05.

TARGET MARKETING
A company cannot serve all customers in a broad market. The customers are too numerous and diverse in
their buying requirements. Many companies are embracing Target marketing. Here, sellers distinguish
the major market segments and develop products and marketing programs tailored to each. Target
Marketing requires marketers to take three major steps:
1. Market Segmentation: Identify and profile distinct groups of buyers who might require separate
products or marketing mixes.
2. Market Targeting: Select one or more market segments to enter.
3. Market Positioning: Establish & communicate the products’ key distinctive benefits in the market.
MARKET SEGMENTATION AND NEED FOR SEGMENTING MARKETS
Segmentation is all about dividing the market, by grouping together customers with similar tastes and
preferences into one segment, to serve it better. The market is filled up of people with different tastes and
preferences. Different product ranges target different customers.
Customers are becoming increasingly aware of their needs and are demanding products that meet their
needs exactly. Segmentation helps marketers to understand the needs of different customers better and
serve them with better value propositions. The increased preferences of customers paved the way for
flooding the market with many different brands of cars catering to the needs of different segments.
Segmentation also helps the marketers increase customer loyalty, as the marketers focus on these smaller
markets with enhanced service and quality features.
Companies, in order to stay competitive, need to develop and refine their products and services to meet
the needs and preferences of various segments.
Some firms adopt market segmentation because they lack the ability and competitiveness to cater to the
mass market.
Research has shown that for most products market share has risen for the carefully launched products.
For instance, Surf, Rin and Wheel are brands in the same product line of HLL, but they are leaders in
different segments. Most products have high sales after segmentation.
PATTERNS OF MARKET SEGMENTATION
There are many ways in which market segments can be built up. One such way is to identify preference
segments. Supposing, ice cream buyers were asked how much they value two of the product attributes
namely sweetness and creaminess, the following patterns can emerge from their responses:
Creaminess Creaminess Creaminess

Sweetness Sweetness Sweetness

Homogeneous preferences Diffused preferences Clustered preferences
Homogeneous preferences indicate that all consumers have roughly the same preference. Existing brands
would be similar and gather around the middle of the scale with respect to both sweetness and
creaminess.
Diffused preferences, on the other hand, indicate that consumers vary greatly in their preferences. The
first brand to enter the market is most likely to position in the centre to appeal to most of the people. This
would minimise the sum of total customer dissatisfaction. Subsequent entries could position themselves
in the corners to attract customer groups that were dissatisfied with the centre brand. When several
brands enter the market, they are likely to position throughout the space and show real differences to
match consumer-preference differences.
Clustered preferences reveal distinct preference clusters called natural market segments. The first firm
entering the market might position itself in the centre, hoping to appeal to all groups. It may concentrate
on the largest market segment. It might develop several brands, each positioned in a different segment.
Subsequent entries in the markets would also have the option of choosing from the segments that are yet
catered to.
MB208 Marketing Management 05. Target Marketing Page - 2 - of 6
MARKET SEGMENTATION LEVELS
A market comprises of different consumers possessing innumerable tastes and preferences. Depending
upon their marketing approach and the nature of their products, marketers can adopt different levels of
segmentation. The different levels of market segmentation are:
 Segment marketing,
 Local marketing,
 Niche marketing
 Individual marketing
In segment marketing, marketers divide the target market into different segments on the basis of
homogeneous needs. Customers are segmented on the basis of a broad similarity with regard to some
attributes such as tastes, preferences etc. The marketer then has to provide flexible solutions to the
segment or may choose to serve more than one segment.
Most marketers who have a global presence tend to offer customised products to suit the local market.
‘Think global act local’ has long been a buzzword. In order to suite the local needs of the Indian
customers, Pizza Hut has come up with pizzas with Indian style toppings.
Niche marketing can be defined as the marketers’ effort to position their product or service in smaller
markets that have similar attributes and have been neglected by other marketers. Saint Gobain, a French
glass company, has effectively carved out a niche for itself by entering the fragmented glass market.
Individual marketing is the extreme level of segmentation in which marketers focus on individual
customers. In fact, almost all business to business marketing is individual marketing.
BASES FOR MARKET SEGMENTATION
Consumer Market
Marketers identify and profile distinct groups of buyers who might require separate products or
marketing mixes. Two broad groups of variables are used to segment consumer markets. Some
researchers try to form segments by looking at consumer characteristics: Geographic, Demographic and
Psychographic. Others try to form segments by looking at consumer responses to benefits sought, use
occasions or brands.
If marketers segment potential markets, the segmentation needs to be such that they can target their
customers effectively and develop communication programs to convert potential customers into real
customers. For effective segmentation, segmentation variables need to exhibit certain characteristics. The
variable used for the segmentation of the markets should be measurable. Each segment should be
substantial, that is should consist of an adequate number of customers to cater to. The segment or
segments should be accessible to the marketer. The segments should be differentiable, that is each
segment should be different from the other. A segmentation variable should be actionable, that is a
segmentation variable should help marketers develop effective marketing programs to attract and serve
potential customers effectively.
Bases of Consumer Market Segmentation
On the basis of Consumer
On the basis of Consumer Characteristics Response

Geographic Demographic Psychographic Behavioural

Nations Age Lifestyle Occasions
Regions Family Size Personality Benefits
States Family Life Cycle Values User Status
Cities Gender Usage Rate
Income, Occupation Loyalty Status
Education Religion Buyer Readiness Stage
Race Attitude
Generation,
Nationality
Social Class

The major segmentation variables are – Geographic, Demographic, Psychographic and Behavioural.
Geographic Segmentation:
It calls for dividing the market into different geographical units such as nations, states, regions, cities or
neighbourhoods. The company can operate in one or few geographic areas or operate in all but pay
attention to local variations.
Demographic Segmentation:
The market is divided into groups on the basis of variables such as age, family size, family life cycle,
gender income, occupation, education, religion, race, generation, nationality and social class.
Demographic variables are the most popular bases for distinguishing customer groups.
Psychographic Segmentation:
Buyers are divided into different groups on the basis of lifestyle or personality and Values. People within
the same demographic group can exhibit very different psychographic profiles.
Behavioural Segmentation:
Buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to
a product. Many marketers believe that behavioural variables – Occasions, Benefits, User Status, Usage
Rate, Loyalty Status, Buyer Readiness Stage, and Attitude – are the best starting points for constructing
market segments.
Industrial Market
Industrial markets or business markets can be segmented using some of the bases of consumer market
segmentation like geography, benefits sought and usage rate. But then business markets use several other
variables as well. Bonoma and Shapiro proposed in 1983, the following variables for segmenting the
business market:
Major Segmentation Variables for Business Markets
Demographic
Industry: Which industries should the firm serve?
Company size: What size companies should the firm serve?
Location: What geographical areas should the firm cater to?
Operating Variables
Technology: What customer technologies should the firm focus on?
User or nonuser status: Should the firm serve heavy users, medium users, light users, or nonusers?
Customer capabilities: Should the firm serve customers needing many or few services?
Purchasing Approaches
Purchasing-function organisation: Should the firm serve companies with highly centralised or decentralised purchasing
organisations?
Power structure: Should the firm serve companies that are engineering dominated, financially dominated
and so on?
Nature of existing relationships: Should the firm serve companies with which strong relationships exist or should the firm
go after the most desirable companies?
General purchase policies: Should the firm serve companies that prefer leasing, service contracts, system purchases,
sealed bidding and so on?
Purchasing criteria: Should the firm serve companies that are seeking quality, service, price?
Situational Factors
Urgency: Should the firm serve companies that need quick and sudden delivery or service?
Specific Application: Should the firm focus on certain applications of their product rather than all applications?
Size of order: Should the firm focus on large or small orders?
Personal Characteristics
Buyer-seller similarity: Should the firm serve companies whose people and values are similar to theirs?
Attitudes towards risk: Should the firm serve risk-taking or risk-avoiding customers?
Loyalty: Should the firm serve companies that show high loyalty to their suppliers?
MARKET TARGETING
Once the firm has identified its market-segment opportunities, it has to decide how many and which
segments to target. In Market Targeting, marketers must focus their attention on targeting the market
segments that are relevant to their products and likely to respond positively to their marketing strategies.
Evaluating the Market Segments
In evaluating different market segments, the firm must look at two factors: the segment’s overall
attractiveness and the company’s objectives and resources. The firm must evaluate the potential of the
segment as well as its own ability to tap that particular segment. First, the firm must ask whether a
potential segment has the characteristics that make it generally attractive such as size, growth,
profitability, scale economies and low risk. Second, the firm must consider whether investing in the
segment makes sense given the firm’s objectives and resources. Some attractive segments could be
dismissed because they do not mesh with the company’s long-run objectives, or the segment could be
dismissed if the company lacks one or more necessary competences to offer superior values.
Selecting the Market Segments
After evaluating different market segments, the marketer has to decide on which segment or segments to
target. A company can consider five patterns of target market selection:
 Single Segment Concentration
 Selective Specialisation
 Product Specialisation
 Market Specialisation
 Full Market Coverage
Single Segment
Concentration Selective Specialisation Product Specialisation Market Specialisation Full Market Coverage
M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3
P1 P1 P1 P1 P1
P2 P2 P2 P2 P2
P3 P3 P3 P3 P3

Patterns of Target Market Selection P= Product, M= Market.

Single Segment Concentration: The strategy of targeting a single segment has worked well for some
marketers, like Mercedes only concentrates on the upper income group customers. Focusing on a single
segment gives the marketer an advantage, as he can put all his marketing efforts and direct all his
resources on that segment and on improving the product to exactly match the tastes and preferences of
the customers in the segment. However, concentrated marketing involves higher than normal risks. If the
single segment stops patronising the product for some reason, the marketer will face severe losses as he
had been concentrating on only this segment. Or a competitor may invade the segment. For these reasons,
many companies prefer to operate in more than one segment.
Selective Specialisation: Automobile manufacturer Hyundai manufactures different models of cars like
the Santro, Accent and Sonata to cater to different segments with different levels of income. In this case,
the company specialises in cars and targets a few segments of the market.
Product Specialisation: Some companies specialise in a particular product, like Gillette is famous world
wide for its series of shaving products. A specialist microscope manufacturer may manufacture
microscopes only and not any other equipments or instruments that laboratories may use. It can sell the
microscopes to University laboratories, Government laboratories and Commercial laboratories. Thus the
company specialises in making a certain product that it sells to several segments. The firm builds a strong
reputation in the specific product area. But, if a competitor develops a breakthrough technology, the
firm’s product may be totally replaced in the market. Wilkinson’s sword specialised in shaving blades
and twin blade razors and enjoyed a market leader position till Gillette came up with ‘Sensor’ technology
and completely captured the market.
Market Specialisation: Companies like the Ordinance factory caters to the needs of the Indian defence
services by manufacturing different types of arms and ammunitions for them. A firm may sell an
assortment of products only to university laboratories, including microscopes, chemical flasks, Bunsen
burners etc. The firm concentrates on serving many needs of a particular customer group and gains a
strong reputation in serving this customer group and becomes a channel for further products that the
customer group could use. However, there is an inherent risk in focusing on the needs of a specific
market only. The customer group may have its budgets cut. If there is any turn in the market due to an
external environmental factor, it adversely affects the performance of the company.
Full Market Coverage: Companies like Hewlett-Packard targets the full market for its printers. Its printer
range starts from entry level printers for home and small office segments to high end heavy duty printers
for commercial segments. The firm tries to serve all customer groups with all the products they might
need. No segment is left untargeted by it. Only large firms can undertake a full market coverage strategy.
Other Considerations
Four other considerations must be taken into account in evaluating and selecting segments:
 Ethical Choice of Market Targets
 Segment Interrelationships and Supersegments
 Segment-by-Segment Invasion Plans
 Intersegment Cooperation
Ethical Choice of Market Targets: Marketers should take adequate care not to promote harmful products
and try not to take undue advantage of vulnerable groups, like children.
Segment Interrelationships and Supersegments: A company that is targeting more than one segment
needs to examine the relationship between the segments so that it can optimise its costs and
performances. A supersegment is a set of segments that are similar. Companies should try to operate in
supersegments rather than in isolated segments. For example: Big Bazaar targets the supersegment rather
than individual segments. It targets people who want to buy apparels, kitchenware, vegetables, groceries,
toys etc.
Segment-by-Segment Invasion Plans: A company would be wise to enter one segment at a time without
revealing its total expansion plans. Competitors should not get a clear picture of the direction in which
the company is moving.
Intersegment Cooperation: The best way to manage segments is to appoint segment managers for each
segment. The marketer needs to develop mutual cooperation and information sharing procedures amongst
the different segment managers and other company personnel.

MARKET POSITIONING
The word ‘positioning’ was coined by Al Ries and Jack Trout way back in 1972. According to them,
positioning is not what you do to the product; rather it is what you do to the mind of the customer.
Creating a position for its products in the market helps a company develop a competitive advantage. It is
the creative exercise applied on an existing product so that the successful products occupy a distinctive
position in consumers’ minds.
Positioning is the act of communicating the company’s offer so that it occupies a distinct and valued
place in the customers’ mind. After a company has divided the market into segments and targeted one or
more segments, it now needs to establish and communicate the products’ key distinctive benefits to the
target group or groups in the market.
Product positioning refers to all the activities undertaken by a marketer to create and maintain the concept
of value regarding its brand in the minds of the customers as against competitors’ brands. It is the image
projected by the product against the competitors’ products and other products of the same firm. Marketers
try to position their products in such a manner, that it seems to possess all desired characteristics.
DIFFERENTIATION AND POSITIONING STRATEGIES
A major decision in the commercialization of a product is how to differentiate it in the midst of an
already over crowded market. Product differentiation, an important part of product positioning, is the act
of designing a set of meaningful differences to distinguish the company’s offering from competitors’
offerings. The strategy to differentiate the product is to place it in the minds of the target group of
customers. The idea is to project the product in such a way – from designing its package to designing its
advertising campaigns – that it has high recall in the minds of the target audience.
Horizontal differentiation is a positioning strategy that makes use of the fact that consumers differ in their
tastes. Some consumers prefer small cars, some like sedans while others like sports cars. Each of these
groups consists of a relatively homogeneous set of people with similar needs. The idea of horizontal
differentiation is to identify the groups whose needs are not yet served by a competitor.
Vertical differentiation is a positioning strategy that makes use of the fact that consumers differ in their
willingness to pay for quality. Quality may be the combination of many complementary attributes. In the
case of passenger cars, for example, it can be a combination of speed, comfort and reliability. All
consumers agree that these are relevant dimensions contributing to quality and they all unanimously
prefer more quality to less. They only differ in their valuation of quality. Most consumers prefer a BMW
to a Ford, but few can or are willing to pay the price for the BMW. Vertical differentiation amounts to
positioning products to consumers with specific willingness to pay for quality un-served by a competitor.
In most product categories, marketers have the option to differentiate their products both along quality as
well as in terms of customer tastes. Creativity plays an important role in this task. The primary time to
think of differentiation for existing products is in the phase of product concept development. The firms
strive to develop products that are differentiated from competitors’. Packaging can also be an important
tool for differentiation. However, other elements of the marketing mix also have an important role in
differentiation. Advertising is an obvious tool to communicate to consumers to what extent and along
what dimensions the product is different from other alternatives. Price can be an important signal of
quality and therefore an effective tool for vertical differentiation. Customer service is also one of the most
important tools of differentiation.
Various Differentiation Variables
Product Service Personnel Channel Image
Features Ordering ease Competence Coverage Symbols
Performance quality Delivery Courtesy Expertise Media
Conformance quality Installation Credibility Performance Atmosphere
Durability Customer training Reliability Events
Reliability Customer consulting Responsiveness
Reparability Maintenance & repair Communication
Style Miscellaneous services
Design
Form
Price

According to Rooser Reeves, a company should develop a unique selling proposition (USP) for each of
its brands. A USP can be any special attributes about a brand like quality, price, service, value, safety
provisions, technology etc. Marketers often try to promote the product on the basis of its USP. Number
one positionings include ‘best quality’, ‘lowest price’, ‘best value’, ‘best service’, ‘safest ’, and ‘most
advanced technology’ etc. If a company constantly communicates with the consumer hammering away
one of these positionings and also delivers on the promise, it has a fair chance to be best known and
recalled for that particular strength which it has been harping about.
Different positioning strategies that are available are:
Attribute positioning: The firm positions itself on an attribute like size or number of years in existence.
Benefit positioning: The product is positioned as the leader in a certain benefit.
Use or application positioning: The product is positioned as best for some use and application.
User positioning: The product is positioned as best for some user group.
Competition positioning: The product claims to be better in some way than a competitor.
Product category positioning: The product is positioned as the leader in a certain product category.
Quality positioning: The product claims to be of best quality.
Price positioning: The product offers best price to the consumers.