Unit 4: Market
segmentation and
Targeting
Dibakar Bashistha
Course
Market segmentation concept
Levels of Market segmentation
Bases for segmentation consumer and Business
market
Market targeting ( evaluation and selection of market
segment )
Market positioning concept and implementation
Concept of Market Segmentation:
Market:
Demand or potential demand for a product or service
A geographical area for potential exchange.
A consumer group with homogeneous profile.
Market denotes not only a place but also an area and or demand.
Market segmentation: (consumer and business market )
It is a process of dividing large, heterogeneous (dissimilar)
markets into smaller homogeneous (similar) sub markets. It is
the process by which an organization attempts to match a total
marketing program to the unique manner or needs in which one
or more customer groups behave in the market place. It
recognizes this reality and divides the total market in to distinct
group of buyers having different needs and characteristics.
According to Philip Kotler Market
segmentation as a dividing a market into
distinct groups of buyers with different need,
characteristics, or behavior who might require
separate products or marketing mixes.
Summery:
Division of total market into group
Group should be homogeneous with same
preferences
The customers in a group should have similar
needs and characteristics
Levels of Market segmentation:
1. Mass marketing: Under this Organization views the entire
market as a homogeneous in need and characteristics and
adopts a policy of market aggregation. Salt trading
corporations Ayo salt can be used by all categories of people
and institutions.
2. Product variety marketing: the marketer may offer two or
more product varieties to the market so that the buyers may
have product options. For example Chaudhary Groups offer of
the several varieties of WaiWai instant noodles is based on this
approach.
3. Target marketing: ( differentiated marketing strategy )
Customer groups or market segments having similar needs and
characteristics are identified and appropriate marketing mixes
are developed for each market segment.
4. Niche Marketing ( concentrated marketing strategy )
Some small organization target to cover only the market
niches rather than the market segments. It is a more
narrowly defined group of customers. It is identified by
dividing a segment in to sub segments. By identifying
customers groups whose needs have not been meet by the
existing product services offers.
5. Customized Marketing: It is viewed as consisting of
individuals with distinct needs and characteristics.
Marketing mix is tailored to each individuals. Tailor-made
clothes and individually designed houses are examples.
Business to business marketing is largely customised. This
is based on customer concept of marketing.
Market segmentation process:
1. Market segmentation Survey:
. Product attributes desired by buyers
. Customer needs and characteristics
. Product usages patterns and usages rates by
customers
. Brand awareness and rating of customers
. Buyers attitude of the product category
. Buyers demographic, psychographic and
media graphic characteristics.
2. Identify Market Segments:
In order to make meaningful segmentation the marketer must
follow several approaches of market identification such as
consumer's taste, needs preferences, sex group, age group
consumer size product characteristics etc. The first stage is
basically a data collection stage.
3. Develop profiles of Each Segments:
After identifying alternative potential market segments, the
marketer should properly analyze each segment to determine their
similarities and dissimilarities. Then prepare separate profile for
each segment identified.
4. Evaluate market segments:
After the segments have been formed and separate profile has
been developed, the marketer should evaluate the profit
contribution expected from each segment.
5 . Select Target Market: ( segment selection )
After the segments are properly evaluated the marketer
should select the best segment that will be the target market
for the company. A best segment is one which offers the
greatest opportunities for the company.
6. Developing a positing strategy: ( product positioning )
Once the company selects a market segment, it must
identify the attributed and images of each competitor,
product ad select a position for its own product for making
target market more accessible.
7. Establish a marketing plan and program.
After positioning the company's offerings, the company
should develop an overall marketing plan regarding the
particular product's (P4) conditions.
Bases for segmenting consumer and business markets:
Consumer market consists of those people
who buy goods for final consumption or use
while industrial or organizational market
consists of those users who buy goods for
either reproduction or further production
or resale to earn profit or institutional use
or providing facilities to the organizational
staffs for facilitate their performance
Bases for segmenting consumer Markets
Segmentation Basis
1. Geographic:
Market segments
Region
Regional market
Zone
Zonal market
District
District market
City
Urban market
Village
Rural market
Areas / topography and climate / Population
density
2. Demographic:
SexMale / Female
Age
Below 5, 5-10, above 60
Occupation
Driver, Professor, doctor Religion and Culture
Nationality
- Nepalese, Indian, American
Ethical
Brahman, Newer, Low cast etc.
Religion and Culture
Hinduism, Buddhism,
Muslim etc
EducationIlliterate, Literate ,High school, college
etc
IncomeBelow Rs, 10,000/ above 100000/
etc.
Family life cycle Youth single, Youth marriage, Married with children
EmploymentEmployed, Unemployed, etc.
3. Psychographics:
Social class:
Lower, medium, upper
Life style : Drunkard,Hunter,Smoker, Longhaired,
Fashionable
Personality: Extravagant, ambitions, Aggressive, Sociable,
conservative , money minded etc
4. Behavioral:
Product uses rage : Heavy users, medium users, non
users.
Benefits, desired : Cost, quality, durability, tasty,
Healthy, good-looking
Brand loyalty-: Popular brand name, Common brand
name, attractive
Product knowledge : Knowledge of the product sought.
Occasions :Christmas, Festivals, Birthday
Basis for segmentiing Industrial Markets :
The main objectives of industrial market
segmentation also to identify homogeneous
buyer groups than can be reached effectively by
separate marketing mixes and to provide better
service. This market is very large in size. It
includes industrial, institutional, and reseller
markets. Industrial buyers are well informed.
The customers are few but the orders are of big
size. The variables used for segmenting the
industrial market are given below:
1.
Geographic variables:
Location
:
local/national/regional/global
Topography:
Mountain/hill/terai
Climate
: tropical/alpine/temperate , ( for example a
garment manufacturer in Nepal has to supply warm clothing in
the hills and mountains while the plain region of Tarai demand
light type of clothes.
2 Demographic variables:
Type of industry or business :( Agriculture, forestry, fishing,
mining, construction,
finance, communication, transport,
services, real State, whole sellers, retailers, and so on )
Size of customers or business : (cottage and small/ medium and
large, Global)
3. Operating variables: (technology/usages rate/ service needs like
Warranties, guarantee installation, repairs etc )
4. Purchase related variables:
Purchase Organization: individual/purchase committee or
purchase department. )
Purchase documentation: Quotations, tenders, contracts.
Negotiation period : Time required for negotiation and
Completion of sale.
Nepal Government required for purchase following
documents:
Prequalification, based on submission of renewed certificate of
firm registration, income tax clearance VAT etc.
Quotation (at least three) or tender depending on the amount of
order )
Evaluation of quotations and tenders by committees.
Market Targeting:
After the completion of different levels
or steps of segmenting the market, the major
task of marketer's is to select best market
segments where they want to serve. Such
market segment is known as target markets.
For example Coca-Cola, General Motors, IBM
all these large companies have adopted this
strategy. Coca-Cola targets all children, youths
and old people.
Evaluation and selection of target market :
1.
Segment Evaluation: Identified market segments can be evaluated on
the basis of the following three basic criteria:
Size and growth of segments
Structural attractiveness of segment
Company objectives and resources
(1)Size and growth of segment: The information on the size and
growth is collected on the basis of current sales, sales growthness,
profitability etc.
(2)Segment attractiveness: ( the following characteristics determine
segment attractiveness )
Size and growth.
Profitability
Competition
Technology
customer loyalty
Risks
--Organization's objectives and resources: ( the segment
should be evaluated in terms of :
Organization's objectives.
Organization's resources
Interrelationships ( cost, performance and technology )
Co-operation
Ethical consideration: ( environment etc )
Government polices and laws.
2. Segment Analysis: Segment analysis involves a careful
and thorough analysis of the market segments that look
attractive from the point of view of size, growth and long
run profit potentials.
3.
Selection of Market segment:
After the market segments are properly evaluated, a marketer needs to
select the best target market. For a marketer there may be three types of target
markets or strategies as follows:
Single segment coverage market: In this case a marketer selects only one
segment among the identified market segments. This type of market is also
known as niche market. It means single segment concentration. For example
Hotel Holiday-Inn Kathmandu that targets only at the high profile tourist
market.
Limited coverage market: In this case a marketer may select more than one
but less than all market segments for marketing purpose. But it does not cover
all segments. Three type of market segment can be developed like product
specialization, Market specialization, and selective specialization.
o Product specialization: sells the same product in several market segments like
Microscope follow product specialization and sell the same microscope to
research lab, universities, schools, pathology service etc.
o Market specialization: Concentrates on a single market segment for example
operation of hotel or boarding schools etc
Full coverage market: In this case a marketer doesn't
want to avoid any segment for fear or loosing market for
his product. He selects all available market segment,
considers the specific needs and problems of each market
segment an raise to fulfill their needs and wants through a
s single basket. For example full market coverage has
been implemented by IBM in the field of computers.
Market Segmentation in Nepal:
Segmenting a market is a technical and a difficult job for the marketer.
In most cases even a most experience marketer also becomes failure in
this job. The Nepalese market for a very long period of time remained
supply driven with very little choice for consumers. The demand for
products far exceeded their supply. Prior to the liberalization of the
trade and business (1980) the public sector undertakings and few
favored businessmen dominated in the supply of consumer products.
Nepal followed a liberalized trade regime under which many new
business ventures were started. Collaboration with foreign investors
and companies increased in the manufacturing as well as the service
sectors. Many multinational companies were established in the
country. This made the Nepalese market more competitive and demand
driven. The development in the information and communication
sectors also made Nepalese consumers more conscious enabling them
to execute their choices more effectively.
These developments have forced Nepalese business organizations to
locate their target customers, better understand their needs, and
develop products according their needs. The joint venture and
multinational companies such as Surya Nepal, Nepal Lever Ltd.,
Colgate Palmolive, Standard Chartered Bank, Nepal Investment Bank
Coca Cola etc were the first group of companies to adopt the
segmentation strategies. Currently a number of large indigenous
companies selling consumer products have also started implementing
segmentation and market targeting strategies based on consumer and
market profiling. Similarly hotels located in pokhara are looking for
domestic tourists for marketing their services due to the downfall of
foreign tourist in to Nepal. After peace maintain increasing of foreign
tourist in Nepal, although the segmentation efforts of all marketers are
vested in urban areas.
In Nepal very few marketers do market segmentation to survive in the
existing market. Many other marketers do not adopt this strategy. They
do not spend much time and effort on market segmentation practices.
Reasons of slow growth of market
segmentation
Nepalese marketers lack skills in identifying the appropriate
variables for segmenting a market.
Nepalese market is basically seller oriented to the consumers has
weak bargaining power and they lack product and services
consciousness.
The failure rate of market is high.
The size of Nepalese market is small.
Nepalese market is dominated by foreign products and competitive
power of Nepalese marketers is weak so they do not hope that the
target market will be sufficiently stable after segmentation.
Most of the Nepalese marketers lack knowledge about the
importance of market segmentation. They think that it is a wasteful
job and it does not create any market opportunity.
Government policies in Nepal are not very supportive of
marketing. They do not regard businessmen as partners for
development.
Environmental and welfare considerations are generally
disregarded for Market segmentation in Nepal.
In whole sole the concept of market segmentation and targeting
is still at an initial stage in Nepal. Let us hope, increase in
market competition and consumer awareness in the market will
give proper direction and proper shape to this job. Since market
segmentation is a technical, expensive, and difficult job for the
marketer, most marketers avoid market segmentation practice in
Nepal. Only large organizations like Hulas, Surya Tobacco,
Janakpur Cigarette Factory, NEBICO, Distilleries manufactures
of instant noodles, coco-cola, Pepsi, Tourism based industries,
etc have done market segmentation practices recently.
Market Positioning
Concept:
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 its product, brand, or organization.
Although there are different definitions of Positioning,
probably the most common is: "A product's position is how
potential buyers see the product", and is expressed relative to
the position of competitors.
It describe how an organizations brand differ in relation to its
competitors brand in the minds of target customers.
According to Philip Kotler Positioning is the
act of designing the companys offering and
image so that they occupy a meaningful and
distinct competitive position in the target
customers mind.
Types of Positioning:
Attribute positioning: quality, test, price, durability.
Benefit positioning: Health, beauty, time saving.
Image positioning: Image of company, brand,
technology, strategic alliances.
User
positioning:
housewives,
professional,
sportsperson etc.
Implementation of positioning strategy:
It is implemented in a six stage process:
Identification of a target market ( customer group )
Identification of competition
Identification of point of differences and point of parity
Identification product category to compete
Choosing and establishing the positions
Updating positioning overtime ( repositioning )
- laddering ( motivation ladder like Maslow's )
- Reacting ( do nothing, go on the defensive, go on the
offensive )
1.
2.
3.
4.
5.
6.
Important questions
Define market segmentation and write the
bases for business market.
Describe the market segmentation process.
Describe the behavioral variables for
segmentation of a consumer market.
Define product positioning and describe the
various issues related to implementation of
the product positioning strategy.
