personality, values, opinions, attitudes, interests, and lifestyles.

• Dividing buyers into different groups based on:– Social class– Lifestyle– Personality Characteristics

Social Class

• Social class (or simply "class"), asin a class society, is a set ofconcepts in the social sciencesand political theory centered onmodels of social stratification inwhich people are grouped into aset of hierarchical socialcategories, the most commonbeing the upper, middle, andlower classes.

Lifestyle

• The way in which a person lives.

• The habits, attitudes, tastes, moral standards, economic level, etc., that together constitute the mode of living of an individual or group.

Personality

• Personality has to do with individualdifferences among people in behaviorpatterns, cognition and emotion

Behavioral Segmentation

• Divides buyers based on how they behave or act toward particular products.

• The common behavioristic variables are:– Occasions

– Benefit Sought

– User Status

– Usage rate

– Loyalty status

Occasions

• Buyers can be grouped according to occasions when they get the idea to buy, purchasing the product as well as using them.

• Examples?

Benefit Sought

• A powerful form of segmentation

• Group the buyers according to the different benefits that they seek from the product.

• Example?

User Status

• Can be segmented into groups of:

– Non-users

– Ex-users

– Potential users

– First-time users

– Regular users

Usage Rate

• Markets can be segmented into:

– Light user

– Medium user

– Heavy user groups

Loyalty Status

• Market that had been segmented based on loyalty.

• Example?

Market Targeting

• Market segmentation reveals the firm's market segment opportunities.

• The firm now have to evaluate the various segments and decide how many and which ones to target.

• We now look at HOW companies evaluate and select target segments.

Eval

uat

e M

arke

t Se

gmen

tsSegment size &

growth

Structural attractiveness

Company objectives & resources

Selecting Market Segments

Selecting Market Segment

Undifferentiated Marketing

Differentiated Marketing

Concentrated Marketing

Undifferentiated Marketing

Company Marketing Mix

Market

Undifferentiated Marketing

• The firm decide to IGNORE market segment differences and go after THE WHOLE market with one market offer.

• It focuses on what is COMMON in the needs of the customers.

• Example: Hershey Company

• Pro – Cost Economies

• Cons – ?

Differentiated Marketing

Company Marketing Mix 1

Segment 1

Company Marketing Mix 2

Segment 2

Company Marketing Mix 3

Segment 3

Differentiated Marketing

• The firm decide to target several market segments or niches and designs separate offers for each.

• Creates more total sales than undifferentiated marketing

• Pro - ?

• Cons – Increase cost (Why?)

Concentrated Marketing

Company Marketing Mix

Segment 1

Segment 2

Segment 3

Concentrated Marketing

• Especially appealing when company RESOURCES are LIMITED.

• Instead of going after a small share of a large market, the firm goes after a large share of one or a few submarkets.

• Example?

Market Positioning

• Once company has decided which market segments it will enter, it must decide what ‘Positions’ it wants to occupy in those segments.

• A product’s position is the way the product is defined by consumers on important attributes – the place the products occupies in consumers’ minds relative to competing products.

• How?

Positioning Strategies

• Product Attributes

• Benefit

• Classes of users

• Against a competitors

• Away from competitors