MKT 460 Lecture 6 - Indentifying Market Segments and Targets

Identifying Market Segments and Targets

A presentation by:Varqa Shamsi Bahar

I have taught you so far

How to pursue strategic planning in order to achieve superior performance in the marketplace.

How to analyze the macro-environment

How to analyze the micro-environment through customer and competitor analysis.

How to analyze the internal environment of a company.

SWOT Analysis

A presentation by Varqa Shamsi Bahar

In order to be successful in doing business, a company needs to identify which market segments it can serve effectively and profitably.

In this chapter I will teach you the following parameters

Identify and profile distinct groups of buyers who differ in their needs and wants (segmentation).

Select one or more market segments to enter (market targeting).


Market Segmentation

Market segmentation divides a market into well defined slices. A market segment consists of a group of customers who share similar sets of needs and wants. The marketers task is to identify the appropriate number and nature of market segments and decide which ones to enter.

Four things that are considered during the segmentation process:

Individuals or businesses within the segment should be homogeneous.

The segment should differ from other segments.

The segment should be large enough

It should be reachable through some type of media OR channels of distribution.


Bases of Segmentation

Geographic segmentation

Demographic segmentation

Psychographic segmentation

Behavioral segmentation.


Geographic Segmentation

In the geographic segmentation approach, markets are divided into different geographic units. These units may include nations, cities, or even neighborhoods.

Marketers can operate in one or few areas, or it can operate in all but pay attention to local variations. Discussion 1: if you are managing a fast food chain restaurant, will your approach in different geographical areas change?

Discussion 2: If you managing a bank, will your services change from one geographical region to another?


Demographic Segmentation

In demographic segmentation, we divide the market on variables such as age, family size, gender, income, occupation, education, religion, race, generation, nationality, and social class. Hence, demography is the study of human population and it comprises of parameters that can be statistically measured.


Demographic Segmentation

Socio-economic classes is a subset of demographics and are societys relatively permanent and ordered divisions.

Measured by a combination of occupation, income, and education.

I have taught you 5 SECs as far as Bangladesh is concerned which you will utilize to segment the Bangladeshi market.


SEC of Bangladesh: By Nielsen


SEC A

2.42 % of total Population

He/she is businessman/businesswomen or a service holder (mid/senior)

His/Her income level is 40,000 BDT or more per month.

Has a bachelors degree or more.

SEC B

13.28% of Total population

He/She is a house owner or officer/executive (mid/senior)

His/Her income level is minimum 10,000 BDT to maximum 30,000 BDT.

Has a Bachelors degree.

SEC of Bangladesh


SEC C


income level generally lies between BDT 6,000 to BDT 20,000.

SSC/HSC graduate, Diploma degree.

Supervisor

SEC D


He might be a shop owner, salesman

Income level generally lies between BDT 5,000 to BDT 15,000

Has completed high school.

SEC of Bangladesh


SEC E

38.33% of Total populationunskilled labor.

income level : BDT 3,000 to BDT 10,000

Uneducated

Psychographic Segmentation

Psychographic segmentation divides the market on the basis of human personality and lifestyle.

Lifestyle is a persons pattern of living and how they interact in the world. Example: healthy lifestyle, trendy lifestyle, adventurous lifestyle, sporty lifestyle.

Personality refers to the unique psychological characteristics.

Some parameters of personality: self confidence, dominance, sociability, autonomy, adaptable, aggressive.


Behavioral Segmentation

Behavioral segmentation divides consumers into groups according to the following characteristics:

User status: non-users, ex-users, potential users, first time users, regular users. Blood bank (regular donors, first-time donors, ex donors), non branded oral care product users (potential).

Usage Rate: light user, medium user, heavy user. Industrial marketers refer to the 80-20 rule, meaning 20% of their buyers account for 80% of their sales volume.

Buyer involvement: High (special effort), low (minimum effort).


Loyalty Status


HardcoreSplit LoyalsShifting LoyalsSwitchersLoyalty status: low, high (example Apple diehards). How likely are they to switch brands? Will Pepsodent toothpaste users shift to Magic toothpaste if launched?

Behavioral Segmentation

Benefit segmentation: In purchasing products, consumers are generally trying to satisfy specific needs. Hence, they are looking for products which provide specific benefits that satisfies these needs. The grouping of consumers on the basis of the benefits they are looking for in a product is known as benefit segmentation.

Example: The sensitive segment (medi plus, sensodyne), the healthy segment (pepsodent, white plus, colgate), the fresheners (close up, freshgel), the economic (Magic, pepsodent), the whitening (pepsodent whitening, medi plus whitening, toothpastes which removes cigarette marks etc.)


Market Targeting

The market targeting process involves two steps:

Determining how many segments to enter

Determining which segments offer the most potential.


Determining How Many Segments to Enter

In order to determine how many segments to enter, there are a few market coverage alternatives available:

Undifferentiated marketing: involves ignoring segment differences and offering just one product or service to the entire market. This strategy helps to keep the cost down. Example: For many years, Coca Cola offered only one product version for all consumers.

Differentiated marketing: involves marketing in a number of segments and developing separate marketing program for each. However, this increases the cost for the company. Example: Holiday Inn Crowne Plaza, and Holiday Inn Economy hotels.

Concentrated marketing: involves firms selecting one segment and attempting to capture a large share of this market. Example: Rolls Royce has focused its automobile business exclusively on the high income segment.

Determining How Many Segments to Enter

Local Marketing involves tailoring brands and promotions to the needs and wants of local customer groups - cities, neighborhoods, and even specific stores. Discussion: if you possess a grocery store in a locality where you know most of the people are working executives, what will you merchandise more?

Individual Marketing signifies designing a product or service customized for each individual customer.

Remember 1: individual marketing is the same as mass customization, and one to one marketing.

Remember 2: the 4ps of marketing are directed at each individual customer.


Determining Which Segments Offer The Most Potential.

In order to determine which segments offer the most potential, the firm must examine:

The sales potential of the segment: how many potential consumers exist in the segment?

The opportunities of growth of the market: what is the growth rate of the market?

The competition in the market: are there strong multinational and local companies already competing in the market?

Companys own resources: the internal strengths and weaknesses should be analyzed as to whether the company can actually deliver superior value to the customers.


Choosing a Targeting Strategy

Company Resources: A company with limited resources should pursue concentrated marketing, local marketing or even sometimes individual marketing. A company with greater resources can pursue all the types of market targeting strategy they feel is profitable.

Market variability: if most consumers have the same needs, react similarly to a marketing program, then undifferentiated marketing is appropriate.

Competitors targeting strategy: when competitors use differentiated or niche targeting strategy, then undifferentiated marketing is suicidal. However, if a competitor is using undifferentiated marketing, then a firm can gain advantage by using differentiated or niche marketing, focusing of the needs of buyers in specific segments.


Case Study Discussion: Horlicks


Thank you for your Attention.

Any Questions?

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MKT 460 Lecture 6 - Indentifying Market Segments and Targets

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