FSD2025 - RETAIL MARKETING AND MANAGEMENT

Module: 4 – Retail Market Segmentation and

Location
Retail market segmentation and its benefits, kinds of markets,
definition of retail strategy, strategy for effective market segmentation,
strategies for penetration of new markets, growth strategies and retail
value chain.

Importance of retail locations, types of retail locations, factors

determining the location decision, steps involved in choosing a retail
locations, measurement of success of location
 What is a market?
‘A market is a group of potential customers with similar
needs who are willing to exchange something of value
with sellers offering various goods and services that can
satisfy these needs’
Mass marketing approach:
- approaching the entire set of customers with a
uniform marketing approach thereby creating the
largest potential market (sale of staple food items like
rice and bread)
Differentiated Approach
- strategy of market segmentation
- marketer selects one or more of the segments as the
target market and positions his outlet as per the profile of
the targeted segment (Diet Coke sold to market segment
of health conscious adults)
What is market segmentation
‘The process of dividing the heterogeneous total market into
small groups of customers who share a similar set of wants’
Major characteristics
- is an aggregating process: clustering people with similar or
homogenous needs and respond to the marketing mix in the
same way
- different kind of promotional activities are developed for
serving different market segments
- identifying niche segments
- customized products and services are provided to customer
groups (Whirlpool automatic washing machines in urban
Mumbai with large groups of working women can be
segmented)
Benefits of segmentation
Benefits of segmentation
Development of marketing mix
- helps to identify target audience
- customize marketing strategies in terms of product, price
and promotion for customers
Store location decision
- to concentrate stores where target population are found
Understanding customer behavior
- how and why the target group behaves and acts
- determining the buying behavior after segmenting the
market
Contd…

Merchandising decisions
- deciding on which items will occupy the store shelves for
display
- understanding the preference of target groups
Promotional campaigns
- effective and accurate promotional campaigns
Positioning
- major feature of segmentation . Sarvanna stores are
positioned for lower middle class consumers where as
the clientele of Lifestyle and Shoppers Stop are for the
upper income class and the elite
Segmenting, targeting and positioning
Criteria for effective market
segmentation
Contd…
Homogeneous within:
- similar needs, wants and buying behavior
- an effective marketing programme can be developed
(Gillette Mach 3 for young male adults)
Heterogeneous within
- customers between segments stay different for better
focus from retailers
Substantial
- should have sufficient discretionary income
(Ebony must ensure high income groups exist in their
trade area)
Contd…
Actionable
- useful for identifying target groups and deciding on
marketing mix variables (Café Coffee Day attracts college
goers and young working executives to enjoy coffee in a
fashionable outlet)

Accessible
- reachable target market and accessible to target consumer
groups (Crossroads is readily accessible with parking
facilities)

Measurable
- size, purchasing power and characteristics of market
segment should be measurable
Kinds of markets
Markets can be classified as

1.consumer markets

2.industrial markets

3.institutional markets and

4.reseller markets.
Kinds of markets - Consumer markets
When we talk about consumer markets, we are including
those individuals and households who buy and consume
goods and services for their own personal use.
individuals and households purchasing goods for self
consumption (groceries like milk ,poultry etc .)
They are not interested in reselling the product or setting
themselves up as a manufacturer.
Considering the thousands of new products, services, and
ideas being introduced each day and the increased
capability of consumers to afford these products, the size,
complexity, and future growth potential of the consumer
market is staggering.
Kinds of markets - Industrial markets
Individuals, groups and organizations purchasing goods for
reproductions of other products
Industrial market consists of organizations and the people
who work for them, those who buy products or services for
use in their own businesses or to make other products.
For example, a steel mill might purchase computer
software, pencils, and flooring as part of the operation and
maintenance of their business.
Likewise, a refrigerator manufacturer might purchase
sheets of steel, wiring, shelving, and so forth, as part of its
final product. These purchases occur in the industrial
market.
Kinds of markets - Institutional markets
Another important market sector is made up of various
types of profit and nonprofit institutions, such as hospitals,
schools, churches, and government agencies.
Institutional markets differ from typical businesses in that
they are not motivated primarily by profits or market
share.
Also, whatever profits exist after all expenses are paid are
normally put back into the institution.
Because institutions operate under different restrictions
and employ different goals, marketers must use different
strategies to be successful.
Kinds of markets – Reseller markets
Market of the middlemen like wholesalers and retailers
who buy goods for resale
Main focus of retailing is on consumer products
Convenience products: purchased frequently like
packaged foods, milk ,medicines etc
Shopping products: furniture, clothing apparels etc
Specialty items: special effort to purchase branded jewelry
of DeBeers
Unsought items: potential customers have yet to know or
know through promotions (ICICI PRUDENTIAL LIFE
INSURANCE, HUTCHINSON etc.)
Kinds of markets – Reseller markets
All intermediaries that buy finished or semi-finished
products and resell them for profit are part of the reseller
market.
With the exception of products obtained directly from the
producer, all products are sold through resellers.
Since resellers operate under unique business
characteristics, they must be approached carefully.
 Producers are always cognizant of the fact that successful
marketing to resellers is just as important as successful
marketing to consumers.
Definition of Retail Strategy
It is a plan designed by a retail organization on how
the business intends to offer its products and services
to the customers.
A retail strategy includes identification of the following
The retailer’s target market.
Retail format the retailer works out to satisfy the
target market’s needs.
Sustainable competitive advantage.
Retail Strategy
Know the customers
The customer is the one who is going to purchase the
material which is why knowing the customer would mean
knowing the likes and dislikes of the customer the
preferences and tastes of different types of customers and
the current trends in the market.
Get new and retain old
It is essential that the retailer retains the customers. With
the use of advertising and marketing campaigns retailer can
get new customers, but similarly, the focus should be equally
on retaining the existing customers as well.
Retail Strategy
Know your business
Knowing the retail business is also an important factor in
designing the retail strategy. It is crucial that the retailer
considered the nature of the business and the nature of the
goods that are sold.
For example, the retail business of having vegetables and other
perishable items is very different from the retail business of
having grocery, which is also very different from the retail
business of furniture.
All of these businesses require a different strategy, and the
important part of this is to know the product and the business.
Knowing the business also means knowing the story of the
location and how the to impact that is on the customers.
Retail Strategy
Know the competition
Retail store with multiple competitors in the neighborhood,
and it is important that the retail store knows about its
competition and the unique offerings of that competition.
The retailer should invest time in understanding the strategy of
the competition and what is it that the competition is getting
right so that the retailer can incorporate those changes in his
own store.
In terms of service, the retailer can provide free home
deliveries for assisting the customers with their purchases are
specialized offers for the customers who regularly shop at the
retailer for providing membership cards on membership points
for privileged customers.
Strategy for Effective Market Segmentation
For effective market segmentation, the following two
strategies are used by the marketing force of the
organization,
Concentration (Niche) Strategy
Multi-segment Strategy

Example
Establish the size of particular market segments so you know which
ones to go after (e.g. married women, students, apartment dwellers).
Give insight into shared needs, buying tendencies, and lifestyles that
will allow you to target your marketing message more efficiently and
effectively (e.g. married women want to be more organized, students
want cheap meals, apartment dwellers need more space).
Strategy for Effective Market Segmentation
Marketing segmentation strategies ultimately involves

answering these five important questions:‍

Who is your consumer or business market?

Where is your consumer or business market located?

What is your consumer or business market interested in?

How can you market your products and services to this

market?
Why are certain segments interested or not interested in

your products or services?

Strategy for Effective Market Segmentation
Concentration (Niche) Strategy
Under this strategy, an organization focuses going after large
share of only one or very few segment(s).
This strategy provides a differential advantage over competing
organizations which are not solely concentrating on one segment.

For example, Toyota employs this strategy by offering various

models under hybrid vehicles market.
Strategy for Effective Market Segmentation
Multi-segment Strategy
Under this strategy, an organization focuses its marketing efforts
on two or more distinct market segments.

For example, Johnson and Johnson offers healthcare products in

the range of baby care, skin care, nutritionals, and vision care
products segmented for the customers of all ages
 Strategies for Penetration of New Markets
 The lowest risk strategy is for a company to sell its existing products into
existing markets as it knows its customers. This strategy termed as ‘Market
Penetration’.
 This is only possible where markets are still growing, or where organizations
are prepared to use other elements of the marketing mix (such as price
discounting and additional promotional activity) to penetrate the market at
the expense of competitors.

Market Penetration Strategy

Strategies for Penetration of New Markets
 The second strategic option in the Matrix is to develop new products for
existing markets (customers), through a ‘Product Development’ strategy.
 Here the ‘Product’ and ‘Promotion’ elements of the marketing mix will
change (as a minimum), so the risk is higher than market penetration. The
success of this strategy is dependent on the organization being able to
effectively conduct research and insight into their customer and market
needs as well as their own internal capabilities and competencies for driving
innovation.

Product Development Strategy

Strategies for Penetration of New Markets
 The third strategic option involves taking existing products into new markets
using a ‘Market Development’ strategy.
 This is also considered to be risker than market penetration as it can be
difficult to understand the complexities of new markets.
 Key changes in the marketing mix are likely to be ‘Place’, with consideration
of new channels and routes to market, as well as ‘Promotion’, through
promoting to new target segments.

Market Development Strategy

Strategies for Penetration of New Markets
 The final strategy in the Matrix is ‘Diversification’, which is developing new
products for new markets.
 This is seen as the riskiest strategy of all four, as the organization is moving
into an unfamiliar market.
 However, this risk can be mitigated by undertaking ‘related’ diversification
and it could have the potential to gain the highest returns.

Diversification Strategy
Importance of retail location
Location is a major cost factor because it :
i. involves large capital investment
ii. affects transportation costs
iii. affects human resources cost

Location is a major revenue factor because it :

i. affects the amount of customer traffic
ii. affects the volume of business
Levels of location decision and its
determining factors

A retailer takes a location decision based

on:
- selection of a city
- selection of an area or type of location within a city
- identification of a specific site
 Types
Typesof
oflocations

Free standing locations

 neighborhood stores
 highway stores

Unplanned business districts/ centres

 downtown or central business district
 secondary business district
 suburban business district
 strip centre

Planned shopping centres

 regional shopping centres of malls
 neighbourhood / community
 specialist markets
 periodic/ weekly markets
Factors determining the location decision

Types of consumer goods and location decision

Another factor that affects site selection is the customers’
perception of the goods sold by a store. Consumer goods
are generally categorized:
Convenience goods
Shopping goods
Specialty goods
Factors determining the location decision

Trading area
A trade area is contiguous geographic area from which a

retailer draws customers who account for the majority of

a store’s sales.
The trade area can be divided into three zones.

The dimensions of these zones depends on the size of

store, its location, and the nature of merchandise.

 Trade area analysis
A thorough analysis of trade area is necessary to estimate
market potential, understand customer profile,
competition, develop merchandising plan, and focus on
promotional activities. The following aspects to be studied
are:
Demographic Factors
Economic Factors
Subculture
Demand
Market Potential
Sales Potential
Competition
Site selection analysis
Six factors to be considered while selecting a site:

 kinds of products sold

 cost factor

 competitor’s location

 ease of traffic flow and accessibility

 parking and major thoroughfares

 market trends
 visibility
Selection of a particular shopping
centre or market area
• Five factors influence the selection of a particular shopping
centre:

merchants’ association

landlord’s responsiveness

zoning and planning

lease terms

building layout
Traffic count

Pedestrian count: In this case, one must decide who is to

be counted, where the count should take place, when

should be included.
Automobile traffic count: In this case both the quantity

and quality of automotive traffic can be analysed.

Location assessment procedures
There are four established assessment procedures:
 Checklist analysis
 Analogue analysis
 Financial analysis
 Regression analysis
Assessment procedures continued…
Checklist analysis: It deals with relevant factors like
demographics, shopping behavior, etc.

Analogue analysis: It predicts the economic

performance of a potential site against a running
store.
Continued…
Financial analysis: It deals with the development of
outlets compared to the development of costs.

Regression analysis: It deals with the number of

determinants like accessibility, competitive environment.
Retail area development
There are certain key points that influence the
development:
 Law and order situation
 Settlement standings
 Purchasing power
 Rehabilitation costs
 Site attractiveness
 Scope of expansion
Measurement of success of location
Measurement of success of location