CHAPTER 3C: MARKET OPPORTUNITY: MARKET SEGMENTATION

“You have to take risks if you’re going to innovate and revolutionize anything with an
organization. In fact, your tolerance for risk is directly related to how successful you
can be and that tolerance is worth challenging." – Ginna Raahauge, (RAHAGI)
Marketing Management Process
The marketing management process starts with Opportunity seeking before the marketing
strategy (market segmentation and positioning) and tactics (marketing mix) are
formulated. To be successful in business a firm must have the sense making skill to identify then
exploit the opportunities better than competition over the product life cycle than can best be
matched with its resources and strengths.

OPPORTUNITY-SEEKING, and market condition

These strategies for seeking growth opportunities:
1. Market Penetration: This strategy involves increasing sales of existing products or services
in existing markets. This can be achieved by attracting a larger share of the existing customer
base, encouraging current customers to use the product more often, or finding new uses for the
product.
Ex. Colgate is a well-known brand in the oral care industry and has achieved significant market
penetration in the country. They have a wide range of oral care products, including toothpaste,
toothbrushes, mouthwash, and dental floss. Colgate has effectively penetrated the market by
offering quality products, implementing strong marketing campaigns, and establishing a strong
distribution network. Their products are widely available in retail stores, supermarkets, and
online platforms, making them accessible to a large number of consumers across the country.
2. Product Development: This strategy involves creating new products or improving existing
ones to meet changing customer needs or to take advantage of emerging technologies. This
could involve adding features to existing products, developing new products for existing
markets, or innovating in product design and technology.
Ex. San Miguel Corporation (SMC), a diversified conglomerate with interests in food and
beverage, packaging, energy, and infrastructure. SMC has continuously engaged in product
development across its various business segments. For instance, in the food and beverage
sector, SMC has introduced new products like San Miguel Flavored Beer, San Miguel Zero Alcohol
Beer, and Magnolia Ice Cream variants with unique flavors and ingredients. These product
developments allow SMC to tap into changing consumer demands and expand its market reach.
3. Market Development: This strategy involves finding and developing new markets for
existing products. This could mean expanding into different geographical areas, targeting new
demographic segments, or introducing the product to new industries.
Ex. Oishi is a Filipino megabrand that has successfully extended its equity across related food
categories, including savory snacks, sweet snacks, fruit beverages, and milk beverages. They
have a wide range of sub-brands under the Oishi umbrella, offering various snack options to
cater to different consumer preferences
Other ways to grow include:
1. Merger and Acquisitions (M&A): This strategy involves combining with another company
through a merger or acquisition. This can provide instant access to new markets, technologies,
and resources.
Ex. Ayala Corporation has made several notable M&A deals, expanding its business portfolio
and strengthening its market position. One example is its acquisition of Globe Telecom, one of
the leading telecommunications companies in the Philippines. The acquisition allowed Ayala
Corporation to enter the telecommunications industry and diversify its business operations.
Another example is Ayala Corporation's acquisition of Bank of the Philippine Islands (BPI), one of
the largest banks in the Philippines. This strategic move allowed Ayala Corporation to establish a
strong presence in the banking sector and further expand its financial services offerings.
Through these M&A activities, Ayala Corporation has been able to leverage synergies, gain
access to new markets, and enhance its competitiveness in the Philippine business landscape.
It's important to note that M&A activities can be complex and involve various factors such as
financial considerations, regulatory approvals, and integration challenges. Companies like Ayala
Corporation carefully evaluate potential M&A opportunities to ensure they align with their
strategic goals and create value for their stakeholders.
2. Diversification: This strategy involves entering into new markets with new products. It's a
high-risk strategy because it involves moving into areas where the business has little or no
experience.
Ex. SMIC is a conglomerate with interests in various industries, including retail, property
development, banking, and tourism.
SMIC has diversified its business portfolio through strategic investments and expansions into
different sectors. One notable example of their diversification is their entry into the banking
industry. SMIC established BDO Unibank, one of the largest banks in the Philippines. This
diversification moves allowed SMIC to expand its financial services offerings and tap into the
growing banking sector.
Another example of diversification by SMIC is their ventures into the property development
industry. Through their subsidiary, SM Prime Holdings, SMIC has become one of the largest
property developers in the Philippines, with a significant presence in commercial, residential, and
leisure developments. This diversification has allowed SMIC to capitalize on the booming real
estate market in the country.
Furthermore, SMIC has also diversified into the retail industry with their flagship brand, SM
Supermalls. SM Supermalls is the largest shopping mall operator in the Philippines, offering a
wide range of retail, dining, and entertainment options. This diversification has enabled SMIC to
capture the growing consumer market and establish a dominant position in the retail sector.
Through strategic diversification, SMIC has been able to mitigate risks, tap into new revenue
streams, and create synergies across its various business segments. This approach has
contributed to their success as one of the leading conglomerates in the Philippines.
3. New Products: Similar to product development, this strategy involves introducing new
products to either existing markets or new ones. This could be achieved through innovation,
technology, or addressing unmet needs in the market.
Ex. Unilever, a multinational consumer goods company. Unilever has introduced various new
products in the Philippines across different categories, including personal care, home care, and
food and beverages. For instance, they have launched new variants of popular brands like Dove
with specialized formulations, Surf with advanced stain removal technology, and Magnum with
unique flavors and textures.
All these strategies require careful planning and execution, and each carries its own risks and
rewards. The choice of strategy will depend on the company's resources, capabilities, and
market conditions.
MARKET SEGMENTATION
Marketing strategy is sometimes known as “CORE STRATEGY”. Core strategy refers to
the 3-step process of Market segmentation targeting and positioning (STP).
1. Market Segmentation: Market segmentation involves dividing a broad market into smaller,
more manageable segments based on similar characteristics. Here are some key questions to
consider:
Who are our customers? What are their demographics (age, gender, income, etc.)?
What are their psychographic traits (lifestyle, values, interests)?
Are there specific geographic areas where our product/service is more popular?
Are there distinct customer needs and preferences within the market?
2. Target Market: Target market selection involves identifying the specific segment(s) within
the market that the company wants to focus on. Here are some key questions to consider:
Which segment(s) offer the greatest potential for growth and profitability?
Can we effectively reach and communicate with this segment?
Does our product/service align with the needs and preferences of this segment?
Are there any barriers or competition in targeting this segment?
3. Product Positioning: Product positioning is about creating a distinct image or identity for
your product/service in the minds of the target market. Here are some key questions to consider:
How do we want our product/service to be perceived by consumers?
What are the unique features or benefits that differentiate our product/service from
competitors?
What is our competitive advantage in the market?
How can we communicate and promote our unique value proposition effectively?

Nike segments its market based on various factors such as demographics, psychographics, and
behavioral characteristics.
Demographics: Nike targets different age groups, from children to adults, with specific
product lines such as Nike Kids, Nike Women, and Nike Men.
Psychographics: Nike caters to individuals with active lifestyles, targeting athletes,
fitness enthusiasts, and those who value sports and physical activity.
Behavioral: Nike segments its market based on consumer behavior, targeting both
casual wearers and performance-oriented athletes.
2. Target Marketing: Nike selects specific target markets within the segmented market to
focus its marketing efforts and resources. For example:
Nike targets professional athletes and sports teams by sponsoring them and
creating specialized products for their performance needs.
Nike also targets fashion-conscious consumers who seek stylish and trendy athletic
wear by collaborating with fashion designers and influencers.
3. Product Positioning: Nike positions its products as high-quality, innovative, and
performance-driven, while also emphasizing style and fashion. Nike's product positioning is
evident in its marketing campaigns, brand messaging, and product design. Some key elements
of Nike's product positioning include:
o Emphasizing the latest sports technology and innovation in their footwear, apparel,
and equipment.
o Associating the brand with top athletes and sports events to reinforce the
performance aspect.
o Highlighting the stylish and fashionable aspects of their products, appealing to
consumers who value both functionality and aesthetics.
Through effective market segmentation, target marketing, and product positioning, Nike has
established itself as a leading sports brand in the Philippines, appealing to a wide range of
consumers with different needs, preferences, and aspirations.

Here are the basics for market segmentation for consumer products:
1. Segmentation by Needs and Wants (or Benefits): This approach involves dividing the
market based on the different needs and wants of consumers or the benefits they seek from a
product. For example, a skincare brand may segment its market into segments such as
moisturizing, anti-aging, acne treatment, or sun protection, based on the specific needs or
desired benefits of consumers.
2. Segmentation by Socio-demographics: Socio-demographic segmentation involves
dividing the market based on demographic factors such as age, gender, income, education,
occupation, and marital status. This segmentation helps identify consumer groups with similar
socio-demographic characteristics that may have different preferences and purchasing
behaviors. For example, a toy company may target different age groups with specific toys
designed for infants, toddlers, children, or teenagers.
VARIABLES;
Age
Gender
Civil Status
Income
Education
Profession
Location
Location
Geographic
Family Size
Religion
Nationality
Climate
3. Segmentation by Consumer Behavior: This approach involves segmenting the market
based on consumer behavior, such as their usage patterns, brand loyalty, or purchase decision-
making process. For instance, a coffee brand may segment its market based on the frequency of
coffee consumption, targeting heavy coffee drinkers who consume multiple cups a day versus
occasional coffee consumers.
VARIABLES;
Purchase Frequently (Regular, Occasional)
 User status (Non-user, First time user, Occasional user, Regular user)
Usage rate (Heavy User, Medium user, Light user)
Loyalty Status (Absolute, strong, Medium, small, none)
4. Segmentation by Psychographics: Psychographic segmentation considers consumers'
attitudes, values, interests, and lifestyle choices. It helps identify segments with similar
psychological and behavioral traits. For example, a fitness apparel brand may segment its
market based on consumers who prioritize health and fitness, targeting active individuals who
engage in regular exercise and seek performance-oriented products.
VARIABLES;
Social Issues
Personal Interest

By utilizing these segmentation approaches, consumer product companies can identify specific
target segments, tailor their marketing strategies, and develop products that align with the
unique needs, preferences, and behaviors of different consumer groups.
1. Segmentation by Needs and Wants (or Benefits):
Coca-Cola: Coca-Cola segments its market based on different needs and wants of
consumers. They offer a range of products such as Coca-Cola Classic, Diet Coke,
Coke Zero, and Coca-Cola Life to cater to different consumer preferences, including
those seeking regular soda, low-calorie options, or natural sweeteners.
Apple: Apple segments its market based on the benefits consumers seek from their
products. They offer different product lines such as iPhone, iPad, Mac, and Apple
Watch, targeting consumers seeking mobile communication, computing,
entertainment, and wearable technology solutions.
2. Segmentation by Socio-demographics:
Pampers: Pampers, a brand of baby diapers, segments its market based on socio-
demographic factors such as age and life stage. They offer different product lines
for newborns, infants, and toddlers, recognizing the different needs of parents with
babies in different age groups.
Mercedes-Benz: Mercedes-Benz, a luxury automobile brand, segments its market
based on socio-demographic factors such as income and lifestyle. They offer
different vehicle models and series, targeting affluent consumers seeking high-end,
premium automobiles.
3. Segmentation by Consumer Behavior:
Amazon: Amazon segments its market based on consumer behavior, particularly
purchase patterns and preferences. They use data analytics to personalize
recommendations and target consumers based on their browsing history, previous
purchases, and preferences, offering personalized product suggestions and
promotions.
Starbucks: Starbucks segments its market based on consumer behavior and usage
patterns. They offer various products and loyalty programs targeting different
consumer groups, such as frequent coffee drinkers who earn rewards through their
loyalty program or occasional coffee consumers who may prefer seasonal or limited-
time offerings.
4. Segmentation by Psychographics:
 o Lululemon: Lululemon, an athletic apparel brand, segments its market based on
psychographics and lifestyle choices. They target consumers who prioritize health,
fitness, and an active lifestyle, offering high-quality workout apparel and
accessories designed for yoga, running, and other athletic activities.
o Patagonia: Patagonia, an outdoor clothing and gear brand, segments its market
based on psychographics and values. They target environmentally conscious
consumers who value sustainability and ethical practices, offering eco-friendly
outdoor apparel and promoting environmental initiatives.

PRICE SEGMENTATION
Marketers can always do benefit segmentation by price. Except for a few categories such
as those provided by the government or the company, there will always be buyers who are quite
price sensitive (whether in an economic slowdown or not) and buyers who are just the opposite,
such as those wanting superior product or service, especially in an economic boom.

iPhones: Apple offers multiple models of iPhones at different price points, ranging from the
high-end flagship models like the iPhone 12 Pro Max to more affordable options like the
iPhone SE. By offering a range of prices, Apple targets different customer segments with
varying budgets and preferences.
Starbucks: Starbucks practices price segmentation through its menu offerings. They have
a range of coffee options, from basic drip coffee at a lower price point to specialty drinks
like lattes and Frappuccino’s at higher prices. Customers can choose the level of
customization and complexity they desire, allowing Starbucks to cater to different
preferences and budgets.
Toyota: Toyota offers a diverse range of vehicles at different price points to target various
customer segments. They have entry-level models like the Toyota Yaris or Corolla for
budget-conscious customers, while also offering higher-end options like the Toyota Camry
or Lexus brand for customers seeking luxury and premium features.

Business-to-business (B2B) segmentation is a strategy used by companies to divide their

business customers into distinct groups based on various characteristics. B2B segmentation
helps businesses tailor their marketing, sales, and service efforts to meet the specific needs and
preferences of different customer segments.
VARIABLES;
Demographic (Industry, Company size, Geography)
Operating Variables (Use/non-user status, customer requirements, Technology)
Purchasing Approaches (Purchase policies, Organization, Decision Criteria)
Situation Factors (Urgency, Specific application or end-use, order size)
Personal Characteristics (Compatibility, Attitude towards risk, Loyalty)
MARKET MEASUREMENT
Market is composed of people or organizations that have the need, have the ability and
willingness to pay for their purchase, and have the authority to decide.
Market size is independent on the number of qualified customers and the frequency of
purchase. Qualified customers are customers who need or may need the product, have the
purchasing power to pay, and the authority to buy an available product.
Criteria for a Valid Market;
Need (How many percent of the market would need the product?)
Pay (How many percent of those who need can afford and be willing to pay for
the product?)
Authority and Availability (How many of those interested and willing to pay for the
product have the authority or are available to buy?)

Estimating market demand is a crucial step in understanding the potential demand for a
product or service in a specific market. It helps businesses assess the level of customer interest
and determine the size of the target market.

Target marketing, also known as target market segmentation, is a marketing strategy that
involves identifying and focusing on a specific group of customers, known as the target market,
who are most likely to be interested in a company's products or services. The goal of target
marketing is to tailor marketing efforts to meet the needs and preferences of the identified
target market, resulting in more effective and efficient marketing campaigns.
One example of a brand that effectively targets a specific market is Tesla Inc. Tesla primarily
focuses on the market for electric vehicles (EVs) and has positioned itself as a leading brand in
the sustainable transportation industry. Here's how Tesla targets its market:
1. Demographics: Tesla targets environmentally conscious individuals who are interested in
clean energy and sustainable transportation. Their target market typically includes tech-savvy
early adopters, environmentally conscious consumers, and those with higher disposable
incomes.
2. Psychographics: Tesla appeals to customers who value innovation, cutting-edge technology,
and the status associated with owning an electric vehicle. They position their brand as a symbol
of forward-thinking and sustainability, attracting customers who align with these values.
3. Behavior: Tesla targets customers who are willing to embrace new technology and are early
adopters of electric vehicles. They focus on customers who prioritize environmental sustainability
and are willing to invest in premium electric vehicles.
4. Needs and Pain Points: Tesla addresses the need for sustainable transportation solutions
by offering a range of electric vehicles that are known for their performance, range, and
advanced features. They aim to alleviate concerns such as range anxiety and promote the
benefits of owning an electric vehicle.
5. Market Size and Growth Potential: Tesla recognized the growth potential of the electric
vehicle market early on and positioned itself as a leader in the industry. By targeting the growing
market for EVs, Tesla has been able to capture a significant share of the market and drive the
adoption of electric vehicles globally.
Tesla's targeted marketing efforts, innovative product offerings, and strong brand positioning
have helped them establish a strong presence in the electric vehicle market. Their focus on a
specific target market has allowed them to effectively communicate their value proposition and
differentiate themselves from traditional automotive companies.