UNIT – 2

Marketing Segmentation
BY
DR. HIMANI GREWAL
Market Segmentation
 Market segmentation is a business practice that brands use to
divide their target market into smaller, more manageable
groups of people based on common ground they share to
optimize their marketing, advertising, and sales efforts.
 Simply put, customers of each market segment have similar
characteristics that businesses can leverage to advance their
efforts.
Features
 Market segmentation can help you to target just the people
most likely to become satisfied customers of your company
or enthusiastic consumers of your content.
 To segment a market, you split it up into groups that have
similar characteristics.
 You can base a segment on one or more qualities.
 Splitting up an audience in this way allows for more precisely
targeted marketing and personalized content.
Importance of Market Segmentation
 Market segmentation can help you to define and better
understand your target audiences and ideal customers.
 If you’re a marketer, this allows you to identify the right
market for your products and then target your marketing
more effectively.
 Say, for example, you’re a marketer who’s advertising a new brand
of dog food.
 You could split an audience into segments based on whether they
have a dog. You could then segment that audience further based on
what kind of dog they have and then show them ads for food
formulated for their dog’s breed.
 Market segmentation allows you to target your content to the
right people in the right way, rather than targeting your entire
audience with a generic message.
 This helps you increase the chances of people engaging with your
ad or content, resulting in more efficient campaigns and improved
return on investment (ROI).
Types of Marketing Segmentation
 DEMOGRAPHIC SEGEMENTATION
 BEHAVIOURAL SEGMENTATION
 PSYCHOGRAPHIC SEGMENTATION
 GEOGRAPHIC SEGMENTATION
Demographic Segmentation
 Demographic segmentation is one of the most common
forms.
 It refers to splitting up audiences based on
observable, people-based differences.
 These qualities include things like age, gender, marital status,
family size, occupation, education level, income,
race, nationality and religion.
 One benefit of this kind of segmentation is that the
information is relatively easily accessible and low-cost to
obtain.
 Some products are targeted explicitly towards a specific
demographic.
 One personal care company, for example, might make two
deodorant products — one labeled as men’s deodorant and
one labeled as women’s deodorant.
 Automotive companies often segment their audience by
income and market different makes and models of cars to
each segment.
 One company may have a luxury brand, an economy brand
and a mid-range brand.
 The more specific the audience of people interested in your
brand, the more beneficial targeting can be.
 For example, there’s no reason to market dental tools to
anybody but dentists.
 Marketing them to a broad audience would result in wasted
ad dollars.
 Even if you’re selling a product with broad appeal, customer
segmentation can help you tailor your messaging to different
groups to better engage with them.
 An example of demographic market segmentation could be
marketing a retirement service to older citizens.
 Behavioral Segmentation
 You can also segment your market based on consumers’
behaviors, especially regarding your product.
 Behavioral segmentation focuses on specific reactions, i.e.
the consumer behaviors, patterns and the way customers go
through their decision-making and purchasing processes.
 The attitudes the public has towards your brand, the way they use
it and their awareness are examples of behavioral segmentation.
 Collecting this type of data is similar to the way you would find
psychographic data.
 This allows marketers to develop a more targeted approach.
Psychographic Segmentation
 Psychographic segmentation consists of grouping the target
audience based on their lifestyle, attitudes and interests.
 Psychographic segmentation focuses on the intrinsic traits
your target customer possesses.
 Psychographic traits can range from values, personalities,
interests, attitudes, conscious and subconscious motivators,
lifestyles, and opinions.
 To understand your target customers on this level, methods
such as focus groups, surveys, interviews, and case
studies can all prove successful in compiling this type of
conclusion.
 Think about the lifestyle of someone who lives in a small,
beach town and surfs for a living versus someone who lives in
a big city and working in a corporate house.
 Each of their wants and needs on a daily basis are incredibly
different, and marketers must recognize those differences to
be successful.
 For example, a consumer who is very active with outdoor
activities like camping, hiking and skiing would more likely
be interested in tents, hiking boots and ski shoes than
someone who spends lots of time reading indoors. In
marketing, much of this information is procured through
surveys or other data that give a company a better picture of
a consumer's lifestyle and interests to better target their
specific niches.
Geographic Segmentation
 Geographic segmentation, splitting up your market based on their
location, is a basic but highly useful segmentation strategy.
 A customer’s location can help you better understand their needs
and enable you to send out location-specific ads.
 There are several kinds of geographic segmentation. The most
basic is identifying users based on their locations such as their
country, state, county code.
 You can also identify consumers based on the characteristics of the
area they live in, such as its climate, the population density and
whether it’s urban, suburban or rural.
 Identifying characteristics can require you to get more specific
since one county could have rural, suburban and urban areas.
 For example, marketing to Spanish-speaking consumers
would be very different than marketing to English-speaking
consumers.
 Or, a company selling heaters would likely need to know
where their customers in colder climates were as opposed to
those in warmer climates who may have less need of their
product.
Benefits of Market Segmentation
 Increased resource efficiency. Marketing segmentation
allows management to focus on certain demographics or
customers. Instead of trying to promote products to the
entire market, marketing segmentation allows a focused,
precise approach that often costs less compared to a broad
reach approach.
 Stronger brand image. Marketing segment forces
management to consider how it wants to be perceived by a
specific group of people. Once the market segment is
identified, management must then consider what message to
craft.
 Greater potential for brand loyalty. Marketing segmentation
increases the opportunity for consumers to build long-term
relationships with a company. More direct, personal marketing
approaches may resonate with customers and foster a sense of
inclusion, community, and a sense of belonging.
 Stronger market differentiation. Market segmentation gives
a company the opportunity to pinpoint the exact message they
way to convey to the market and to competitors.
 Better targeted digital advertising. Marketing segmentation
enables a company to perform better targeted advertising
strategies. This includes marketing plans that direct effort towards
specific ages, locations, or habits via social media.
Market segmentation objectives

 There are different market segmentation objectives. Following are:

 Product: Creating successful products is one of the main objectives of
organizations and one of the reasons why they conduct market research.
This allows you to add the right features to your product and will also
help you reduce costs to meet the needs of your target audience.
 Price: Another objective of market segmentation is to establish the right
price for your products. Identifying which is the public that will be
willing to pay for it.
 Promotion: It helps you to target the members of each segment and
select them in different categories so that you can direct your strategies
appropriately.
 Place: The ultimate goal of segmentation is to decide how you offer a
product to each group of consumers and make it pleasant to them.
5 steps to implement a market
segmentation strategy
 Define your market: At this point of the segmentation you should
focus on discovering how big the market is, where your brand fits and if
your products have the capacity to solve what it promises.
 Segment your market: This step consists of choosing which of the
types best suits your brand.
 Understand your market: Ask your customers the right questions,
depending on the type you chose. You must know your target audience
in detail.You can use online surveys to get their answers.
 Build your customer segment: After collecting responses, you need
to perform data analysis to create dynamic segments unique to your
brand.
 Test your strategy: Make sure you have correctly interpreted your
survey data by testing it with your target audience. This will help you to
revisit your market segmentation strategies and make the necessary
changes.
 Advantages of market segmentation

 Knowing what market segmentation is and the benefits it has for your
organization will help you implement it correctly. Here are some of its
advantages:
 Create stronger marketing messages: When you know who you are
targeting, you can create strong, personalized messages that respond to the
needs and wants of your target audience.
 Find the ideal marketing strategies:You may not know which is the
right strategy to attract the ideal audience. Market segmentation allows you
to know the audience, create a plan that will work successfully and
determine better solutions and methods to reach them.
 Design targeted advertising: Market segmentation allows you to target
your advertising to the audience in a successful and effective way, knowing
their age, location, buying habits, interests, etc.
 Attract potential customers: By sending direct and clear marketing
messages, you attract the right audience and are more likely to convert them
into buyers.
 Differentiate your brand from the competition: By
creating messages specific to your value proposition, you can stand
out from the competition. Segmentation allows you to
differentiate your brand by focusing on specific customer needs
and characteristics.
 Focus your efforts: Allows you to identify new marketing
opportunities and avoid distractions that take you away from your
target market.
 Create a customer connection: When you know what your
customers want and need, you can create effective strategies. This
allows you to create strong bonds between your brand and the
customer to create brand loyalty and customer satisfaction.
Nature of a Market Segment

 A market segment needs to be homogeneous. There should be

something common among the individuals in the segment that the
marketer can capitalise on.
 Marketers also need to check that different segments have
different distinguishing features which make them unique.
 But segmenting requires more than just similar features.
Marketers must also ensure that the individuals of the
segment respond in a similar way to the stimulus.
 That is, the segment must have a similar type of reaction to the
marketing activities being pitched.
 A good market segment is always externally heterogeneous
and internally homogeneous
Examples Of Market Segmentation

 Market segmentation is a common practice among all the

industries. It is not possible for a marketer to address the mass
with same marketing strategy.
 Here are some examples of market segmentation to prove this
point.
 Beauty Products
 While marketing beauty products, marketers often segment
the target market according to the age of the users, the skin type,
and also the occasion. A perfect example of this is Olay.
 The company developed its ‘Age Defying’ product range to cater
to mature adults and ‘Clearly Clean’ range to cater to young adults
and teens.
 Sports
 Sports brands like Nike, Adidas, Reebok, etc. often segment
the market based on the sports they play which help them
market the sports-specific products to the right audience.
FACTORS AFFECTING MARKET
SEGMENTATION
 1. Nature of demand
 A commodity having wide demand the extent and size of the
market will be large and contrary to it the size and extent of
the market will be Limited.
 For example, Silver, Gold, sugar, and food-grains have a
wide market while the demand for bangles, Gandhian cap,
and Nehru jacket are limited to India only.
 2. Durability
 Perishable goods like vegetables, eggs, milk, bread, and
butter have a limited market while durable goods namely
T.V., radio, vehicles, gold, silver have a wide market.
 3. Banking and Financial System
 In a country where there is well developed organized money
credit, banking and financial system are in existence the market is
widened because payments are quickly finalized.
 On the other hand, if the banking and financial system is not well
developed and organized the markets Limited.
 4. Portability
 The goods having heavyweight and prices are low the market is
limited while those goods which are easily portable and prices are
high have the large size and extent of the market.
 Thus, Bricks, cement other building materials have a small size
and extend market while silver and gold have a large size and
extend the market.
 5. Piece of and Security of Life and Property
 If there is peace in the country and life and property are protected by
the government the business activities will increase in the market is
widened.
 If there is no internal peace and security in the market is limited.
 6. Adequate Supply
 The goods and services having a flexible supply market will be widened
and the goods having inadequate supply will have a limited market.
 7. Substitutes
 A commodity having substitutes in the market will have a limited market
while no substitute commodity will be widely used and the size and
extent of the market are widened.
 Government Policy
 Domestic and foreign trade is affected by government policy relating to
exports and imports, license, protection, taxes, etc.
 If these policies are restricting the trade then the market will be Limited
and when there are liberal policies the market is widened.
 10. Availability of Means of Communication and
Transport
 In a country where there are cheap, quick, and adequate
means of communication and transport available the goods
are transferred from one part of the country to another and
the market is widened.
 Contrary to it the market is limited because goods cannot be
transferred from one place to another.
Market Aggregation

 The term ‘market aggregation’ is used to refer to that marketing

process in which a particular product or service is marketed to a
large set of audiences or consumers, having the similar kind
of needs and demands thus, giving a heavy brand exposure.
 Market aggregation is also known as ‘mass marketing’ or
‘undifferentiated marketing.
 Market aggregation is a marketing strategy in which marketing is
done to a mass number of people belonging to the same segment
of demographics having similar kinds of needs and wants.
 In such type of marketing process, only a particular segment of
customers is targeted who are having the same kind demands.
 Thus for example, if there are products like sugar, then
almost every consumer will need it, and they will buy it
irrespective of which company it belongs to if and only if
marketing is done in the right manner.
 Thus these types of products are generally sold by adopting
the strategy of market aggregation.
 Therefore, whenever the businesses employ mass marketing
campaigns, then the companies try to market a large number
of their products and services over the long term of duration.
Market Targeting
 We have already discussed market segmentation and learnt
that companies are unable to reach all customers in the market.
 The company cannot fulfill all customers needs that is too large.
 Therefore, to solve this problem marketers segment the market
into small segments. After this, one should target those segments
which can be better served is market targeting.
 There are some businesses who believe that everyone will be their
customer. It is not true.
 Targeting is focused on evaluating available segment’s
attractiveness and select one or more segments to serve.
 You only want those people who have a need for the products and
services you are offering.
 Many of your customers belong to multiple target markets at
a time, for example, for a male who is a man, a father and a
husband.
 Each category has some products and services that he needs
to fulfil his wants, needs and responsibilities in each
respective position.
 Here you noticed that everything about him puts him in a
target market for some marketers.
 Market Targeting Definition
 A market is segmented using age, gender, income, education,
lifecycle, social status, social class and many more.
 After identifying segmentation few segments are selected to
reach target customers. This process of evaluating and selecting
market segments is known as market targeting.
 Market Targeting Process
 There are two steps of market targeting process, the first step is to
evaluate market segmentation and select those segments that suit
the business.
 In the second step, marketers select appropriate market targeting
strategies.
 Step1. Evaluation Market Segments
 The market targeting process involves assessing those segments
marketers already identified in the market segmentation. But
when we talk about evaluating market segments, it is based on
certain criteria. Business owners and marketers must answer these
questions while assessing the market segments.
 What are the sizes of the segments I am looking for?
 What are the demographics of identified segments?
 What is the competition level of each segment?
 What is the growth potential in the segments?
 What segments can help to achieve company goals?
 How to best utilize company resources pursuing the segments?
 Step 2. Market Targeting Strategies
 In today's’ business environment every business needs market
targeting strategies. Targeting the right market is very important.
Here we will discuss four types of market targeting strategies
with examples.
Alternative Strategies (Methods) for
Market Targeting:
 1. Single Segment Concentration:
 It is the simplest case. The company selects only a single segment as target
market and offers a single product. Here, product is one; segment is one. For
example, a company may select only higher income segment to serve from
various segments based on income, such as poor, middleclass, elite class, etc. All
the product items produced by the company are meant for only a single
segment.
 2. Selective Specialization:
 In this option, the company selects a number of segments. A company selects
several segments and sells different products to each of the segments. Here,
company selects many segments to serve them with many products. All such
segments are attractive and appropriate with firm’s objectives and resources.
 In our example, if the company X produces plasma TV as well as Walkman, the
two different types of products obviously for two different types of markets,
then it can be cited as an example of Selective Segment Specialization strategy.
 3. Market Specialization:
 This strategy consists of serving many needs of a particular segment.
Here, products are many but the segment is one. The firm can gain a
strong reputation by specializing in serving the specific segment.
 Company provides all new products that the group can feasibly use. But,
reduced size of market, reduced purchase capacity of the segment, or
the entry of competitors with superior products range may affect the
company’s position.
 In our example, the company X can implement Market Specialization
strategy by producing all sorts of home appliances like TV, washing
machine, refrigerator and micro oven for middle class people.
 Here the chosen segment is the middle class and the firm specializes in
that market only. Sudha Publications Pvt. Ltd. publishes and sells books
for the students and job-hunters that include competition books (CAT,
IIT-JEE, IAS), general knowledge books and personality development
books.
 4. Product Specialization:
 In this alternative, a company makes a specific product, which can
be sold to several segments. Here, product is one, but segments
are many. Company offers different models and varieties to meet
needs of different segments. certain products to several different
types of potential customers.
 In our example, if the company X produces only a particular type
of thing like toaster that is consumed by all type of people, they
we can say that the company uses Product Specialisation strategy.
 Product specialisation promises strong recognition of customer
within the product areas. Super Precision Components supply
small nuts and screws for use in military, industry and daily use.
 5. Full Market Coverage:
 In this strategy, a company attempts to serve all the customer
groups with all the products they need. Here, all the needs of
all the segments are served. Only very large firm with overall
capacity can undertake a full market coverage strategy.
 POSITIONNING
 Positioning in marketing is a strategic process that involves
creating an identity/ image of the brand or product
within the target customers’ minds.
 The process indicates how you differentiate your product/
service from that of your competitors and then determine which
market niche to fill.
 A company’s marketing positioning strategy is affected by plenty
of variables related to customers’ requirements and motivations,
as well as by its competitors’ actions.
 Market Positioning refers to the ability to influence consumer
perception regarding a brand or product relative to competitors.
The objective of market positioning is to establish the image or
identity of a brand or product so that consumers perceive it in a
certain way.
 For example:
 A handbag maker may position itself as a luxury status symbol
 A TV maker may position its TV as the most innovative and
cutting-edge
 A fast-food restaurant chain may position itself as the provider of
cheap meals
 Let’s see some typical examples of marketing positioning:
 Tesla and Audi position themselves as a luxury status symbol
 Starbucks positions itself as a trusted source of upscale
quality coffee and beverage
 Microsoft and Apple position themselves as a tech company
that offers innovative and user-friendly products.
 Types of Positioning Strategies
 There are several types of positioning strategies. A few examples are
positioning by:
 Product attributes and benefits: Associating your brand/product
with certain characteristics or with certain beneficial value
 Product price: Associating your brand/product with competitive
pricing
 Product quality: Associating your brand/product with high quality
 Product use and application: Associating your brand/product with
a specific use
 Competitors: Making consumers think that your brand/product is
better than that of your competitors
Position Error
 Under positioning: Some companies discover that buyers have only a
vague idea of the brand. The brand is seen as just another entry in a
crowded marketplace.
 When Pepsi introduced its clear Crystal Pepsi in 1993, customers were
distinctly unimpressed. They didn’t see “clarity” as an important benefit
in a soft drink.
 https://www.casestudyinc.com/pepsi-crystal-fiasco/
 https://www.mashed.com/111261/crystal-pepsi-flop/
 A firm that has under-positioned a product has failed to
communicate a clear positioning to the end-consumer. This means that
the product positioning is vague or that the firm has tried to
communicate too much about the product (and the consumers are
confused about what the product stands for). In either case, the
positioning is quite weak and we have not effectively communicated any
real points-of-difference.
 Over positioning: Buyers may have too narrow an image
of the brand. For example, buyers think that Apple only
comes out with expensive products where Apple has a range
of products at different prices.
 Almost the opposite of under positioning, is referred to
as over-positioning. This is where we have over
emphasized one or two points of the product and the target
market now has been very narrow perception of what the
product offers.
 Confused positioning: buyers might have a confused image of
the brand resulting from the company’s making too many claims
or changing the brand’s positioning too frequently. This was the
case with Stephen job’s sleek and powerful next desktop
computer, which was positioning first for students, then for
engineers, and then for businesspeople, all unsuccessfully.

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honey-bunny-song-example-of-confused-positioning/

 Case study on NEXT computers
 Doubtful positioning: Buyers may find it hard to believe
the brand claims in view of the product’s features, price, or
manufacturer. Example-

 There is a subtle difference between doubt and confusion as
"doubt" is used when you don't believe or trust
something while "confusion" is used when you don't
understand the subject you are concerned with.
Steps to product Positioning

 Marketers with the positioning process try to create a

unique identity of a product amongst the customers.
 Know your target audience well
 Identify the product features
 Unique selling Propositions
 Know your competitors
 Ways to promote brands
 Maintain the position of the brand
Product Differentiation
 Product differentiation is a marketing strategy designed to
distinguish a company's products or services from the
competition.
 Successful product differentiation involves identifying and
communicating the unique qualities of a product or company
while highlighting the distinct differences between that
product or company and its competitors.
 Product differentiation goes hand in hand with developing a
strong value proposition so that a product or service is
attractive to a target market or audience.
 Product differentiation strategy helps Product Managers
answer these key questions “Why should a targeted customer
buy my product?” and “How can I make my product stand out
from the rest?”
 The seemingly easy answer is: because my product is
different from the others on the market.
 Product Managers often shoot for the easiest way to create
product differentiation: they add more features. They
productize their way into differentiation.
Vertical Differentiation

 An example of vertical differentiation is when customers

rank products based on a measurable factor, such as price or
quality, and then choose the most highly ranked item.
 Distinctions in products that can be evaluated in terms of
quality. It’s a case where it is possible to say that one good is
better than the other.
 Consumers can say “Product A is better than Product B.”
 For example, in the pharmaceutical industry, a person can
decide whether to get a branded medication or a generic.
They know the quality of each one.
 A feature that also differentiates the two medications is
‘price.’ Brand names are much more expensive than generic
medications.
 Although the measurements are objective, each customer
chooses to measure a different factor. For example, a
restaurant might top one customer's list because their meals
are lower in calories. Another customer might choose a
different restaurant because the meals are cheaper, and price
is the most important factor for them.
Horizontal Differentiation

 An example of horizontal differentiation is when

customers choose between products based on personal
preference rather than an objective measurement.
 Distinctions in products that cannot be evaluated in
terms of quality. E.g.: Mineral water brands.
 For example, whether someone chooses a vanilla, chocolate,
or strawberry milkshake comes down to personal taste. If
most of the products on the market cost about the same and
have many of the same features or qualities, the purchase
decision is based on subjective preference.
 For example, when considering drinks, consumers may
choose one because of its taste. However, they cannot
determine which one is superior in quality.
 When we choose between a Coke or Pepsi, for example,
taste drives our decision. Regarding their quality, we have no
idea which one is best.
Mixed Differentiation

 More complex purchases tend to consider a mix of vertical

and horizontal differentiation. When buying a car, for
example, a consumer may consider safety metrics and gas
mileage, both of which are objective measures and examples
of vertical integration.
 However, the consumer may also consider what colors the
car is available in or the brand image. Each consumer will
place a different weight of importance on each of the
criteria.
 Differentiation based on numerous characteristics.
BRANDING
 Branding can be the name, logo, concept, etc., which differentiate the
product or service from the other competitors in the market.
 Reasons for Branding
 Branding is aimed at promoting your own product. Let us now see why
branding a product is essential.
 It makes the promotion process easy.
 It increases the rate of success in advertising.
 It creates an image of the product in customers’ minds, which he/she can
relate to.
 Brand signifies the organization.
 Brand creates product loyalty and stabilizes sales.
 It differentiates the product from other competitors in market.
 It makes the introduction of a new product easier.
 Branding creates a difference from other products, which helps to tackle
price competition.
 Branding of a product has many upsides; by creating a brand, the product can
be stabilized in the market for a longer duration.
Branding Strategies

 Branding strategy can be divided into the following two

types-
 Producer strategy
 Middleman strategy
 Producer Strategy
 The following need to be considered for producer strategies −
 Marketing under producer’s brand
 Developing a market preference for branded parts or materials
 Marketing the product under a renowned middleman brand
 This strategy is used by the companies or manufacturers to build a
brand.
 Middleman Strategy
 In this strategy, the manufacturer uses a known distributor brand to
advertise the product.
 It is the middlemen or distributor brand policy.
 It is used by companies without adequate finance for advertisement
and promotion.
 This can be an advantage to the producer in market.
Positioning a Brand

 Positioning a brand means occupying a unique place in the

minds of the consumers. The following are the various ways
for positioning a brand −
 Taking benefit from a trending situation
 Connecting various uses
 Positioning according to consumer lifestyle
 Advertising the benefits
 Accruing a competitive position
 Benefits offered by the product
Brand Equity

 Brand equity can be described as the value of a well-established brand name. A

product of a popular brand can generate more revenue as compared to an
unknown brand. Consumers have a perspective that a product from well know
brand will be better in terms of quality than others. This gives an advantage to a
branded product over an unknown product.
 Elements of Brand Equity
 Brand equity valuation is difficult and doesn’t have any basic criteria. Some of
the elements associated to it include −
 Consumer loyalty
 Awareness of brand
 Quality of product
 Association with brand
 Proprietary assets owned by the brand
 Elements of brand equity add a value to the brand; a successful brand has all the
elements of brand equity.
 Brand Benefits
 A brand has various advantages compared to unknown products.
Some of the benefits are as follows −
 It increases customer confidence in purchasing decision
 It increases efficiency and effectiveness of advertisement and
promotion
 Brand loyalty is increased
 Products can be priced higher for bigger margin and higher
Return On Investment (ROI)
 Extension of brand
 Leverage in trade
 Unique position of brand
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