CHAPTER THREE: UNDERSTANDING THE MARKET

1.1. What is a market?

The concept of exchange leads to the concept of a market. A market is the set of actual and
potential buyers of a product. These buyers share a particular need or want that can be satisfied
through exchange. Thus, the size of a market depends on the number of people who exhibit the
need, have resources to engage in exchange, and are willing to offer these resources in exchange
for what they want.
Originally the term market stood for the place where buyers and sellers gathered to exchange
their goods, such as a village square. Marketers, however, see the sellers as constituting an
industry and the buyers as constituting a market. The sellers and the buyers are connected by
four flows. The sellers send products or services and communications to the market; in return,
they receive money and information.

The relationship between the industry and the market

Types of market
There are several types of markets that marketers provide their offerings. This includes:
consumer markets (markets that consist of individuals and households that buy goods and
services for personal consumption), business markets (markets that buy goods and services for
further processing or use in their production processes), reseller markets (markets that buy goods
and services to resell at a profit), government markets (markets that consist of government
agencies that buy goods and services to produce public services or transfer the goods and
services to others who need them), and international markets (markets that consist of those
buyers in other countries, including consumers, producers, resellers, and governments). In this
chapter we focus more on consumer markets and its buying behavior, and business markets and
its buying behavior.
1.2. Consumer market and consumer buying behavior
The aim of marketing is to meet and satisfy target customers’ needs and wants better than
competitors. Marketers must have a thorough understanding of how consumers think, feel, and
act and offer clear value to each and every target consumer.

Consumer buyer behavior refers to the buying behavior of final consumers (individuals and
households that buy goods and services for personal consumption). Buying behavior is never
simple, yet understanding it is an essential task of marketing management. All of these final
consumers combine to make up the consumer market. Consumer market is a market that
consists of all the individuals and households that buy or acquire goods and services for personal
consumption.

1.2.1. Factors affecting consumer behavior

A consumer’s buying behavior is influenced by cultural, social, personal and Psychological
factors. For the most part, marketers cannot control such factors, but they must take them into
account.
1. Cultural factors
Cultural factors exert a broad and deep influence on consumer behavior. Marketers need to
understand the role played by these cultural factors which includes buyer’s culture, subculture,
and social class.
A. Culture
Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of
society from family and other important institutions. It is the most basic cause of a person’s
wants and behavior. Every group or society has a culture, and cultural influences on buying
behavior may vary greatly from country to country. A failure to adjust to these differences can
result in ineffective marketing or embarrassing mistakes.
B. Subculture
Each culture contains smaller subcultures. Subculture is group of people with shared value
systems based on common life experiences and situations. It includes nationalities, religions,
racial groups, and geographic regions. Many subcultures make up important market segments,
and marketers often design products and marketing programs tailored to their needs.
C. Social class
Almost every society has some form of social class structure. Social classes are society’s
relatively permanent and ordered divisions whose members share similar values, interests, and
behaviors. Social class is measured as a combination of occupation, income, education, wealth,
and other variables. Marketers are interested in social class because people within a given social
class tend to exhibit similar buying behavior.
2. Social factors
A consumer’s behavior also is influenced by social factors such as reference groups, family, and
social roles and status.
A. Reference groups
Reference groups are all the groups that have a direct or indirect influence on their attitudes or
behavior. Groups having a direct influence are called membership groups. Some of these are
primary groups with whom the person interacts fairly continuously and informally, such as
family, friends, neighbors, and coworkers. People also belong to secondary groups, such as
religious, professional, and trade-union groups, which tend to be more formal and require less
continuous interaction.
People are also influenced by groups to which they do not belong. Aspirational groups are
those a person hopes to join; dissociative groups are those whose values or behavior an
individual rejects. Where reference group influence is strong, marketers must determine how to
reach and influence the group’s opinion leaders.
B. Family
Family members can strongly influence buyer behavior. The family is the most important
consumer buying organization in society, and it has been researched extensively. Marketers are
interested in the roles and influence of the husband, wife, and children on the purchase of
different products and services.
C. Social roles and status
The person’s position in each group can be defined in terms of both role and status. A role
consists of the activities people are expected to perform according to the people around them.
Each role carries a status reflecting the general esteem given to it by society. People usually
choose products appropriate to their roles and status.
3. Personal factors
A buyer’s decisions also are influenced by personal characteristics such as the buyer’s age and
life-cycle stage, occupation, economic situation, lifestyle, and personality and self-concept.
A. Age and life-cycle stage
People change the goods and services they buy over their lifetimes. Tastes in food, clothes,
furniture, and recreation are often age related. Buying is also shaped by the stage of the family
life cycle: the stages through which families might pass as they mature over time. Life stage
changes usually result from demographics and life-changing events: marriage, having children,
purchasing a home, divorce, children going to college, changes in personal income, moving out
of the house, and retirement. Marketers often define their target markets in terms of life-cycle
stage and develop appropriate products and marketing plans for each stage.
B. Occupation
A person’s occupation affects the goods and services bought. Marketers try to identify the
occupational groups that have an above-average interest in their products and services. A
company can even specialize in making products needed by a given occupational group.
C. Lifestyle
People coming from the same subculture, social class, and occupation may have quite different
lifestyles. Lifestyle is a person’s pattern of living as expressed in his or her psychographics. The
lifestyle concept can help marketers understand changing consumer values and how they affect
buying behavior. Consumers don’t just buy products; they buy the values and lifestyles those
products represent.
D. Personality and self-concept
Personality refers to the unique psychological characteristics that distinguish a person.
Personality is usually described in terms of traits such as self-confidence, dominance, sociability,
autonomy, defensiveness, adaptability, and aggressiveness. Personality can be useful in
analyzing consumer behavior for certain product or brand choices.
4. Psychological factors
A person’s buying choices are further influenced by four major psychological factors:
motivation, perception, learning, and beliefs and attitudes.
A. Motivation
A person has many needs at any given time. Some are biological, arising from states of tension
such as hunger, thirst, or discomfort. Others are psychological, arising from the need for
recognition, esteem, or belonging. A need becomes a motive when it is aroused to a sufficient
level of intensity. A motive is a need that is sufficiently pressing to direct the person to seek
satisfaction.
B. Perception
A motivated person is ready to act. How the person acts is influenced by his or her own
perception of the situation. All of us learn by the flow of information through our five senses:
sight, hearing, smell, touch, and taste. However, each of us receives, organizes, and interprets
this sensory information in an individual way. Perception is the process by which people select,
organize, and interpret information to form a meaningful picture of the world.
C. Learning
When people act, they learn. Learning describes changes in an individual’s behavior arising
from experience. Learning theorists say that most human behavior is learned. Learning can
influence a consumer’s response to his or her interest in buying the product.
D. Beliefs and attitudes
A belief is a descriptive thought that a person has about something. Beliefs may be based on real
knowledge, opinion, or faith and may or may not carry an emotional charge. Marketers are
interested in the beliefs that people formulate about specific products and services because these
beliefs make up product and brand images that affect buying behavior. If some of the beliefs are
wrong and prevent purchase, the marketer will want to launch a campaign to correct them.
People have attitudes regarding religion, politics, clothes, music, food, and almost everything
else. Attitude describes a person’s relatively consistent evaluations, feelings, and tendencies
toward an object or idea. Attitudes put people into a frame of mind of liking or disliking things,
of moving toward or away from them.

5. Economic Factors
The purchasing quirks and decisions of the consumer largely rely upon the market or nation’s
economic circumstances. The more that a nation is prosperous and its economy stable, the larger
will be the money supply of the market and the consumer’s purchasing power. A strong, healthy
economy brings purchasing confidence while a weak economy reveals a strained market, marked
by a weakened purchasing power and unemployment.
Some significant economic factors include:
a) Personal Income
Our personal income is the criteria that dictate the level of money we will spend on buying goods
or services. There are primarily two kinds of personal incomes that a consumer has namely
disposable income and discretionary income. Our disposable income is mainly the income that
remains in hand after removing all necessary payments such as taxes. The greater the disposable
personal income the greater would be the expenditure on several products, and the same would
be the case when it is the other way round.
Meanwhile, our discretionary personal income would be the income that remains after managing
all the basic life necessities. This income is also used when it comes to purchasing shopping
goods, durables, luxury items, etc. An escalation in this income leads to an improvement in the
standard of living which in turn leads to greater expenditure on shopping goods.
b) Family Income
Our family income is actually an aggregate of the sum total of the income of all our family
members. This income also plays a considerable role in driving consumer behavior. The income
that remains after meeting all the basic life necessities is what is then used for buying various
goods, branded items, luxuries, durables, etc.
c) Income Expectations
It's not just our personal and family income that impacts our buying behavior, our future income
expectations also have a role to play. For instance, if we expect our income to rise in the future,
we would naturally spend a greater amount of money in purchasing items. And of course, in case
we expect our income to take a plunge in the near future, it would have a negative influence on
our expenditure.
d) Consumer Credit
The credit facilities at our behest also impact our purchasing behavior. This credit is normally
provided by sellers, either directly or indirectly via banks or financial institutions. If we have
flexible credit terms as well as accessible EMI schemes, our expenditure on items is likely to
increase and in less flexible credit terms would result in the opposite.
e) Liquid Assets
Even the liquid assets we’ve maintained influence our purchasing behavior. In case you are
wondering, these are the assets that get promptly converted into cash such as stocks, mutual
funds, our savings or current accounts. If we have more liquid assets, there is a greater likelihood
of us spending more on luxuries and shopping items. Lesser liquid assets meanwhile result in
lesser expenditure on these items.
f) Savings
The savings generated from our personal income are also regulating our buying behavior. For
instance, if we take the decision of saving more from our income for a certain period of time, our
expenditure on goods and services would be lesser and for that period and if we wish to save
less, our expenditure on such items would increase.
We undertake purchase decisions nearly every day, be it big or small. For every buying decision
made, we think of fulfilling a need. This need can be steered by a range of factors, which have
been elaborately highlighted over here.

1.2.2. Types of consumer buying decision behavior

Consumer decision making varies with the type of buying decision. More complex decisions
usually involve more buying participants and more buyer deliberation. The consumer buying
decision behavior is classified into four types based on the degree of buyer involvement and the
degree of differences among brands. This are: complex buying behavior, dissonance-reducing
buying behavior, habitual buying behavior, and variety-seeking buying behavior.

1. Complex buying behavior

Complex buying behavior is a consumer buying behavior in situations characterized by high
consumer involvement in a purchase and significant perceived differences among brands.
Consumers involve in complex buying behavior when the product is expensive, risky, purchased
infrequently, and highly self-expressive. This buyer will pass through a learning process, first
developing beliefs about the product, then attitudes, and then making a thoughtful purchase
choice. Marketers of high involvement products must understand the information-gathering and
evaluation behavior of high-involvement consumers and help buyers to learn about product-class
attributes and their relative importance by differentiate their brand’s features. Marketers need to
influence the consumers final brand choice.

2. Dissonance-reducing buying behavior

Dissonance-reducing buying behavior occurs when consumers are highly involved with an
expensive, infrequent, or risky purchase but see little difference among brands. In this case,
because perceived brand differences are not large, buyers may shop around to learn what is
available but buy relatively quickly. They may respond primarily to a good price or purchase
convenience. After the purchase, consumers might experience post purchase dissonance (after-
sale discomfort) when they notice certain disadvantages of the purchased brand or hear favorable
things about brands not purchased. To counter such dissonance, the marketer’s after-sale
communications should provide evidence and support to help consumers feel good about their
brand choices.

3. Habitual buying behavior

Habitual buying behavior occurs under conditions of low-consumer involvement and little
difference among brands. For example, take table salt. Consumers have little involvement in this
product category—they simply go to the store and reach for a brand. If they keep reaching for the
same brand, it is out of habit rather than strong brand loyalty. Consumers appear to have low
involvement with most low-cost, frequently purchased products.

4. Variety-seeking buying behavior

Variety-seeking buying behavior is a consumer buying behavior in situations characterized by
low consumer involvement but significant perceived brand differences. In such cases, consumers
often do a lot of brand switching. In such product categories, the marketing strategy may differ
for the market leader and minor brands. The market leader will try to encourage habitual buying
behavior by dominating shelf space, keeping shelves fully stocked, and running frequent
reminder advertising. Challenger firms will encourage variety seeking by offering lower prices,
special deals, coupons, free samples, and advertising that presents reasons for trying something
new.

1.2.3. The buyer decision process in consumer market

There are five stages that buyers pass through to reach a buying decision. Clearly, the buying
process starts long before the actual purchase and continues long after. This encourages the
marketer to focus on the entire buying process rather than just the purchase decision since
consumers pass through all five stages with every purchase.

Stage 1 Need recognition

It is the first stage of the buyer decision process in which the consumer recognizes a problem or
need. The need can be triggered both by internal stimuli and external stimuli. The marketer can
identify the stimuli that most often trigger interest in the product and can develop marketing
strategies that involve these stimuli.

Stage 2 Information search

It is the stage of the buyer decision process in which the consumer is aroused to search for more
information. The consumer may simply have heightened attention or may go into an active
information search. The consumer can obtain information from any of several sources: personal
sources (family, friends, and neighbors), commercial sources (advertising, salespeople, dealers,
packaging, and displays), public sources (mass media, consumer-rating organization) and
experiential sources (handling, examining, and using the product). The marketer should identify
consumers' sources of information and design its marketing mix to make prospects aware of and
knowledgeable about its brand.

Stage 3 Evaluation of alternatives

It is the stage of the buyer decision process in which the consumer uses information to evaluate
alternative brands in the choice set. The consumer ranks brands and forms purchase intentions.
Marketers should study buyers to find out how they actually evaluate brand alternatives. If
marketers know what evaluative processes go on, they can take steps to influence the buyer’s
decision.

Stage 4 Purchase decision

It is the stage of the buyer decision process in which the consumer actually buys the product. A
consumer's decision to change, postpone or avoid a purchase decision is influenced heavily by
perceived risk. Many purchases involve some risk taking. The marketer must understand the
factors that provoke feelings of risk in consumers and must provide information and support that
will reduce the perceived risk.

Stage 5 Post purchase behavior

It is the stage of the buyer decision process in which consumers take further action after purchase
based on their satisfaction or dissatisfaction with a purchase. If the product falls short of
expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if
it exceeds expectations, the consumer is delighted. This suggests that sellers should promise only
what their brands can deliver so that buyers are satisfied.

1.3. Business markets and business buying behavior

The business marketer needs to know: who are the major participants? In what decisions do they
exercise influence? What is their relative degree of influence? What evaluation criteria does each
decision participant use? The business marketer also needs to understand the major
environmental, interpersonal, and individual influences on the buying process.
Business buyer behavior refers to the buying behavior of the organizations that buy goods and
services for use in the production of other products and services that are sold, rented, or supplied
to others. Business market is a market that comprises all the organizations that buy goods and
services for use in the production of other products and services that are sold, rented, or supplied
to others.

1.3.1. Characteristics of business markets

In some ways, business markets are similar to consumer markets. Both involve people who
assume buying roles and make purchase decisions to satisfy needs. However, business markets
differ in many ways from consumer markets. The main differences include:
A. Market structure and demand
The business marketer normally deals with far fewer but far larger buyers than the consumer
marketer does. Business demand is derived demand: it is ultimately derived from the demand for
consumer goods. Many business markets have inelastic demand; that is, the total demand for
many business products is not much affected by price changes, especially in the short run.
Finally, business markets have more fluctuating demand. The demand for many business goods
and services tends to change more and more quickly than the demand for consumer goods and a
service does. A small percentage increase in consumer demand can cause large increases in
business demand.
B. Nature of the Buying Unit
Compared with consumer purchases, a business purchase usually involves more decision
participants and a more professional purchasing effort. Often, business buying is done by trained
purchasing agents who spend their working lives learning how to buy better. Therefore,
companies must have well-trained marketers and salespeople to deal with these well-trained
buyers.
C. Types of Decisions and the Decision Process
Business buyers usually face more complex buying decisions than do consumer buyers. Because
the purchases are more complex, business buyers may take longer to make their decisions. The
business buying process also tends to be more formalized than the consumer buying process.
Large business purchases usually call for detailed product specifications, written purchase
orders, careful supplier searches, and formal approval.

1.3.2. Major types of business buying situations

There are three major types of business buying situations. This are:

i) Straight rebuy situation

A business buying situation in which the buyer routinely reorders something without any
modifications. It is usually handled on a routine basis by the purchasing department.
ii) Modified rebuy situation
A business buying situation in which the buyer wants to modify product specifications, prices,
terms, or suppliers.
iii) New task situation
A business buying situation in which the buyer purchases a product or service for the first time.
In such cases, the greater the cost or risk, the larger the number of decision participants and the
greater the company’s efforts to collect information.

iii.3.3. Participants in the Business Buying Process

a) Users: - are members of the buying organization who will actually use the purchased
product or service.
 b) Influencers: - are people in an organization’s buying center who affect the buying
decision. They often help define specifications and also provide information for
evaluating alternatives.
c) Buyers: - are people in an organization’s buying center who make an actual purchase.
d) Deciders: - are people in an organization’s buying center who have formal or informal
power to select or approve the final suppliers.
e) Gatekeepers: - are people in an organization’s buying center who control the flow of
information to others.

iii.3.4. Major Influences on Business Buyers

Business buyers are subject to many influences when they make their buying decisions. They affected by
environmental, organizational, interpersonal, and individual factors.
Environmental Organizational Interpersonal Individual
The economy Objectives Influence Age/education
Supply condition Strategies Expertise Job position
Technology Structure Authority Motives
Politics/regulation Systems Dynamics Personality
Competition Procedures Preferences
Culture and customs Buying style

iii.3.5. The Business Buying Process

There are eight stages of the business buying process. Buyers who face a new-task buying
situation usually go through all stages of the buying process. Buyers making modified or straight
rebuys may skip some of the stages.
Stage 1 Problem recognition: The first stage of the business buying process in which someone
in the company recognizes a problem or need that can be met by acquiring a good or a service.
Stage 2 General need descriptions: It is the stage in the business buying process in which a
buyer describes the general characteristics and quantity of a needed item.
Stage 3 Product specification: It is the stage of the business buying process in which the buying
organization decides on and specifies the best technical product characteristics for a needed item.
Stage 4 Supplier search: It is the stage of the business buying process in which the buyer tries
to find the best vendors.
Stage 5 Proposal solicitation: The stage of the business buying process in which the buyer
invites qualified suppliers to submit proposals.
Stage 6 Supplier selection: It is the stage of the business buying process in which the buyer
reviews proposals and selects a supplier or suppliers.
Stage 7 Order-routine specifications
The stage of the business buying process in which the buyer writes the final order with the
chosen supplier(s), listing the technical specifications, quantity needed, expected time of
delivery, return policies, and warranties.
Stage 8 Performance review
The stage of the business buying process in which the buyer assesses the performance of the
supplier and decides to continue, modify, or drop the arrangement.
 CHAPTER FOUR: MARKET SEGMENTATION, TARGETING AND
POSITIONING

Introduction
A market can be seen as people or organizations with needs to satisfy, and the willingness to
spend money. However, within a total market, there is always some diversity among the buyers.
For example, not all consumers want the product at the same time. What we are seeing here is
that within the general market, there are groups of customers with different wants, buying
preferences, or product use behavior. This chapter deals with market segmentation, market
targeting and positioning.

4.1. Market segmentation

Markets consist of buyers, and buyers differ in one or more ways. They may differ in their
wants, resources, locations, buying attitudes and buying practices. Companies today recognize
that they cannot appeal to all buyers in the market place in the same way because, buyers are
too numerous, widely scattered, varied in their needs and companies also vary widely in their
abilities to serve different segments of the market. This needs the company to design strategies
to build the right relationships with the right customers. This can be done by identifying bases
for segmenting the market and develop segment profiles. Market segmentation is dividing a
market into smaller groups of buyers with distinct needs, or behaviors who might require
separate marketing mixes. Through market segmentation, companies divide large,
heterogeneous markets into smaller segments that can be reached more efficiently with
products and services that match their unique needs. A market segment consists of a group of
customers who share a similar set of needs and wants.

4.1.1. Levels of market segmentation

Market segmentation can be carried out at many different levels. Companies can practice no
segmentation (mass marketing), complete segmentation (micromarketing) or something in
between (segment marketing or niche marketing).

1. Mass marketing (undifferentiated marketing)

Here a firm attempts to serve all customers groups with all the products that they might need.
Mass marketing is a plan of action under which an organization treats its total market as a single
segment that is, as one market whose members are considered to be similar with respect to
demand for the product and thus develops a single marketing mix to reach most of the customers
in the entire market. Single marketing mix consists of:
 One pricing strategy
 One promotional program aimed at everybody
 One type of product with little/no variation
 One distribution system aimed at entire market

2. Segmented/differentiated/ marketing
Segmented marketing is a market coverage strategy in which a firm decides to target several
groups of market segments and designs separate offers for each. Here the firm selects a number
of segments, each objectively attractive and appropriate, given the firm’s objectives and
resources. There may be little or no synergy (interaction, agreement, cooperation) among the
segments, but each segment promises to be a moneymaker. These multi segment coverage
strategies have the advantage of diversifying the firm’s risk, even if one segment becomes
unattractive, the firm can continue to earn money in other segments. Developing a stronger
position within several segments creates more total sales than mass marketing across all
segments. But segmented marketing also increases the cost of doing business. Developing
separate marketing plans for the separate segments requires extra marketing research,
forecasting, sales analysis, promotion planning, and channel management. Segment marketing
offers several benefits over mass marketing. The company can market more efficiently, targeting
its products or services, channels and communications programmed towards only consumers that
it can serve best. The company can also market more effectively by fine-tuning its products,
prices and programs to the needs of carefully defined segments.

3. Niche marketing
Market segments are normally large, identifiable groups within a market. Niche marketing
focuses on subgroups within segments. A niche is a more narrowly defined group, usually
identified by dividing a segment into sub segments or by defining a group with a distinctive set
of traits that may seek a special combination of benefits. Niche marketers aim to understand their
customers’ needs so well that customers willingly pay a premium. an attractive niche involves:
customers that have a distinct set of needs; they will pay a premium to the firm that best satisfies
them; the niche is fairly small but has size, profit, and growth potential and is unlikely to attract
many competitors; and the niche gains certain economies through specialization.

4. Micro marketing
Micro marketing is the practice of tailoring products and marketing programs to suit the tastes of
specific individuals and locations. Micromarketing includes local marketing and individual
marketing. Local marketing involves tailoring brands and promotions to the needs and wants of
local customer groups - cities, neighborhoods and even specific stores. Individual marketing
involves tailoring products and marketing programs to the needs and preferences of individual
customers. Individual marketing has also been called markets-of-one marketing, customized
marketing and one-to-one marketing.

4.1.2. Segmenting consumer markets

There is no single way to segment a market. A marketer has to try different segmentation
variables alone and in combination. The major variables used in segmenting consumer markets
include geographic, demographic, psychographic and behavioral variables.

i) Geographic segmentation
Geographic segmentation is dividing a market into different geographical units such as
nations, countries, state, cities, density, climate etc. A company may decide to operate in one
or a few geographic areas or operate in all areas but pay attention to geographic difference in
needs and wants.
ii) Demographic segmentation
Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, race, and
nationality. Demographic factors are the most popular bases for segmenting customer groups
because consumer needs and wants often vary closely with demographic variables and
demographic variables are easier to measure than most other types of variables. Even when
market segments are first defined using other bases, such as benefits sought or behavior, their
demographic characteristics must be known in order to assess the size of the target market and to
reach it efficiently.
Some of demographic segmentations are:
A. Age and life cycle segmentation
Age and life cycle segmentation consists of offering different products or using different
marketing approaches for different age and life-cycle groups. Consumer needs and wants change
with age. The marketer must identify these age and life cycle stages to know their interest toward
the product they buy. Some companies use age and life cycle segmentation, offering different
products or using different marketing approaches for different age and life-cycle groups.
B. Gender segmentation
Gender segmentation divides a market into different groups based on sex. Men and women have
different attitudes and behave differently, based partly on genetic makeup and partly on
socialization. This segmentation form has long been used for clothing, cosmetics, toiletries, and
magazines.
C. Income segmentation
Income segmentation divides a market into different income groups. Marketers must remember
that they do not always have to target the affluent. Other income groups are also viable and
profitable market segments.
D. Occupation segmentation
Occupation segmentation refers to dividing a market based on the activities of the customers,
such as professional and technical, managers, officials, clerical, supervisors, sellers, operatives,
students, craft people, farmers, home makers, …etc

1. Psychographic segmentation
Psychographic segmentation divides a market into different groups based on social class,
lifestyle, or personality characteristics. People in the same demographic class can exhibit very
different psychographics characteristics. It includes social class segmentation, lifestyle
segmentation, and personality segmentation. As previously seen in, lifestyle also affects people’s
interest in various goods, and the goods they buy express those lifestyles. Personality variables
can also be used to segment markets. Marketers will give their products personalities that
correspond to consumer personalities.

2. Behavioral segmentation
Behavioral segmentation refers to dividing a market into groups based on consumer knowledge,
attitudes, uses, or responses to a product. Many marketers believe that behavioral variables can
include: Occasions, Benefits, User status, User rates, Loyalty status, and Readiness stage
segmentations.
A. Occasion segmentation
Occasion segmentation consists of dividing the market into groups according to occasions when
buyers get the idea to buy, actually make their purchase, or use the purchased item. Occasion
segmentation can help firms build up product usage.
B. Benefit segmentation
Benefit segmentation involves dividing the market into groups according to the different benefits
the consumers seek from the product. It requires finding the main benefits people look for in the
product class, the kinds of people who look for each benefit and the major brands that deliver
each benefit.
C. User status segmentation
User status segmentation divides the market into non-users, ex-users, potential users, first-time
users and regular users of a product. Potential users and regular users may require different kinds
of marketing appeal.
D. Usage rate segmentation
Markets can be segmented into light, medium, and heavy product users. Heavy users are often a
small percentage of the market but account for a high percentage of total consumption.
Marketers usually prefer to attract one heavy user rather than several light users, and they vary
their promotional efforts accordingly. Product users were divided into two halves, a light-user
and a heavy-user half, according to their buying rates for the specific products.
E. Loyalty status segmentation
A market can be segmented by consumer loyalty patterns. According to loyalty, buyers can be
divided into four groups: Hard-core loyal (consumers who buy one brand all the time), Split
loyal (consumers who are loyal to two or three brands), Shifting loyal (consumers who shift
from favoring one brand to another), and Switchers (consumers who show no loyalty to any
brand).
F. Buyer-readiness stage segmentation
A market consists of people in different stages of readiness to buy a product: Some are unaware
of the product, some are aware, some are informed, some are interested, some desire the product,
and some intend to buy. The relative numbers make a big difference in designing the marketing
program. Marketers segment the market by taking into consideration this stage of buyer-
readiness.

4.1.3. Segmenting business market

We can segment business markets with some of the same variables we use in consumer markets,
such as geography, benefits sought, and usage rate, but business marketers also use other
variables. Major segmentation variables for business markets include:

A. Business customer demographic variables

 Industry: Which industries should we serve?
 Company size: What size companies should we serve?
 Location: What geographical areas should we serve?
B. Operating Variables
 Technology: What customer technologies should we focus on?
 User or nonuser status: Should we serve heavy, medium, and light users, or nonusers?
 Customer capabilities: Should we serve customers needing many or few services?

C. Purchasing Approaches
 Purchasing-function organization: Should we serve companies with highly
centralized or decentralized purchasing organizations?
 Power structure: Should we serve companies that are engineering dominated,
financially dominated, and so on?
 Nature of existing relationships: Should we serve companies with which we have
strong relationships or simply go after the most desirable companies?
 General purchase policies: Should we serve companies that prefer leasing? Service
contracts? Systems purchases? Sealed bidding?
 Purchasing criteria: Should we serve companies that are seeking quality? Service?
Price?

D. Situational Factors
 Urgency: Should we serve companies that need quick and sudden delivery or service?
 Specific application: Should we focus on certain applications of our product rather than
all applications?
 Size of order: Should we focus on large or small orders?

E. Personal Characteristics

 Buyer-seller similarity: Should we serve companies whose people and values are
similar to ours?
 Attitudes toward risk: Should we serve risk-taking or risk-avoiding customers?
 Loyalty: Should we serve companies that show high loyalty to their suppliers?

4.1.4. Requirements for effective segmentation

Even after applying segmentation variables to a consumer or business market, marketers must
realize that not all segmentations are useful. To be useful, market segments must be:
1. Measurable: The size, purchasing power, and characteristics of the segments can be
measured.
2. Substantial: The segments are large and profitable enough to serve. A segment should be the
largest possible homogeneous group worth going after with a tailored marketing program.
3. Accessible: The segments can be effectively reached and served.
4. Differentiable: The segments are conceptually distinguishable and respond differently to
different marketing mixes. If two segments respond identically to a particular offer, they do
not constitute separate segments.
5. Actionable: Effective programs can be formulated for attracting and serving the segments.

4.2. Market targeting

Market targeting is the process of evaluating each market segment‘s attractiveness and
selecting one or more segment to enter the market. Once the firm has identified its market-
segment opportunities, it has to decide how many and which ones to target.
There are two steps in the market targeting: evaluating market segments and selecting target
market segments.
1. Evaluating market segments
In evaluating different market segments, the firm must look at two factors: Segment’s overall
attractiveness and company’s objectives and resources.
A. Segment’s overall attractiveness
Segment attractiveness must be in the size, growth, profitability, scale economies, low risk
and so on. The company should target consumers who will spend a lot on the category, stay
loyal and influence others. Does it have characteristics that make it generally attractive, such
as size, growth, profitability, scale economies, and low risk? So the company must first collect
and analyze data on current segment sales, growth rates, and expected profitability for various
segments.
B. Company’s objectives and resources
Even if a segment has the right size and growth and is structurally attractive, the company must
consider its objectives and resources for that segment. Company’s objectives may be in the short
time or long time based on the company’s purpose toward the given activities. Even if the
segment fits the company’s objectives, the company must consider whether it possesses the skills
and resources it needs to succeed in that segment.

2. Selecting and entering market segments

Having evaluated different segments, the company must decide which and how many
segments to serve. In other words, it must decide which segments to target. After evaluating
different segments, the company can consider the following five patterns of target market
selection.
1. Single segment concentration
With single-segment concentration, the firm markets to only one particular segment. Through
concentrated marketing, the firm gains a strong knowledge of the segment's needs and achieves a
strong market presence. Furthermore, the firm enjoys operating economies through specializing
its production, distribution, and promotion. If it captures segment leadership, the firm can earn a
high return on its investment. However, there are risks. A particular market segment can turn
sour or a competitor may invade the segment. For these reasons, many companies prefer to
operate in more than one segment.
2. Selective specialization
A firm selects a number of segments, each objectively attractive and appropriate. There may
be little or no synergy among the segments, but each promises to be a moneymaker. This
coverage strategy has the advantage of diversifying the firm’s risk, even if one segment
becomes unattractive, the firm can continue to earn money in other segments. However,
segmented marketing also increases the cost of doing business. Developing separate marketing
plans for the separate segments requires extra marketing research, forecasting, sales analysis,
promotion planning, and channel management. Trying to reach different market segments with
different advertising effort increases promotion costs. Thus, the company must weigh
increased sales against increased costs when deciding on a differentiated marketing strategy.

3. Product specialization
The firm makes a certain product that it sells to several different market segments. An example
would be a microscope manufacturer who sells to university, government, and commercial
laboratories. The firm makes microscopes for the different customer groups and builds a strong
reputation in the specific product area. The downside risk is that the product may be
supplanted by an entirely new technology.

4. Market specialization
The firm concentrates on serving many needs of a particular customer group. An example
would be a firm that sells an assortment of products only to university laboratories. The firm
gains a strong reputation in serving this customer group and becomes a channel for additional
products the customer group can use. The downside risk is that the customer group may suffer
budget cuts or shrink in size.

5. Full market coverage

The firm attempts to serve all customer groups with all the products they might need. Only
very large firms can undertake a full market coverage strategy. Large firms can cover a whole
market in two broad ways: through-undifferentiated marketing or differentiated marketing.

A. Undifferentiated marketing
The firm ignores segment differences and goes after the whole market with one offer. It designs
a marketing program for a product with a superior image that can be sold to the broadest number
of buyers via mass distribution and mass communications. Undifferentiated marketing is
appropriate when all consumers have roughly the same preferences and the market shows no
natural segments.

B. Differentiated marketing
The firm sells different products to all the different segments of the market. Differentiated
marketing typically creates more total sales than undifferentiated marketing. However, it also
increases the costs of doing business. Because differentiated marketing leads to both higher sales
and higher costs, no generalizations about its profitability are valid.

4.3. Positioning
All marketing strategy is built on STP Segmentation, Targeting, and Positioning. A company
discovers different needs and groups in the marketplace, targets those needs and groups that it
can satisfy in a superior way, and then positions its offering so that the target market
recognizes the company's distinctive offering and image. In marketing, positioning has come
to mean the process by which marketers try to create an image or identity in the minds of their
target market for their product, brand, or organization. Positioning is the battle for your mind.
It is the act of designing the company's offering and image to occupy a distinctive place in the
mind of the target market.

The positioning task consists of the following steps:

1. Identifying a set of possible competitive advantages upon which to build a position,
2. Choosing the right competitive advantages,
3. Selecting an overall positioning strategy, and
4. Communicating and Delivering the Chosen Position