Chapter Four

Market Segmentation, Targeting,

and Positioning
 What are Markets?

• Market: people or institutions with sufficient

purchasing power, authority, and willingness to
buy
• Types of Markets
Requirements of a Markets
 Steps in Target Marketing

• 1. Market segmentation
– Dividing a market into smaller groups of buyers with distinct needs,
characteristics, or behaviors requiring separate products or marketing
mixes.

• 2. Target marketing
– Evaluating each segment’s attractiveness and selecting one or more to
enter.

• 3. Market positioning
– Establish and communicate the products key distinctive benefits in the
market to create image in consumers' minds.
Market Segmentation

Market Aggregation?????

Mass Marketing ??????

 Role of Market Segmentation
• Market Segmentation: division of the
total market into smaller, relatively
homogeneous groups

• Why?

• Levels – Mass, Segment, and

Niche
 Why segment?
.
Most efficient Most effective

Many Groups
of One
One Mass
Market
.
No Market Segmentation
Segmented
Segmentedby
byGender
Gender
 Segmented by Age

.
 Defined…
• Market Segmentation: is the process
of identifying and profiling distinct group of
buyers who might require separate products
or marketing mixes.
Consists of dividing a heterogeneous market
into a number of smaller, more homogeneous
submarkets.
 Levels of Market
Segmentation:
Mass Marketing
The seller engages in the mass production, mass
distribution and mass promotion of the same
product in about the same way to all customers.
Cont’d…

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.
Cont’d…

Niche Marketing:
Focus on subgroups within segments.
• A niche is more narrowly defined group
(segment), typically a small market
whose needs are not well served.
Cont’d…

• Niches are fairly small and attract very few

competitors.
• Accordingly, it is an opportunity for small
companies.
Cont’d…

Micro Marketing
♣ Local Marketing: Marketing programs
being tailored to the needs and wants of
local customer groups – trading areas,
neighborhood, and individual stores.
 Mass Customization
Modern technology allows for efficient
production of customized products,
Cont’d…

♣ Individual Marketing: Ultimate level of

marketing – “segment of one”,
“customized marketing”, “one-to-one
marketing”.
PATTERNS OF MARKET SEGMENTATION

• Homogeneous preferences
• Diffused preferences
• Clustered preferences
MARKET SEGMENTATION PROCEDURE

–Step One: Survey stage

–Step Two: Analysis Stage
–Step Three: Profiling Stage
Step 1: Survey stage

• Identifying the current and potential wants that exists

within a market.
• involves interviewing, or observing the customers or firms
to determine their behaviors, levels of satisfactions and
dissatisfactions.
• It can also be conducted by selecting certain group of
people from market and ask them for information about
different characteristics of the market through
questionnaires, interviews, etc.
Step 2: Analysis stage

• This stage involves analyzing of data

conducted by in first stage which help in
identification of the characteristics that
distinguish the segments.
Step 3: Profile stage
• Here estimate how much demand or potential sales
each segment represents.
• These forecasts, will determine which segments are
worth pursuing (serving in the future).
• A group that shares a want distinguishable from the
rest of the market is a market segment.
• This group is identified by profiling
(ranking) its characteristics that
distinguish it from others.
CONSUMER MARKET SEGMENTATION
VARIABLES

–Geographic
–Demographic
–Psychographics
–Buying Behavior
Bases for Segmentation
 Geographic segmentation

• It calls for dividing the market into different geographic

units such as nations, states, regions, counties, and

cities.
• Example:
♠ Region  Region 1 – 14
♠ City  Addis Ababa, Dire-dawa, Awassa, Adama, Mekelle…..
♠ Urban-Rural  Urban, Sub-Urban, Rural
♠ Climate  Hot, cold, sunny, rainy, cloudy
 Demographic segmentation

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.
One of the most popular bases
Easier to measure than most other types of variables.

• Example:
 Income  Under $1000, $1000-$2500, over $2500
 Age  Under 5, 5-10, 10-19, 20-34, 35+
 Gender  Male, Female
 Family lifecycle  Young, single, married, no children
 Social class  Upper class, middle class, lower class
Cont’d…
 Education  High school, Diploma, Degree

 Occupation  Professional, managers,

clerical, employee

 Religion  Orthodox, Muslim, Catholic,

Protestant, etc

 Ethnic Background  African, Asian,

European
 Psychographic segmentation

Buyers are divided into different groups

based on VALs.
 Behavioral Segmentation

• Product related market segmentation.

• The way consumers behave toward the product.

• Buyers are divided into groups on the basis of

their knowledge of, attitude toward, use of, or

response to a product.
Cont’d…

Segmentation is made based on:

 The benefit desired from a

product, and

 The rate at which the consumer

uses the product

Benefits desired:
• Benefits desired: - Cost, quality,
operating life:

 Occasions: - Regular occasions, special

occasions
 User status: - Non-user, ex-user, potential user,
first time used
Occasions
Cont’d…
Usage rate: -

 nonuser,
 light user,
 heavy user.
Cont’d…
 Loyalty status: -
 Loyalty status
.

• None, • Hard-core loyal

• medium, • Split loyal

• Shifting loyal
• strong,
• Switchers
• absolute
Cont’d…
 Readiness stage:-
• unaware-
• aware,
• informed,
• interested desirous,
• intending to buy
Cont’d…
• Attitude toward products: -
 Enthusiastic,
 positive,
 indifferent,
 negative
 Hostile
Importance of Segmentation
Helps distinguish one customer group from another

Facilitates proper choice of target market.

Facilitates effective tapping of the market.

Helps to divide the markets and conquer them.

Helps crystallize the needs of the target buyers and elicit more
predictable responses from them;

Helps achieve the specialization required in product,

distribution, promotion and pricing for matching the customer
group and develop marketing offers
Cont…
Makes the marketing effort more efficient and economic.

Helps concentrate efforts on the most productive and profitable

segments

Helps spot the less satisfied segments and succeed by satisfying

such segment.

Brings benefits not only to the marketer but to the customer as

well
 Requirements for Effective Segmentation

 Measurability– the degree to which the size and purchasing power of the
segments can be measured.

 Accessibility– the degree to which the segments can be effectively reached

and served.

 Substantiality– the degree to which the segments are large and/or

profitable enough.

 Differentiability- the segments are conceptually distinguishable, and

respond differently to different marketing mix elements and programs.

 Action ability– the degree to which effective programs can be formulated

for attracting and serving the segments.
rg Ma
et rk
in e t
g
What is Market Targeting??
 Hence:
• is the set of buyers who share common needs or characteristics that the company

decides to serve.
• Market Targeting is the process of selecting one or more market segments to
enter.
Evaluating market segments
A. Segment size and segment growth

• Right size and growth rate

• Structural factors – competitors and substitutes

• Relative power of buyers and suppliers

B. Company objectives and resources
Company should have strengths that can provide basis for competing in the segment
=> offer superior value and gain advantage over competitors.
 Target Market Strategies

Market coverage strategies

• It more concentrated on selecting market segments.

• A. Undifferentiated marketing = mass marketing

Focus on what is common in all buyers, appeal to that.

E.g.; Mass distribution, mass marketing, etc.

Ignores segmentation opportunities

Often difficult to compete with focused competitors

B. Differentiated Marketing
♥ Target several segments and design separate offers for each .
♥ Claim- developing a stronger position within several segments creates more
total sales than undifferentiated marketing across all segments.

C. Single Segment /Concentration/

• Concentrate on a single segment.

• The firm gains a thorough understanding of the segment’s needs and achieves a
strong market presence.

• The risk and limitation of a simple-segment strategy is that the seller has all its
eggs in one basket. If the market potential of that single segment declines, the
seller can suffer considerably.
Example: Single Marketing Mix  Market Segment A
 Market Segment B
D. Multiple-Segment Strategy
Under a multiple-segment strategy two or more difficult groups of potential
customer one identified as target markets.
A separate marketing mix is developed to reach segment.

• Marketing mix A  Market segment A

• Marketing mix B  Market segment B

• Marketing mix C  Market segment C
A multiple segment strategy normally results in a greater sales volume than a
single segment strategy.
Market Positioning
Market Positioning
Positioning is the place the product occupies in consumers’ minds
relative to competing products.

Market Positioning Strategies

A company must try to identify the specific may it can differentiate its products to
obtain a competitive advantage.

Choosing a positioning strategy

1. Identifying a set of possible competitive advantages to build on

2. Choosing the right competitive advantages

3. Selecting an overall positioning strategy

Identifying possible competitive advantages
Competitive advantage – the extent to which a company can position itself as

providing superior value.

Competitive advantage is achieved via differentiation.

Product differentiation
– Features, performance, style, design
– Consistency, durability, reliability, reparability

Services differentiation
– Speedy, convenient, or careful delivery
– Installation, repair, customer training or consultation

Channel differentiation
– Channel's coverage, expertise, and performance

Personnel differentiation
Better-trained personnel exhibit six characteristics:
Competence –The employees possess the required skill and knowledge.

Courtesy –The employees are friendly, respectful and considerate.

Credibility –The employees are trust worthy.

Reliability–The employees perform the service consistently and accurately.

Responsiveness–The employees respond quickly to customer’s requests

and problems.

Communication–The employees make an effort to understand the

customer and communicate clearly.

Image differentiation

– May affect decision e.g. when products / services otherwise look alike

– Requires creativity and hard work

– Image must be supported by everything the company does

Choosing the right competitive advantages
Three basic errors
i. Under positioning – Failing to really position the company at all.
ii. Over positioning – Giving buyers too narrow a picture of the company.

iii. Confused positioning – Leaving buyers with a confused image of a company.

Which differences to promote? (not all differences are meaningful)

 Important – highly valued benefit to customers
 Distinctive – competitors do not offer, or company can offer it in a more distinctive way
 Superior – difference is superior compared to customer alternatives to get the same
benefit
 Communicable – can be communicated, visible to buyers
 Preemptive – competitors cannot easily copy
 Affordable – buyers can afford to pay the difference
 Profitable – difference can be introduced profitably
3. Selecting an overall positioning strategy
Consumers typically choose products with greatest value.

Full positioning of the brand is called the brand’s value

proposition.
Potential value propositions include:
* More for More- High quality/Upscale product, high price
* More for the Same- More value for same price
* More for Less– A “winning proposition” - but often not achievable
* The Same for Less- Same value but cheaper
* Less for Much Less- Customers that settle for less than optimal quality to
get cheaper price