ASSIGNMENT

WEEK 5

MARKETING MANAGEMENT AN ASIAN PERSPECTIVE

CHAPTER 8

HAPIPAH

22081022

MANAJEMEN (S2)

UNIVERSITAS NEGERI PADANG

2022
 CHAPTER 8

IDENTIFYING MARKET SEGMENTS AND TARGETS

A Company cannot serve all customers in a broad market – customers are too numerous and
diverse in their requirements. The company needs to identify the market segments that it can
serve more effectively. Many companies embrace target marketing where sellers distinguish the
major market segments, target one or more of those segments, and develop products and
marketing programmes tailored to each. Instead of scattering the marketing effort (shotgun
approach) they focus on the buyers the have the greatest chance of satisfying (Rifle approach). 

Target marketing requires three steps:

1. Identify and profile distinct group of buyers who might require separate products or marketing
mixes – market segmentation.
2. Select one or more market segments to enter – market targeting.
3. Establish and communicate the products’ key distinctive benefits to the target market – market
positioning.

Levels and Patterns of Market Segmentation

Levels of market segmentation

Market segmentation is an effort to increase a company’s precision marketing.

Mass marketing: In this sellers engages in mass production, mass distribution and mass
promotion of one product for all buyers. Model T-ford, Coca-Cola etc are example of mass
marketing. Mass marketing creates a large potential market, which leads to the lowest cost,
which in turn can lead to lower prices or higher margins. But with the increasing splintering of
the market, mass marketing gets more difficult.

Four levels of marketing:

1. Segment Marketing:

A market segment consists of a large identifiable group within a market with similar wants,
purchasing power, geographical location, buying attitudes or buying habits. For example, for an
auto company might have four broad segments: customers seeking basic transportation or high
performance or luxury or safety. 

Each segment buyers are assumed to be quite similar in needs and wants. Anderson and Narus
urge to present flexible market offering instead of a standard offering (“one size fits all”) to all
members within the segment. A flexible market offering consists of two parts:

1. Naked Solution: Product and service element that all segment members value
2. Options: That some segment members value, each option carries extra chrge.
 For example seat, food and drinks offered to the economy class passenger of an airline are naked
Solution while extra amount charged for an alcoholic beverage/Internet facility to those who are
ready to pay for it would be option.

Benefits of Segment Marketing are:

1. The company can create more fine tuned product or services offering and price it appropriately
for target audience
2. Choice of distribution channel and communication channel becomes much easier
3. The company also may face fewer competitions in a particular segment. 

1. Niche Marketing:

A niche is more narrowly defined group, typically a small market whose needs are not well
served. Marketers usually identify niches by dividing a segment into sub segments or defining a
group seeking a distinctive mix of benefits.

Niches are fairly small and attract very few competitors. Large companies loose pieces of their
market to nichers and Dalgic has labelled this confrontation as “Guerrillas against gorillas”.
Niche marketing requires more decentralization and changes in the way normal business is done.
Niche marketers understand their customers so well that customer’s willingly pay a premium.
Attractive niches are characterized as:

1. Customers in the niche have a distinct set of needs

2. They will pay a premium to the firm that best satisfies their needs
3. The niche is not likely to attract other competitors
4. The nichers gain certain economies trough specialization
5. The niche has size, profit and growth potential

Linneman and Santon, “There are riches in the niches” Blattberg and Deighton, “Niches too
small to serve profitably today will become viable as marketing efficiency improves.”

The low cost of setting up shop on the Internet is a key factor on making it more profitable to
serve even more seemingly miniscule niches.

1. Local Marketing:

Marketing programmes being tailored to the needs and wants of local customer groups – trading
areas, neighbourhood, individual stores.

Disadvantages of local marketing are – it drives up the manufacturing and marketing cost by
reducing the economies of scale, logistical problems become magnified and a brands overall
image may be diluted if the product and message differ in different localities.
1. Individual Marketing:

Ultimate level of marketing – “segment of one”, “customised marketing”, “one-to-one

marketing”. Tailors, cobblers etc. B2B marketing today is customised. Mass customisation is the
ability to prepare on a mass basis individually designed products and communication to meet
each customer’s requirements. New technologies such as computers, Internet, databases, robotic
production, email, fax etc. permit companies to adopt mass customisation. 

For mass customisation marketers need to set up – toll free phone number and email ids for
customers suggestions, complaints, feed back, involve customer more during the product
specification process, sponsor web pages containing full details about the products and services
offered, guarantees and locations etc.

Patterns of Market Segmentation

Way to build up market segments – preference segments. Three different patterns

1. Homogeneous Preferences: Markets where all customers have roughly same The market shows
no natural segments.
2. Diffused Preferences: Consumer preferences are scattered through out the space – consumers
vary widely in their preferences. The first brand to enter the market is likely to position itself in
the centre to appeal the most people. A brand in the centre minimizes the total customer
dissatisfaction.
3. Clustered Preferences: The market reveals distinct preference clusters – natural market segments.
The first firm to enter the market has three optionso Position in the center to appeal to all groups.
It will develop only one brand, competitors would enter and introduce brands in the other
segments

1. Position in the largest market segment – concentrated marketing

2. Develop several products positioned in a different segment.

Market segmentation procedure

3-step procedure

1. Service stage: the researcher conducts exploratory interviews and focused groups to gain insights
into consumer motivations attitudes and behaviours. Then the researcher prepares a questionnaire
and collects data on attributes and their importance ratings, brand awareness and brand ratings,
product usage patterns, attitudes towards product category and demographics, geographic,
psychographics and media graphics of the respondents.
2. Analysis Stage: under this he applies factor analysis to the data to remove highly correlated
variables then apply cluster analysis to create specific number of maximally different segments.
3. Profiling stage: each cluster is profiled according to its distinguishing attitudes, behaviour,
demographics, psychographics and media graphics and media patterns.

Each segment is given a name depending on its dominant characteristics. Market segmentation
should be redone periodically because they change. Way to discover new segments is to discover
the hierarchy of attributes that consumers examine while choosing a brand. This process is called
market partitioning.

The hierarchy of attributes can reveal customer segments. Buyers who first decide on price are
price dominant. Those who first decide on type of car ( eg sports, passenger ) are type dominant.
Those who first decide on the car brand are brand dominant. Each segment may have different
demographics, psychographics and media graphics.

SEGEMENTING CONSUMER AND BUSINESS MARKETS

Basis for segmenting consumer markets: 2 broad groups of variables are used to segment
consumer markets. Some researchers try to form segments by looking at consumer
characteristics: demographic, geographic, and psychographic. Then they examine whether these
customer segments exhibit different needs or product responses.

Methods of Segmentation

Geographic segmentation: it calls for dividing the market into different geographic units such as
nations, states, regions, counties, and cities. The company can operate in one or few geographic
areas or operate in all but pay attention to local variations.

Demographic segmentation: in this the market is divided into groups on the basis of variables
such as age, family, size, life cycle, gender, income, occupation, education, religion, race,
generation, nationality, social class. These variables are the most popular basis for distinguishing
customer groups. One reason is that consumer wants, preferences, usage rates are often
associated with demographic variables. Another reason is that demographic variables are easier
to measure even when the target market is defined in non-demographic terms. The link back to
demographic characteristics is needed in order to estimate the size of the target market and the
media that should be used to reach it efficiently.

Geographic: Region Pacific, mountain, west north central City or metro size Under 5000 etc

Demographic: Age, Family size, Family life cycle, Gender, Income, Occupation, Education,
Religion, Race Generation, Nationality, Social class, 

Psychographics: Life style, Personality,

Behavioural: Occasions, Benefits, User status, Usage rate, Loyalty status, Readiness stage
Unaware, aware, informed, interested, desirous

Attitude towards product Enthusiastic, positive, indifferent Age and life cycle stage: consumer
wants and abilities change with age. Gerber realized this and began expanding beyond its baby
food lines. Nevertheless age and life cycle can be tricky variables.

Gender: gender segmentation has been applied to clothing hairstyling cosmetics and magazines.
Other marketers also noticed opportunity for gender segmentation for eg the cigarette market
where brands like Virginia slims was launched to reinforce female image.
 Income: it is a long standing practice in such product and service categories e.g. Automobile,
clothing and cosmetic and travel.

Generation:

 Baby boomers born between 1946-64

 Generation X born between 1964-84 – more sophisticated in evaluating products, turn off by
advertising that has too much hype or takes itself too seriously
 Cohort segmentation: cohorts are groups of people who share experiences of major external
events that have deeply affected their attitudes and preferences.

Members of cohort groups feel the bonding with each other for having shared the same major
experiences. Advertising to a cohort group should be done using icons and images prominent in
their experiences.

Social Class: has a strong influence on preference in cars clothing home furnishing, leisure
activities reading habits and retailers. The taste of social class can change with years.

Psychographic segmentation:

Buyers are divided into different groups based on personality and values. People within the same
demographic group can exhibit very different psychographic profiles.

Lifestyle: people generally exhibit more lifestyle than are suggested by social classes generally
the goods they consume express their lifestyle such as cosmetics, alcoholic beverages, furniture
etc.

Personality: Marketers can use personality variables to segment markets. They endow their
products with brand personalities that correspond to consumer personalities.

Values: some marketers segment by core values, the belief systems that underlie consumer
attitudes and behaviours. Core values go much deeper than behaviour or attitude and determine
at a basic level people’s choices and desires over long term.

Marketers who segment by values believe that by appealing to people’s inner selves it is possible
to influence their outer selves- their purchase behaviour.

Behavioral Segmentation

Buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or
response to a product.

Starting points for constructing market segments

Ocassions: Distinguish buyers according to the occasions they develop a need, purchase a
product, or use a product

Benefits: Buyers classified on the basis of the benefits they seek

 User status: Market segmentation into non-users, ex-users, potential users, first time users and
regular users of a product.

Usage rate: Market segmented into light, medium and heavy product users. 

Loyal status: Consumers can be divided into 4 groups according to the brand loyalty status:

 Hard-core loyals – one brand all the time

 Split loyals – loyal to 2 or 3 brands
 Shifting loyals – consumers who shift from one brand to another
 Switchers – no loyalty to any brand

Markets

 Brand loyal markets – high % of hard-core brand loyal buyers. A company can learn a great deal
by analyzing degrees of brand loyalty Analysis of:
 Hard-core loyals: the company can identify products’ strengths
 Split loyals: company can pinpoint which brands are most competitive with its
 Shifting loyals: company can learn about its marketing weaknesses and attempt to correct them.

Buyer readiness stage: A market consists of people in different stages if readiness to buy a
product.

Stages of readiness:

 Aware of product
 Informed about product
 Interested in product
 Desirous of buying the product
 Intention to buy product

Attitude: Five attitude groups can be found in the market:

 Enthusiastic
 Positive
 Indifferent
 Negative
 Hostile

Multi-Attribute segmentation (geoclustering)

Marketers no longer talk about the average consumer or even limit their analysis to only a few
market segments. Increasing trend towards combining several variables in an effort to identify
smaller, better defined target groups
 Geoclustering captures the increasing diversity of the population, and marketing to micro
segments has become accessible even to small organisations as database costs decline, PCs
proliferate, software becomes easy to use, data integration increases and as the Internet grows.

Basis for segmenting business markets

Segmentation variables for business markets:

Demographic

 Industry: which industries to serve

 Company size: what size companies to serve
 Location: what geographical areas to serve

Operating variables

 Technology: what customer technologies should we focus on

 User or non-user status: should we serve heavy users, medium users, light users, or non-users?
 Customer capabilities: should we serve customers needing many or few sevices Purchasing
approaches
 Purchasing-function organisation: should we serve companies with centralized or decentralized
 Power structure: shud we serve companies that are engineering dominated
 Nature of existing relationships: shud we serve companies with which we have a strong
relationships or simply go after the most desirable companies
 General purchase policies: shud we serve companies that prefer leasing or service contracts or
systems purchases or bids?
 Purchasing criteria: shud we serve companies that are seeking quality or service or price? 

Situational factors

 Urgency
 Specific application: focus on specific application rather than all applications
 Size or order

Personal characteristics

 Buyer seller similarity

 Attitudes towards risk
 Loyalty

Business buyer stages

 First-time prospects – prefer to deal with a company rep

 Novices –
 Sophisticates – may want to conduct more of their buying over electronic media

 
 Business segments among business buyers

 Programmed buyers: view the product as not very important to their operation
 Relationship buyers: regard the product as moderately imp and r knowledgeable abt competitive
offerings
 Transaction buyers: see the product as v imp to their operations. Price, service sensitive
 Bargain hunters: see the product as v important. Demand deep discounts and highest service.

To be useful market segments must be Measurable Substantial accessible Differentiable

Actionable

Evaluation of market segments: 2 factors to be looked at : (a) segment’s overall attractiveness (b)
company’s objectives and resources

Selecting the market segments

1. Single market concentration: firm gains strong knowledge of segment’s needs and achieves
strong market presence
2. Selective specialization: firm selects a no. of segments, each objectively attractive and
appropriate
3. Product specialization: firm specializes in making a certain product that it sells to several
segments
4. Market specialization: firm concentrates on serving many needs of a specific customer group
5. Full market coverage: firm attempts to cover all customer groups with all the products they
might need. 

1. Undifferentiated marketing: firm ignores market segment differences and goes after the whole
market with one offer
2. Differentiated marketing: firm operates in several market segments and designs different
programs for each segment

Costs expected to be higher in differentiated marketing

 Product modification costs

 Manufacturing costs
 Administrative costs
 Inventory costs
 Promotion costs

Additional considerations: other considerations must be taken into account in evaluating and
selecting segments:

 Ethical choice of target markets

 Segment interrelationships and supersegments
 Segment-by-segment invasion plans
 Intersegment cooperation