1. Marketing Reading Material: Test 1
Segmentation
Segmentation: A market segment consists of a group of customers who share a similar set of wants. Market
segmenting is dividing the market into groups of individual markets with similar wants or needs.
Generally three criteria can be used to identify different market segments:
1) Homogeneity (common needs within segment)
2) Distinction (unique from other groups)
3) Reaction (similar response to market)
Basis for segmenting consumer markets
Geographic segmentation: The market is
segmented according to geographic criteria—
nations, states, regions, countries, cities,
neighbourhoods, or zip codes.
Demographic Segmentation: Demographic
segmentation consists of dividing the market into
groups based on variables such as age, gender,
family size, income, occupation, education,
religion, race and nationality.
Psychographic Segmentation:
Psychographics is the science of using psychology
and demographics to better understand
consumers. Psychographic segmentation: consumers are divided according to their lifestyle, personality, values
and social class. Aliens within the same demographic group can exhibit very different psychographic profiles.
Behavioral Segmentation: In behavioral segmentation, consumers are divided into groups according to their
knowledge of, attitude towards, use of or response to a product. It is actually based on the behavior of the
consumer.
Occasions: Segmentation according to occasions. We segment the
market according to the occasions of use. For example, whether the
product will be used alone or in a group, or whether it is being purchased
as a present or for personal use.
Benefits: Segmentations according to benefits sought by the consumer.
Market segmentation allows three alternative marketing
approaches:
A) Undifferentiated marketing or mass marketing (one product for all);
B) Differentiated marketing (e.g. premium, standard and budget
options);
C) Concentrated marketing (focusing on just one segment).
10 Steps in Market Segmentation

2. Targeting
Target Market is a specific group of consumers at which a company aims its marketing efforts, products and
services
The psychology of target marketing
A principal concept in target marketing is that those who are targeted show a strong affinity or brand loyalty to
that particular brand. Target Marketing allows the marketer to customize their message to the targeted group of
consumers in a more focused manner.
Market Targeting Options
After segmentation firms can adopt one of three strategies to
target customers.
Option 1: Undifferentiated Marketing
Undifferentiated marketing is marketing that does not target a
particular segment of the market. Instead the firm adopts one
marketing strategy and hopes that it will appeal to as many
people as possible. Sometimes referred to as mass marketing,
undifferentiated marketing usually involves targeting the whole
market with one product. Coca Cola's original marketing
strategy was based on this format when they offered one
product, which they believed had universal appeal. However
now that Coca Cola has introduced other products, it has
changed its marketing strategy to differentiated marketing. An
undifferentiated marketing strategy can be cheaper than the
other strategies because there is only one product to produce,
distribute and market. It can also be cheaper because the firm
is not targeting multiple market segments. The disadvantage is
the challenge involved in producing a product and marketing
campaign which is universally appealing enough to make it
profitable.
Option 2: Differentiated Marketing Strategy
If a firm decides to target several segments of the market, it is engaging in a differentiated marketing strategy.
Under a differentiated marketing strategy, a firm will develop products and services with separate marketing mix
strategies for each of the segments chosen by the firm. An airline company offering Luxury, Business and
Economy class tickets with separate marketing programmes to attract customers for each of the ticket types is an
example of differentiated marketing strategy.
Option 3: Concentrated Marketing
Concentrated marketing occurs when a business concentrates its marketing effort on one segment of the market.
The firm will develop a product that caters for the needs of that particular group. Concentrated marketing can
have lower costs than the other two options. It can be a good option for small or new businesses. The
disadvantage is that it reduces the number of customers that the firm is targeting. It also means that the firm
needs to be sure that they have selected the correct segment of the market.

3. Positioning
Positioning is 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.
Re-positioning involves changing the identity of a product, relative to the identity of competing products.
De-positioning involves attempting to change the identity of competing products, relative to the identity of your
own product.
Brand positioning process:
Effective Brand Positioning is contingent upon
identifying and communicating a brand's uniqueness,
differentiation and verifiable value. Copycat brand
positioning only works if the business offers its
solutions at a significant discount over the other
competitors.
1. Identifying the business's direct competition
2. Understanding how each competitor is positioning
their business today
3. Documenting the provider's own positioning as it
exists today
4. Comparing the company's positioning to its
competitors' to identify viable areas for
differentiation
5. Developing a distinctive, differentiating and value-
based positioning concept
6. Creating a positioning statement with key
messages and customer value propositions
Product positioning process:
1. Defining the market in which the product or brand
will compete
2. Identifying the attributes that define the product
'space'
3. Collecting information from a sample of
customers about their perceptions of each product
on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the
product space
6. Determine the target market's preferred
combination of attributes
Positioning concepts:
More generally, there are three types of positioning
concepts:
1. Functional positions
2. Symbolic positions
3. 3Experiential positions
Market positioning is the manipulation of a brand or
family of brands to create a positive perception in the
eyes of the public. If a product is well positioned, it will
have strong sales, and it may become the go-to brand
for people who need that particular product. Poor
positioning, on the other hand, can lead to bad sales
and a dubious reputation. A number of things are
involved in market positioning, with entire firms
specializing in this activity and working with clients to
position their products effectively.
Market Positioning
A Positioning Strategy is how you want to be perceived in the minds of prospects versus your competition. It must
clearly distinguish you from competitors and make it obvious you are the best available choice. The first step in
developing a winning Positioning Strategy is to develop an in-depth understanding of target prospects and
competitors. This provides the insight required to clearly distinguish yourself versus all of the available choices.
To develop an effective Positioning Strategy, the following questions must be answered:
What sets us apart?
Based on what prospects deem most important in making a buying decision (logic), or the hot button issues that
drive the initial interest (emotion), what do you specifically do that’s unique or better?

4. What makes us unique or superior versus competition?
If competitors have a distinct weakness, especially in industries with a poor reputation, a winning Positioning
Strategy may be to highlight your strengths in areas where your competition is weak.
Are we a leader or visionary, is there something innovative about what we do that sets us apart from
competitors?
If we’re able to re-define the rules of the game, or to introduce a new way of doing things, this may place us in
the industry leadership or visionary position.
Differentiation
Product differentiation is the process of
distinguishing a product from others, to make it
more attractive to a particular target market. This
involves differentiating it from competitors'
products as well as a firm's own product.
Differentiation can be a source of competitive
advantage. Although research in a niche
market may result in changing a product in order
to improve differentiation, the changes themselves
are not differentiation. Marketing or product
differentiation is the process of describing the
differences between products or services, or the
resulting list of differences. This is done in order to
demonstrate the unique aspects of a firm's product
and create a sense of value. Any differentiation
must be valued by buyers.
1. Simple: based on a variety of characteristics
2. Horizontal : based on a single characteristic
but consumers are not clear on quality
3. Vertical : based on a single characteristic and
consumers are clear on its quality
The brand differences are usually minor; they can be merely a difference in packaging or an advertising theme.
The physical product need not change, but it could. Differentiation is due to buyers perceiving a difference, hence
causes of differentiation may be functional aspects of the product or service, how it is distributed and marketed, or
who buys it.
The major sources of product differentiation are as
follows.
1. Differences in quality which are usually
accompanied by differences in price
2. Differences in functional features or design
3. Ignorance of buyers regarding the essential
characteristics and qualities of goods they are
purchasing
4. Sales promotion activities of sellers and, in
particular, advertising
5. Differences in availability (e.g. timing and
location).
Benefits of Differentiation: Differentiation primarily impacts performance through reducing directness of
competition. As the product becomes more different, categorization becomes more difficult and hence draws fewer
comparisons with its competition. A successful product differentiation strategy will move your product from
competing based primarily on price to competing on non-price factors, such as product characteristics, distribution
strategy, or promotional variables.
Most people would say that the implication of differentiation is the possibility of charging a price premium;
however, this is a gross simplification. If customers value the firm's offer, they will be less sensitive to aspects of
competing offers; price may not be one of these aspects. Differentiation makes customers in a given segment
have a lower sensitivity to other features (non-price) of the product.
Ethical concerns: Some product differentiation approaches raise ethical concerns. These include techniques
based on customers' ignorance, rebranding existing products to sell them as new or introducing anti-features that
create artificial limitations to otherwise fully functional goods.
A unique selling proposition (USP) is a description of the qualities that are unique to a particular product or
service and that differentiate it in a way which will make customers purchase it rather than its rivals.
Marketing experts used to insist that every product and service had to have a USP, but this idea was usurped by
the view that what really matters in marketing a product or service is its positioning, where it sits on the spectrum

5. of customer needs. Shampoos, for instance, claim to meet all sorts of different customer needs and sit in all sorts
of different positions—the need to wash dry hair or greasy hair, dark hair or blond hair, or the need to wash hair
frequently or not so frequently. Few of them, however, can claim to have a unique selling proposition. All of them
clean hair.
Uniqueness is rare, and coming up with a continuous stream of products with unique features is, in practice,
extremely difficult. Philip Kotler says that the difficulty firms have in creating functional uniqueness has made
them ―focus on having a unique emotional selling proposition (an ESP) instead of a USP‖. He gives the example of
the Ferrari car and the Rolex watch. Neither has a distinctive functional uniqueness, but each has a unique
emotional association in the consumer's mind.
Branding
A Brand is a distinguishing name or symbol (logo, trademark, or package design) intended to identify the origin of
the goods or services–and to differentiate those goods or services from those of competitors.
The process involved in creating a unique name and image for a product in the consumers' mind, mainly through
advertising campaigns with a consistent theme. Branding aims to establish a significant and differentiated
presence in the market that attracts and retains loyal customers.
Benefits of a brand for
Sellers Customers
 Identifies the company’s products, makes repeat  Helps identify products
purchases easier  Helps evaluate the quality of a product
 Facilitates promotion efforts  Helps to reduce perceived risk in buying, provides
 Fosters brand loyalty – stabilises market share assurance of quality, reliability etc.
 Allows to charge premium prices and thus to get  Is dependable (consistent in quality)
better margins  May offer psychological reward (status symbol)
 Allows to extend the brand to new products, new  “rout map” through a range of alternatives
markets and to new geographic areas  Saves customer time
 Can communicate directly with the customer, reach  Is easier to process mentally
over the shoulder of the retailer
 More leverage with middlemen
 Is more resistant to price competition
 Can have a long life
Customer Focus
Definition
The orientation of an organization toward serving its clients' needs. Having a
customer focus is usually a strong contributor to the overall success of a
business and involves ensuring that all aspects of the company put its
customers' satisfaction first. Also, having a customer focus usually includes
maintaining an effective customer relations and service program.
Ascertaining consumer demand is vital for a firm's future viability and even
existence as a going concern. Many companies today have a customer focus
or customer orientation. This implies that the company focuses its activities
and products on consumer demands. Generally, there are three ways of doing
this: the customer-driven approach, the market change identification
approach and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy
is pursued until it passes the test of consumer research. Every aspect of a market offering, including the natu re of
the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The
rationale for this approach is that there is no reason to spend R&D funds developing products that people will not
buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.
A formal approach to this customer-focused marketing is known as SIVA(Solution, Information, Value, Access).
This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides
a demand/customer-centric alternative to the well-known 4Ps supply side model (product, price, placement,
promotion) of marketing management
Product →Solution
Promotion→Information
Price → Value
Place →Access

6. Customer-focus is quite literally
and quite obviously, focusing on
the customer. That means
thinking about them when
decisions are made, policies are
implemented, and employees
are trained. It spans across the
whole business and is a cultural
thing as much as it is anything
else. Customer-focused
businesses think about what
they can do to make customers
happy (as opposed to get the
most money out of them, signup
the most accounts, etc.) all the
time and think about how they
can make the customer
experience better.
Consumer behaviour
Consumer behaviour is the study of individuals, groups, or organizations and the processes they use to select
products or services to satisfy needs. It blends elements from psychology, sociology, social anthropology and
economics. It attempts to understand the buyer decision making process, both individually and in groups. It
studies characteristics of individual consumers such as demographics and behavioural variables in an attempt to
understand people's wants. It also tries to assess influences on the consumer from groups such as family, friends,
reference groups, and society in general.
Consumer Behaviour = the actions a person takes in purchasing and using products and services, including the
mental and social processes that precede and follow these actions.
Consumer Behaviour is a branch which deals with the various stages a consumer goes through before purchasing
products or services for his end use.
Consumer behaviour and factors influencing buyer behavior
Consumer behaviour is an attempt to understand & predict human actions in the buying role. It has assumed
growing importance under market-oriented or customer oriented marketing planning & management. Consumer
behaviour is defined as ―all psychological, social & physical behaviour of potential customers as they become
aware of, evaluate, purchase, consume, & tell others about product & services‖.
 Each element in this definition is important.
 Consumer behaviour involves both individual (psychological) processes & group (social processes).
 Consumer behavior is reflected from awareness right through post-purchase evaluation indicating
satisfaction or non-satisfaction, from purchases
 Consumer behaviour includes communication, purchasing & consumption behaviour
 Consumer behaviour is basically social in nature. Hence social environment plays an important role in
shaping buyer behaviour.
 Consumer behaviour includes both consumer & business buyer behaviour
 In consumer behaviour we consider not only why, how, & what people buy but other factors such as where
, how often, and under what conditions the purchase is made. An understanding of the buyer behaviour is
essential in marketing planning & programmes. In the final analysis buyer behaviour is one of the most
important keys to successful marketing.
Why do you think an individual buys a product?
 Need
 Social Status

7.  Gifting Purpose
Why do you think an individual does not buy a product?
 No requirement
 Income/Budget/Financial constraints
 Taste
When do you think consumers purchase products?
 Festive season
 Birthday
 Anniversary
 Marriage or other special occasions
A consumer searches for information which would help him in his purchase.
Following are the sources of information:
 Personal Sources
 Commercial Sources
 Public Sources
 Personal Experience
The selective perception process
Perception also plays an important role in influencing the buying decision of consumers.
Buying decisions of consumers also depend on the following factors:
 Messages, advertisements, promotional materials, a consumer goes through also called selective
exposure.
 Not all promotional materials and advertisements excite a consumer. A consumer does not pay attention to
everything he sees. He is interested in only what he wants to see. Such behaviour is called selective
attention.
 Consumer interpretation refers to how an individual perceives a particular message.
 A consumer would certainly buy something which appeals him the most. He would remember the most
relevant and meaningful message also called as selective retention. He would obviously not remember
something which has nothing to do with his need.
The implications of this process help develop an effective promotional strategy, and select which sources of
information are more effective for the brand.
Consumer Behaviour: Decision making process, External & Internal
Influencers
Purchase Decision process
Consumer decision making involves several steps.
1. Problem recognition = perceiving a need
Perceiving a difference between a person's ideal and actual situations (shortcomings)
You realize that something is not as it should be. Perhaps, for example, your car is getting more difficult to
start and is not accelerating well.
2. Information search = seeking value

8.  Internal search = memory of experiences with products or brands
 External search = if past experience or knowledge is insufficient = if risk of making a wrong decision is
high = if cost of gathering information is low
 personal sources - relatives, friends
 public sources - product-rating organizations, publications, government agencies, TV programs,
Internet
 marketer dominated sources = ads, stores, salespeople, point-of-sale displays, Internet etc.
3. Evaluation of alternatives = assessing value = clarify the problem
 determine criteria to use for the purchase
 discover brand names that might meet these criteria
 develop consumer value perceptions
What are some alternative ways of solving the problem? You might buy a new car, buy a used car, take your
car in for repair, ride the bus, ride a taxi, or ride a cycle to work.
4. Purchase decision = buying value
 Which alternative from the evoked set?
 What product attributes from whom?
 Where (or who)?
 When to purchase?
5. Post purchase behaviour = value in consumption or use
 consumer compares the product with expectations - satisfied/dissatisfied
 Customer loyalty = repeat-purchase behaviour = satisfied buyers tend to buy from the same seller each
time.
 cognitive dissonance = the feeling of post purchase psychological tension or anxiety a consumer often
experiences
 Postpurchase communications and service - reassurance and congratulations on the purchase choice, toll-
free telephone numbers, liberal return and refund policies, trained staff to handle complaints and answer
questions and record suggestions = relationship building (cf. CRM)
In reality, people may go back and forth between the stages. For example, a person may resume alternative
identification during while evaluating already known alternatives.
Herd behavior in marketing is used to explain the dependencies of customers' mutual behavior. The basic idea is
that people will buy more of products that are seen to be popular.
Major Factors Influencing Buyer Behaviour
Cultural Factors
Cultural factors exert the
broadest and deepest
influence on consumer
behavior. The roles played by
the buyers culture, sub
culture and social class are
particularly important.
 Culture- Culture is the
most fundamental
determinant of a
person’s wants and
behavior. The growing
child acquires a set of
values, perceptions,
preferences, and
behavior through his or
hr family or other key
institutions.
 Sub-Culture- Sub-
culture includesnationalities, religions, racial groups, and geographical regions. Many sub-cultures make up
important market segments, and marketers often design marketing programs tailored to their needs.
 Social Class- Social classes are relatively homogenous and enduring divisions in a society, which are
hierarchically ordered and whose members share similar values, interests, and behavior. Social classes do not
reflect income alone but also other indicators such as occupation, education, and area of residence.

9. Social Factors
 Reference Groups- A Person’s reference groups consist of all the groups that have a direct or indirect
influence on the person’s attitudes or behavior. Groups having direct influence on a person are called
membership groups.
 Family- The family is the most important consumer buying organization in society, and has been researched
extensively. Family members constitute the most influential primary reference group.
 Role And Statuses- A person’s position in each group that he participates throughout his life –family, clubs,
and organizations can be defined in terms of role and status. A role consist of activities that a person is
expected to perform. Each role carries a status. Marketers are aware of the status symbol potential of
products and brands.
Personal Factors
A buyer’s decisions are also influenced by personal characteristics. These include the buyer’s age & stage in the
life cycle, occupation, economic circumstances, lifestyle, personality & self concept.
 Age & Stage In The Life Cycle- People buy different goods & services over their lifetime. They eat baby food
in the early years, most foods in the growing & mature years & special diets in the later years. People’s taste
in clothes, furniture & recreation is also age related.
 Occupation- A person’s occupation also influences his or her consumption pattern. Marketers try to identify
the occupational groups that have above – average interest in their products and services. A company can
even specialize its products for certain occupational groups.
 Economic Circumstances- Product choices are greatly affected by one’s economic circumstances. Economic
stability consist of their spend able income (its level, stability and time pattern), saving and assets (including
the percentage that is liquid), debts , borrowing power, attitude toward spending versus saving.
 Lifestyle- People coming from the same subculture, social class & occupation may lead quite different
lifestyles. A person’s lifestyles the person’s pattern of living in the world as expressed in the persons activities,
interests & opinions.
 Personality And Self-Concept- Each person has a distinct personality that influences his or her buying
behavior. By personality, we mean a person’s distinguishing psychological characteristics that lead to relat ively
consistent and enduring responses to his or her environment. Personality can be a useful variable in analyzing
consumer behavior, provided that personality type can be classified accurately and that strong correlations
exist between certain personality types and product or brand choices.
Psychological Factors
A person’s buying choices are influenced by four major psychological factors-motivations, perception, learning,
beliefs and attitudes.
 Motivation- A person has many needs at any given time. A need becomes motive when it is aroused to a
sufficient level of intensity. Motivational researchers hold that each product is capable of arousing a unique set
of motive in consumers.
 Learning- When people act they learn. Learning involves changes in an individual’s behavior arising from
experience. Learning theory teaches marketers that they can build up demand for a product by associating it
with strong drives, using motivating cues and providing positive reinforcement.
 Perception- Perception is the process by which an individual selects, organizes, & interprets information
inputs to create a meaningful picture of the world. A motivated person is ready to act. How the motivated
person actually acts is influenced by his or her perception of the situation.
 Beliefs & Attitudes- A belief is a descriptive thought that a person holds about something. Through doing &
learning, people acquire beliefs & attitudes. These in turn influence their buying behavior. Particularly
important to global marketers is the fact that buyers often hold distinct disbeliefs about brands or products
based on their country of origin. An attitude is person’s enduring favorable or unfavorable evaluations,
emotional feelings, and action tendencies towards some object or idea. People have attitude toward almost
everything: religion, politics, clothes, music, food, and so on. Attitude put them into a frame of mind of liking
or disliking an object , moving toward or away from it.
Consumer involvement will tend to vary
dramatically depending on the type of
product. In general, consumer involvement
will be higher for products that are very
expensive (e.g., a home, a car) or are
highly significant in the consumer’s life in
some other way (e.g. acne medication).
It is important to consider the consumer’s
motivation for buying products. To achieve
this goal, we can use the Means-End chain,
wherein we consider a logical progression of
consequences of product use that eventually
lead to desired end benefit. Thus, for
example, a consumer may see that a car
has a large engine, leading to fast
acceleration, leading to a feeling of

10. performance, leading to a feeling of power, which ultimately improves the consumer’s self-esteem. In advertising,
it is important to portray the desired end-states. Focusing on the large motor will do less good than portraying a
successful person driving the car.
A compensatory decision involves the consumer ―trading off‖ good and bad attributes of a product. For example,
a car may have a low price and good gas mileage but slow acceleration. If the price is sufficiently inexpensive and
gas efficient, the consumer may then select it over a car with better acceleration that costs more and uses more
gas. Occasionally, a decision will involve a non-compensatory strategy. For example, a parent may reject all soft
drinks that contain artificial sweeteners. Here, other good features such as taste and low caloriescannot
overcome this one ―non-negotiable‖ attribute.
The amount of effort a consumer puts into searching depends on a number of factors such as the market (how
many competitors are there, and how great are differences between brands expected to be?), product
characteristics (how important is this product? How complex is the product? How obvious are indications of
quality?), consumer characteristics (how interested is a consumer, generally, in analyzing product characteristics
and making the best possible deal?), and situational characteristics (as previously discussed).
Two interesting issues in decisions are:
 Variety seeking (where consumers seek to try new brands not because these brands are expected to be
―better‖ in any way, but rather because the consumer wants a ―change of pace,‖ and
 “Impulse” purchases—unplanned buys. This represents a somewhat ―fuzzy‖ group. For example, a shopper
may plan to buy vegetables but only decide in the store to actually buy broccoli and corn. Alternatively, a
person may buy an item which is currently on sale, or one that he or she remembers that is needed only once
inside the store.
 A number of factors involve consumer choices. In some cases, consumers will be more motivated. For
example, one may be more careful choosing a gift for an in-law than when buying the same thing for one self.
Some consumers are also more motivated to comparison shop for the best prices, while others are more
convenience oriented. Personality impacts decisions. Some like variety more than others, and some are more
receptive to stimulation and excitement in trying new stores. Perception influences decisions. Some people,
for example, can taste the difference between generic and name brand foods while many
cannot. Selective perception occurs when a person is paying attention only to information of interest. For
example, when looking for a new car, the consumer may pay more attention to car ads than when this is not
in the horizon. Some consumers are put off by perceived risk. Thus, many marketers offer a money back
guarantee. Consumers will tend to change their behavior through learning—e.g., they will avoid restaurants
they have found to be crowded and will settle on brands that best meet their tastes. Consumers differ in
the values they hold (e.g., some people are more committed to recycling than others who will not want to go
through the hassle).
Buying center
A buying center is a group of employees, family members, or members of any type of organization responsible
for finalizing major decisions, usually involving a purchase. In a business setting, major purchases typically require
input from various parts of the organization, including finance, accounting, purchasing, information technology
management, and senior management. Highly technical purchases, such as information systems or production
equipment, also require the expertise of technical specialists. In some cases the buying center is an informal ad
hoc group, but in other cases, it is a formally sanctioned group with specific mandates, criteria, and procedures.
The employees that constitute the buying center will vary depending on the item being purchased.
In a generic sense, there are
typically six roles within any buying
center. They are:
1. Initiator who suggests
purchasing a product or
service.
2. Influencers who try to
affect the outcome decision
with their opinions.
3. Deciders who have the final
decision.
4. Buyers who are responsible
for the contract.
5. End users of the item being
purchased.
6. Gatekeepers who control
the flow of information.