UNIT 2

Segmentation Concept, Basis

of Segmentation
 Unit – 2
Segmentation

1. Segmentation Concept, Basis of Segmentation

Segmentation means to divide the marketplace into parts, or segments,

which are definable, accessible, actionable, and profitable and have a growth
potential. In other words, a company would find it impossible to target the
entire market, because of time, cost and effort restrictions. It needs to have a
‘definable’ segment – a mass of people who can be identified and targeted
with reasonable effort, cost and time.

Once such a mass is identified, it has to be checked that this mass can
actually be targeted with the resources at hand, or the segment should be
accessible to the company. Beyond this, will the segment respond to
marketing actions by the company (ads, prices, schemes, promos) or, is it
actionable by the company? After this check, even though the product and the
target are clear, is it profitable to sell to them? Is the number and value of the
segment going to grow, such that the product also grows in sales and profits?

Description: Segmentation takes on great significance in today’s cluttered

marketplace, with thousands of products, media proliferation, ad-fatigue and
general economic problems around the world markets. Rightly segmenting the
market place can make the difference between successes and shut down for a
company.

Segmentation allows a seller to closely tailor his product to the needs, desires,
uses and paying ability of customers. It allows sellers to concentrate on their
resources, money, time and effort on a profitable market, which will grow in
numbers, usage and value.

1.1 Basis of Segmentation

Segmenting is dividing a group into subgroups according to some set ‘basis’.

These bases range from age, gender, etc. to psychographic factors like
attitude, interest, values, etc.

a. Gender

Gender is one of the most simple yet important bases of market segmentation.
The interests, needs and wants of males and females differ at many levels.
Thus, marketers focus on different marketing and communication strategies
for both. This type of segmentation is usually seen in the case of cosmetics,
clothing, and jewellery industry, etc.

b. Age group

Segmenting market according to the age group of the audience is a great

strategy for personalized marketing. Most of the products in the market are
not universal to be used by all the age groups. Hence, by segmenting the
market according to the target age group, marketers create better marketing
and communication strategies and get better conversion rates.

c. Income

Income decides the purchasing power of the target audience. It is also one of
the key factors to decide whether to market the product as a need, want or a
luxury. Marketers usually segment the market into three different groups
considering their income. These are

 High Income Group

 Mid Income Group
 Low Income Group

d. Place

The place where the target audience lives affect the buying decision the most.
A person living in the mountains will have less or no demand for ice cream
than the person living in a desert.

e. Occupation

Occupation, just like income, influences the purchase decision of the audience.
A need for an entrepreneur might be a luxury for a government sector
employee. There are even many products which cater to an audience engaged
in a specific occupation.

f. Usage

Product usage also acts as a segmenting basis. A user can be labelled as

heavy, medium or light user of a product. The audience can also be
segmented on the basis of their awareness of the product
.
g. Lifestyle
Other than physical factors, marketers also segment the market on the basis
of lifestyle. Lifestyle includes subsets like marital status, interests, hobbies,
religion, values, and other psychographic factors which affect the decision
making of an individual.

2. Importance of Segmentation in Marketing

Benefits or importance of market segmentation can be better explained by

below stated points:-

a. More Precise Definition of the Market

Segmentation improves company’s understanding of why consumers do or do

not buy certain products. Marketer can have very clear understanding of his
consumers. He knows adequately about the market. He can formulate and
implement marketing plan more successfully.

b. Maximum Customer Satisfaction

Marketer can cater needs of customers more effectively. Market segmentation

is relevant to the modern marketing practices. It ensures both maximum
satisfaction to consumers and maximum sales to the company. Maximum
consumer satisfaction is the master key to solve any problem. Marketer can
cater needs of customers more effectively. Customers can have products as
per their needs; they can get better products or services at lower costs.

c. Effective Marketing Strategy

Market segmentation provides an opportunity to understand needs and wants

of different segments of the market. This can help in formulating marketing
mix/programme more meaningfully. Company can gain a maximum market
response.

d. Essence of Modern Marketing

Market segmentation strategy fits with modern marketing philosophy. If the

marketer wants to satisfy his valued consumers, market segmentation is the
only option. It is an essential condition for the successful modern marketing
practice.

e. Improved Profitability
On the basis of the study on needs of specific group of buyers, the products
are manufactured. Company can attract distinct groups of buyers and can
increase sales. An increased sale has positive impact on its profitability.

f. Optimum Use of Productive Resources

Market segmentation leads to effective use of the valuable resources.

Resources are allocated and used exactly as per market needs, avoiding
mismatching between what marketer offers and what the market needs. So,
valuable resources like man, money, material, space, technology, time, etc.,
can be utilized more effectively.

g. Benefit of Specialization

It is easy to direct marketing efforts more clearly and specifically. Company

designs its marketing programme for different products and for various groups
of buyers. Specialization in production and marketing can offer a lot of benefits
to the company.

h. High Competitiveness

As a result of market segmentation, a company can treat its consumers more

effectively than competitors. It improves competitive strength of the company.
Company can respond strongly to the competitor; can prevent the entry of
competitors; or can defeat competitors. Company can create and maintain the
loyal consumers for long period of time.

i. Collection of Valuable Information

Market segmentation process elicits a lot of valuable information for the

company. Such information is instrumental for marketing research, product
development, and evaluation of marketing activities. It is also useful for
measuring effectiveness of sales and distribution facilities.

j. Identifying Market opportunity

Market segmentation helps establish close relations with specific groups of

buyers. Close relations facilitate a continuous interaction between consumers
and company. Consumers inform the company regarding changes in their
needs, wants, and habits on a continuous basis or whenever asked. Thus, it is
easy for a marketer to project the future trends. He can identify opportunities
to be available currently or in the near future, and can plan accordingly.

k. Benefits to Society and Nation

Market segmentation, if taken objectively, can contribute to social welfare and

national development. Basically, it is a consumer-oriented philosophy, and it
results into a win-win-win approach, that is, company, society, and nation, all
three, are benefited
.
This can improve overall economic system by manufacturing the right
products of the right quantity and quality for the right groups of consumers,
made available continuously at the right price and place by the right
distribution channel.

L. Benefits to Small Scale Industrial Units

We know that small-scale industrial units can function on a limited scale of

operation. They can have only the limited manufacturing and marketing
capacity. Industries working on a small- scale basis can take advantages of
market segmentation. By concentrating on special demand of specific group of
a limited number of consumers, they can afford products and get profitable
market easily. They can compete with the large industrial units, too.

3. Targeting Concepts, Types and Importance

Target marketing involves breaking a market into segments and then

concentrating your marketing efforts on one or a few key segments consisting
of the customers whose needs and desires most closely match your product or
service offerings. It can be the key to attracting new business, increasing
sales, and making your business a success.

Targeting in marketing is a strategy that breaks a large market into smaller

segments to concentrate on a specific group of customers within that
audience. It defines a segment of customers based on their unique
characteristics and focuses solely on serving them.

Instead of trying to reach an entire market, a brand uses target marketing to

put their energy into connecting with a specific, defined group within that
market.

3.1 Five Different Types of Targeting

a. Behavioral Targeting
Behavioral targeting is the practice of segmenting customers based on web
browsing behavior, including things like pages visited, searches performed,
links clicked, and products purchased. If you add mobile and physical store
data into the mix, that can also include things like location, and in-store
purchases. Visitors with similar behaviors are then grouped into defined
audience segments, allowing advertisers to target them with specific, relevant
ads and content based on their browsing and purchase history. An oft cited
example of behavioral targeting is retargeting ads.

b. Contextual Targeting

Contextual targeting involves displaying ads based on a website’s content.

Think: placing an ad for dishware on a recipe site, or an ad for running shoes
on a running forum. It’s kind of like the digital version of placing a print ad in a
niche magazine. It works based on the assumption that someone reading a
page about running is likely to also be interested in your ad for sneakers.

c. Search Retargeting

Search retargeting is when you serve display ads to users as they browse the
web based on their keyword search behavior. Campaigns are set up with
keywords that you choose and that are relevant to your business or products.
For example, if you are a furniture retailer, you might want to serve display
ads to users who have searched for “leather couch”, or “leather sectional”.
This kind of advertising is successful because it uses intent to connect with
shoppers. The shopper may or may not know about you, but they are showing
interest in a product or solution that you offer. Think of this as an upper funnel,
prospecting strategy.

d. Site Retargeting

Site retargeting, also known as just “retargeting”, involves showing display

ads to users who visited your site and then left without completing a purchase
to browse elsewhere. It differs from search retargeting in two important ways:
it is not keyword based, and it is targeting people who are already familiar
with your brand, or who at least have visited your site once and showed
interest in your offerings. Because of this brand recognition, the ROI of site
retargeting is often extremely high. Think of this as a lower funnel, conversion
focused strategy.

e. Predictive Targeting

Predictive targeting uses all of the web browsing data from behavioral
targeting, layers in 3rd party data (if available), and applies powerful AI and
machine learning to analyze the data and predict future buying patterns based
on past behaviors. The AI that powers predictive targeting can make
connections between behaviors, identify similar and related products for
upselling and cross-selling, and zero in on the shoppers most likely to convert
at any given time—all in an instant. And the more data it analyzes, the more it
learns and the better its models become.

3.2 Importance of Targeting

Targeting in marketing is important because it’s a part of a holistic marketing

strategy. It impacts advertising, as well as customer experience, branding, and
business operations. When your company focuses on target market
segmentation, you can do the following:

a. Speak directly to a defined audience

Marketing messages resonate more deeply with audiences when readers can
relate directly to the information. Brands that have a large, varied market of
customers often struggle with creating marketing campaigns that speak
directly to their audience. Because their viewers are very different, few
slogans or stories can resonate with each person on a personal level. Through
target marketing, you can alleviate this problem and focus on crafting
messages for one specific audience.

b. Attract and convert high-quality leads

When you speak directly to the people you want to target, you are more likely
to attract the right people. Your marketing will more effectively reach the
people most likely to want to do business with you. When you connect with the
right people, you are then more likely to get high-quality, qualified leads that
will turn into paying customers.

c. Differentiate your brand from competitors

When you stop trying to speak to every customer in your market and start
focusing on a smaller segment of that audience, you also start to stand out
from competitors in your industry. When customers can clearly identify with
your brand and your unique selling propositions, they will choose you over a
competitor that isn’t specifically speaking to or targeting them. You can use
your positioning in marketing to make your brand more well-known and
unique.

d. Build deeper customer loyalty

The ability to stand out from competitors by reaching your customers on a
more personal, human level also creates longer-lasting relationships. When
customers identify with your brand and feel like you are an advocate for their
specific perspectives and needs, they will likely be more loyal to your brand
and continue to do business with you over a longer period of time.

e. Improve products and services

Knowing your customers more intimately also helps you look at your products
and services in a new way. When you have a deep understanding of your
target audience, you can put yourself in their shoes and see how you can
improve your offerings. You can see what features you can add to better serve
your customers.

f. Stay focused

Finally, the benefit of using targeting in marketing is that it also serves to help
your brand and team. Target marketing allows you to get more specific about
your marketing strategies, initiatives, and direction of your brand. It helps you
clarify your vision and get everyone in the organization on the same page. You
have more direction when it comes to shaping upcoming plans for both
marketing and the business as a whole. A focused approach helps you fully
optimize your resources, time, and budget.

4. Positioning Concept & Importance

A marketing strategy that aims to make a brand occupy a distinct position,

relative to competing brands, in the mind of the customer. Companies apply
this strategy either by emphasizing the distinguishing features of their brand
(what it is, what it does and how, etc.) or they may try to create a suitable
image (inexpensive or premium, utilitarian or luxurious, entry-level or high-
end, etc.) through advertising. Once a brand is positioned, it is very difficult to
reposition it without destroying its credibility. Also called product positioning.

Positioning is defined as the act of designing the company’s offering and

image to occupy distinctive place in the target market’s mind. A simple
example of positioning would be If I say An expensive TV, what comes first to
your mind probably will be A Sony or A Samsung TV whereas if i say a cheaper
or VFM TV (value for money TV) you might think of an Onida or a Videocon.

The main points that you should remember are:

 Positioning is the final part of the SEGMENT – TARGET – POSTION or STP

process
 Positioning is undoubtedly one of the simplest and most useful tools to
marketers.
 Positioning is all about ‘perception’. As perception differs from person to
person, so do the results of the positioning map e.g. what one perceive’s
as quality, value for money in terms of worth, etc, will be different to any
other person’s perception. However, there will be similarities in certain
cases.
 After segmenting a market and then targeting a consumer, next step will
be to position a product within that market. It refers to a place that the
product offering occupies in consumers’ minds on important attributes,
relative to competing offerings. How new and current items in the
product mix are perceived, in the minds of the consumer, therefore re-
emphasizing the importance of perception!! New Product-need to
communicate benefits.

4.1 Importance of Positioning

a. To Make Entire Organization Market-oriented

Product positioning is a part of the broader marketing philosophy. It concerns

with identifying superior aspects of product and matching them with
consumers more effectively than competitions. This philosophy makes the
entire organization market oriented.

b. To Cope with Market Changes

Once the product is positioned successfully doesn’t mean the task of manager
is over. He has to constantly watch the market. As per new developments in
the market place, new competitive advantages should be identified,
discovered or developed to suit the changing expectations of the market. It
makes the manager active, alert and dynamic.

c. To Meet Expectation of Buyers

Generally, the advantages to be communicated are decided on the basis of

expectations of the target buyers. So, product positioning can help realize
consumers’ expectations.
d. To Promote Consumer Goodwill and Loyalty

Systematic product positioning reinforces the company’s name, its product

and brand. It popularizes the brand. The company can create goodwill and can
win customer loyalty.

e. To Design Promotional Strategy

More meaningful promotional programs can be designed. Based on what

advantages are to be communicated, appropriate means are selected to
promote the product.

f. To Win Attention and Interest of Consumers

Product positioning signifies those advantages that are significant to

consumers. When such benefits are promoted through suitable means of
advertising, it definitely catches the interest and attention of consumers.

g. To Attract Different Types of Consumers

Consumers differ in terms of their expectations from the product. Some want
durability; some want unique features; some want novelty; some wants safety;
some want low price; and so on. A company, by promoting different types of
competitive advantages, can attract different types of buyers.

h. To Face Competition

This is the fundamental use of product positioning. Company can respond

strongly to the competitors. It can improve its competitive strength.

i. To Introduce New Product Successfully

Product positioning can assist a company in introducing a new product in the

market. It can position new and superior advantages of the product and can
penetrate the market easily.

j. To Communicate New and Varied Feature Added Later on

When a company changes qualities and/or features of the existing products,

such improvements can be positioned against products offered by the
competitors. Product positioning improves competitive strength of a company.
Normally, consumers consider product advantages before they buy it. So,
product positioning proves superiority of company’s offers over competitors. It
may also help consumers in choosing the right product.
5. Brand Positioning

Brand positioning refers to “target consumer’s” reason to buy your brand

in preference to others. It is ensures that all brand activity has a common aim;
is guided, directed and delivered by the brand’s benefits/reasons to buy; and it
focuses at all points of contact with the consumer.

Positioning creates a bond between the customer and the business. It’s that
friend of the customer who’ll always stay in their subconscious mind and will
make them recall about the company whenever they hear about the any of its
product or a particular feature which makes it stand out.

Examples of Brand Positioning

 Colgate is positioned as protective.

 Patanjali can be trusted as it is fully organic.
 Woodland is tough and perfect for outdoors.
 Coca-Cola brings happiness.
 Axe deodorants have a sexual appeal.

5.1 Characteristics of a Good Brand Positioning Strategy

 Relevant: The positioning strategy you decide should be relevant

according to the customer. If he finds the positioning irrelevant while
making the purchase decision, you’re at loss.
 Clear: Your message should be clear and easy to communicate. E.g.
Rich taste and aroma you won’t forget for a coffee product gives out a
clear image and can position your coffee brand differently from
competitors.
 Unique: A strong brand positioning means you have a unique credible
and sustainable position in the customers’ mind. It should be unique or
it’s of no use.
 Desirable: The unique feature should be desirable and should be able
to become a factor which the customer evaluate before buying a
product.
 Deliverable: The promise should have the ability to be delivered. False
promises lead to negative brand equity.
 Points of difference: The customer should be able to tell the difference
between your and your competitor’s brand.
 Recognizable Feature: The unique feature should be recognizable by
the customer. This includes keeping your positioning simple, and in a
language which is understood by the customer.
 Validated by the Customer: Your positioning strategy isn’t successful
 until the time it is validated by the customer. He is the one to decide
whether you stand out or not. Hence, try to be in his shoes while
deciding your strategy.

Figure 1: Brand Positioning Strategy.

How to create a strong brand positioning strategy?

Before you decide your brand positioning, ask yourself these three questions.

 What does my customer want?

 Can I promise him to deliver it better and/or differently than my
competitors?
 Why will they buy my promise?

What does my customer want?

Not everyone in the market is your customer. You need to divide the market
into ‘my customer’ and ‘not my customer’.

This way, it’ll be easier for you to know what exactly is your customers’ wants
are.
The division should be followed by you trying to be in your customers’ shoes. A
good businessman speaks in the voice of the consumer.

Your research should not be based on secondary data. You should go out and
look for what the customer actually wants, make the product fit those wants,
and they’ll buy it.

Be Better and/or Different

If it’s not just you who is in the market, you’ve got to find a way to deliver your
promise better and/or differently than your competitors. Make a brand which
has a recall, which comes to the customer’s minds when they hear about the

particular product category or the feature you’re offering. Every time I hear
about girls being attracted by a deodorant, I get an image of Axe deodorants
in my mind.

Give them a reason to buy your promise.

Your promise should be one of the factors they consider while buying the
product. Use this trick

 Decide your product

 List its various characteristics
 Do a research, and
 Divide the characteristics into essential and add-ons.
 Select only those categories, be it essential or add-ons, which customers
consider while making a purchase. (E.g. aesthetics, fragrance, taste, shape,
cost, etc.)
 Find out what among these categories can you provide better than the
competitors.
 Whatever you decide, don’t lose your focus from the essential
characteristics. (E.g. Taste will always be most important characteristic
which a customer consider while buying a food product)
 Provide your unique feature along with the essential characteristics.

6. Repositioning
Repositioning is defined as altering the position of a brand or product in the
minds of the customer relative to the offerings of the competitive product. It is
a very subtle and difficult process as the brand needs to change the target
market’s understanding of the product.

The brand positioning of any brand is based on the target market, the benefits
to the customers and the market situation. The brand positioning for any
brand should be unique and should set apart a brand from its competitors.

Reason for Repositioning

The company decides for the repositioning of the brand due to low or declining
sales because of increased competition in the market, loss of the customers,
retarded benefits, innovation or better technology. The actual reason for
declining sales could be faulty brand positioning, poor distribution or poor
promotional strategy.

How to Reposition

When a company repositions its brand it needs to alter the expectations of all
its stakeholders, including shareholders, investors and employees along with
the customers. A firm can reposition a product line, brand or an entire
organisation while sticking to the values of the firm. It requires strong
determination and dedication of all the stakeholders to survive a volatile
change in the brand’s positioning.

7. Steps for Repositioning

a. Analyse the current status of the brand

The history of the brand and the how the brand has evolved needs to be
analysed. Now the company needs to look at the sales, market share,
competition, challenges, benefits, customer behaviour, industry performance
etc.

b. Consumer perception

A market research should be conducted to get the insights about the loyalty,
purchase behaviour and growth rate of the company. The survey can be
conducted through mailers, questionnaires, email or interviews.

c. Developing the repositioning strategy

The process will develop objectives, brand’s mission, vision and values that it
offers to the customers.