1. Market Segmentation,
Selecting Target Market &
Developing Product
Positioning

2. MARKET SEGMENTATION:
Strategic & Tactical Marketing Decisions
Define a continuing basis for
determining how an organization
interacts with the market place
to achieve its broad objectives
Short duration actions adapted to
specific situations to achieve limited
objectives in line with the general
strategy
Marketing
Strategy
Marketing
Tactics

3. MARKET SEGMENTATION:
Strategic Marketing Decisions
Characteristics
Defining the scope and nature of an organization’s market place by
segmenting the market into customer groups:
‘How can customers be grouped according to their needs and buying
Patterns?’
Matching the activities of an organization to the market in which it
operates by TARGETING selected customer groups:
‘’What benefits do these particular group of customers look for and
how can we provide them?’’
Matching the strengths of an organization to the needs of a
customer group by adopting an appropriate market POSITION:
‘’What do we have to offer this customer group that is special in
some way?’’

4. MARKET SEGMENTATION:
Levels of Segmentation
Mass Marketing One standardized product for
all.
Market Segments Homogenous groups having
similar characteristics
Market sub-segments Narrower groups within
segments
Niche Marketing Group of buyers who require
very specialized products or
services
Customized Marketing Segment of one.

5. MARKET SEGMENTATION:
Levels of Segmentation: Example- Book Market
Recreational Buyers
Display Buyers
Knowledge Buyers
Students
ParentsHobbyistsStamp Collectors
NICHE
SEGMENTS
SUB-SEGMENTS

6. MARKET SEGMENTATION:
Advantages Of Segmentation
Closer matching between what is offered by the
organization and customer needs
Concentration of resources on areas of greatest
advantage e.g. Body Shop – more natural & less synthetic
Market leadership through domination of a narrowly
defined market
Key to profitability in competitive markets.

7. MARKET SEGMENTATION:
Criteria for Effective Segmentation
Measurability
 Degree to which size and purchasing power of segments can
be assessed, examples: age, income
Accessibility
 Degree to which a firm can reach intended target segments
efficiently through unique communication & distribution
strategies
Substantialness
 Degree to which identified target segments are large enough
or have sufficient sales and profit potential to warrant unique
or separate marketing programs.

8. MARKET SEGMENTATION:
Criteria for Effective Segmentation
Durability
 Stability of the segments
Differential Responsiveness
 Extent to which market segments exhibit different
responses to different marketing mixes

9. Developing Market Segmentation
Strategy
Define overall product market
Identify bases for segmentation
Describe segments
Analyze segments for potential & likely success
Select Target Markets
Determine positioning & develop marketing mix

10. Define overall product market
A company’s market
Focus on customers
Generic vs. Product market
 Generic is a market with broadly similar needs and
sellers offering various, often diverse ways of
satisfying those needs.
 Product market has very similar needs and sellers
offer various close substitutes
 Example, entertainment seekers
 buy a digital camcorder or plasma screen TV, sign up for
a cruise or reserve tickets for a concert.

11. Relationship between Generic & Product-
Market Definitions
Generic
market
definition
Product -
market
definition
Customer
(user) needs
Customer
types
Geographic
area
Product type
(good and/ or service)

12. Narrowing down to target markets
Narrowing down to specific
product-market
All
Customer
needs
Some
generic
market
One broad
Product-
market
Homogeneous
(narrow)
product-
markets
Segmenting
into possible
target markets

13. Geography
• National
• Regional
• Urban/ rural
Psychographics
• Lifestyle
• Personality
Bases for Segmentation
Benefits Sought
• Low price
• Reliability
• Safety
• Convenience
• Status
Buyer Behavior
• Purchase rates
• Loyalty
• Payment methods
• Media usage
Demographics
•Age
• Gender
• Culture
• Family Lifecycle
• Company size
End Use
• Applications
• Product Types

14. Principal benefit sought
Demographic strengths
Special behavioral
characteristics
Brands disproportionately
favored
Lifestyle characteristics
Example: Toothpaste Market Benefit
Segments
Sensory Segment
Flavor & product
appearance
Children
Users of spearmint-
flavored toothpaste
Colgate
Hedonistic
Sociable Segment
Brightness of teeth
Teens, young people
Smokers
Macleans, Ultra Brite
Active
Worrier Segment
Decay prevention
Large families
Heavy users
Crest
Conservative
Independent
Segment
Price
Men
Heavy users
Cheapest brand
Value-oriented

15. Example: Market segments for High-
Tech Products
Less Affluent
More affluent
Sidelined citizens
Not interested in technology
Hand-Shakers
Old consumers – typically
Managers – who don’t
touch their computers at
work. They leave that to
younger Assistants.
Traditionalists
Willing to use technology
but slow to upgrade.
not convinced upgrades
and other add-ons are
worth paying for.
Media junkies
Seek entertainment
And can’t find much
Of it on-line. Prefer TV
And other media.
EntertainmentBusiness Family
THE PESSIMISTS
Based on 131,000 people poll about their motivations, buying habits and financial
ability to purchase high-tech products

16. Example: Market segments for High-
Tech Products (contd..)
Less Affluent
More affluent
Fast Forwards
These customers are the
biggest spenders, and they
are early adopters of new
technology for individual
use.
New age nurturers
Also big spenders, but
focused on technology
for home uses such as
family PC.
Mouse potatoes
They like the on-line
world for entertainment
and are willing to spend
for the latest
technotainment.
EntertainmentBusiness Family
THE OPTIMISTS
Techno-strivers
Use technology from cell
phones and pagers to
on-line services primarily
to gain career edge.
Digital Hopefuls
Families with a limited
budget but still interested
in new technology. Good
candidates for the under
$1000 PC.
Gadget-Grabbers
They also favor on-line
entertainment but have
less cash to spend on it.

17. Innovators
Highest income, self
esteem & abundant
resources; can indulge
in any or all self-orientations
Thinkers
High resource motivated by
ideals; mature, responsible,
well-educated professionals;
practical consumers &
rational decision makers
Believers
Low resource group;
conservative & predictable
consumers; prefer established
brands; life centered around
family, church, community &
nation
Survivors
Lowest income, too few
resources to be included in
any self-orientation; oldest of all
segments with limited means,
who tend to be brand loyal
Achievers
Successful, work-oriented
& get satisfaction from job
& family; politically
conservative & respect
authority; Favor established
products that show off their
success to peers
Strivers
Values similar to achievers
but few economic, social &
psychological resources;
style is important
Experiencers
Youngest of all the segments;
Lot of energy; physical
exercise & social activities;
heavy spenders on clothing,
fast food, music; emphasis
new products
Makers
Practical people who value
self-sufficiency; focused on
family, work, physical recreation
appreciate practical & functional
products
Example: VALS Values & Lifestyle

18. Market Targeting

19. Narrowing down to target markets
Narrowing down to specific
product-market
All
Customer
needs
Some
generic
market
One broad
Product-
market
Homogeneous
(narrow)
product-
markets
Single Target
Market
approach
Multiple target
Market
approach
Combined
Target
Market
approach
Segmenting
into possible
target markets
Selecting
target marketing
approach

20. Market Targeting - Strategies
Marketing Mix Market
Marketing Mix 1
Marketing Mix
Marketing Mix 2
Marketing Mix 3
Segment 1
Segment 2
Segment 3
Segment 1
Segment 2
Segment 3
Undifferentiated
Strategy
Differentiated
Strategy
Concentrated
Strategy

21. Market Targeting - Strategies
Undifferentiated
Strategy
Differentiated
Strategy
•Little diversity - applies the same marketing effort to the
whole market
• Lower costs
• Vulnerable to competition
• e.g. Coca Cola, brass & silver polish, Ford etc.
•Targets distinct customer groups with appropriate
marketing efforts for each segment
• Developing different products or offering different mixes
of pricing, promotion or distribution arrangements.
•e.g. Marriott: Residence Inns, Marriott Courtyards,
Fairfield Inns, Marriott Hotels, Marriott Resort Hotels.

22. Market Targeting - Strategies
Differentiated
Strategy
•e.g. Clairol hair coloring market
• Men with gray hair
• Young men with gray hair
• Young women
• Middle aged women with gray hair
• Glamour oriented middle aged
women
• Young and middle aged women
(who perceive risks)
• Brand loyal, long time users
Clairol Option for Men
Clairol Men’s Choice
Clairol frost & tip
Clairol Quiet Touch
Clairol Loving Care
Clairol Ultress
Clairol Nice ‘n Easy
Miss Clairol

23. Market Targeting - Strategies
Concentrated
Strategy
•Usually one specialized segment; could be a combination
of two
• Effective use of resources
• 80/20 principle
• e.g. jewelers, clothes, radio stations etc.
e.g. Chain saw manufacturer
Professional lumberjackFarmCasual or occasional user

24. Market Targeting - Strategies
Manufacturer of gasoline-powered lawn mowers
Farm Professionals
Maker of electric tools
Electric chain saws, can target segment/s that provide a match between
company goals & abilities and customer needs. Concentrated approach can be
Employed.

25. Market Targeting
Higher costs using differentiated
marketing include:
 Product modification cost
 Manufacturing cost
 Administrative cost
 Inventory cost
 Promotion cost

26. Sales Forecast
“Level of sales a single organization expects
to
achieve based on a chosen market strategy
and an assumed competitive environment.”
Market Targeting – Estimating Potential

27. Sales Forecasting Methods
 Qualitative
 Survey of buyer’s intentions
 Expert Opinion
 Composite of sales force estimates
 Quantitative
 Trend Analysis
 Market Tests
 Statistical Demand Analysis
Sales Forecast

28. Sales Forecast = f (M, T, C, U, P)
M = Market potential
T = Proportion of market you are Targeting
C = Extent of market Coverage
U = Number of Units expected to sell per customer during the year
P = Average Price per unit (P)
Therefore,
Sales Forecast = M x T x C x U x P
Making A Sales Forecast

29. Making A Sales Forecast - Example
Total number of potential buyers = 1 Million
Target Market (25%) = x 0.25
Market Coverage (75%) = x 0.75
Units purchased per year (20) = x 20
Average Price ($10)= x $10
Forecasted Sales = $ 37.5 Million

30. Important Factors for Selecting Target
Segments
 Segment’s Potential Sales
 Competition currently selling to the segments
 Firm’s objectives & distinctive competence
A number of variables can be selected
simultaneously for targeting a market place
 e.g. Burton Group
Selecting Target Markets

31. Positioning

32. Image of a product or a firm in the eyes of the
customer in relation to the competitors’
products and/or products offered by the
same firm
Positioning
(for Competitive Advantage)
3 Steps in a Positioning Strategy:
1. Select the positioning concept
2. Design the dimension or feature that most effectively
conveys the position
3. Coordinate the Marketing Mix to convey a consistent
position

33. Positioning for Competitive Advantage:
Strategies
Products can be positioned on the basis of:
Superiority to
competitors
Use or application
Users
Product
Class
Directly against
competitors

34. Positioning Map/ Perceptual Mapping
Brands of soaps
High moisturising
Nondeodorant
Deodorant
Low moisturising
Tone
Dove
Lux
Lever 2000
Lifebuoy
Dial
Zest
Mercury
Safeguard

35. Positioning Map/ Perceptual Mapping
Automobiles
Luxurious
Traditional Sporty
Functional
Lincoln
Cadillac
Mercedes
Oldsmobile
Chrysler
Buick
BMW
Infiniti
Lexus
Porsche
Chevrolet
Nissan
Toyota
Saturn
VW
Ford
Dodge
Acura
Mercury

36. Positioning Map/ Perceptual Mapping
Mobile Phone Service Provider
Innovative
Coverage
High
High
Low
Low
Mobilink
Paktel
Warid
Ufone
Telenor

37. Wind’s classification for segmentation
 Single basis for segmentation for all marketing
decisions may result in incorrect marketing decisions
as well as a waste of resources.
 For general understanding of a market
 Benefits sought
 Product purchase and usage patterns
 Needs
 Brand Loyalty and switching pattern
 A Hybrid of the variables above
 For positioning studies
 Product usage
 Product preference
 Benefits sought
 A hybrid of the above variables
Strategic Market Segmentation

38.  For new product concepts
 Reactions to new concepts (intention to buy, preference over current brand
etc.)
 Benefits sought
 For pricing decisions
 Price sensitivity
 Deal proneness
 Price sensitivity by purchase/ usage pattern
 For advertising decisions
 Benefits sought
 Media usage
 Psychographic/ lifestyle
 For distribution decisions
 Store loyalty and patronage
 Benefits sought in store selection
Strategic Market Segmentation

39. Basic Patterns/ Procedures of
Segmentation
 An a priori segmentation – management decides on a basis
for segmentation e.g. product purchase, loyalty etc. OR
grouping customers using descriptive characteristics and
then comparing response differences across the groups
 Clustering – segments determined on the basis of a
clustering of respondents on a set of relevant variables. The
only significant difference is that the segments are
determined after the data have been collected on the basis
of perceived groupings or clusters within the data. OR
Forming groups based on response differences (e.g.
frequency of purchase etc.) and determining if groups can
be identified based on differences in their characteristics.
Strategic Market Segmentation

40. Hooley’s review of multivariate techniques which he
dichotomizes as being either predictive or descriptive in nature.
 Predictive Techniques
 Multiple Regression
 Multiple Discriminant Analysis
 Conjoint Analysis
 Descriptive techniques
 Factor Analysis
 Cluster analysis
 Multidimensional scaling
Strategic Market Segmentation

41. Multiple Regression – develops a model of the relatonship
between a dependent variable such as sales and 2 or more
independent variables such as price, promotional expenditure
etc. so that variations in the former may be explained and
predicted in terms of changes in the latter.
Strategic Market Segmentation

42. Multiple Discriminant Analysis – also uses a set of independent
variables to predict one or more dependent variables. It is useful
in marketing as a means of discriminating between market
segments in terms of member characteristics.
 Example.
Strategic Market Segmentation

43. Conjoint Analysis – identifies the relative importance of each
product attribute in creating an overall desirability for the
product.
 Example.
Strategic Market Segmentation

44. Conjoint Analysis
Industrial cleanser – 3 attributes important for customers
 Cleansing ingredient
 Form
 Brand Name
To operationalize attributes, certain levels for each
attribute needs to be determined; in this case 2 levels
were determined
L E V E L S
 Ingredients Phosphate free Phosphate based
 Forms Liquid Powder
 Brand Name A B

45. Conjoint Analysis
Next step: Evaluations from respondents regarding their preferences
across 8 combinations of the two different levels for each of the three
attributes. (1=most preferred and 8=least preferred)
Ranking
Liquid Phosphate free A 1 1
Liquid Phosphate free B 2 2
Liquid Phosphate based A 5 3
Liquid Phosphate based B 6 4
Powder Phosphate free A 3 7
Powder Phosphate free B 4 5
Powder Phosphate based A 7 8
Powder Phosphate based B 8 6

46. Cluster Analysis groups people according to the similarity of
their answers to questions such as brand preferences or
product attributes. OR
It classifies objects (e.g. respondents, products etc.) so that
each object is similar to others in the cluster based on a set of
selected characteristics. The resulting clusters should exhibit
high internal homogeneity and high external heterogeneity.
Strategic Market Segmentation

47. Multidimensional Scaling – also known as perceptual mapping,
is a procedure that determines the perceived relative image of a
set of objects (firms, products, ideas etc.). The purpose is to
transform consumer judgments of overall similarity or
preference into distances represented in multidimensional
space.
Strategic Market Segmentation